Private equity 4.0
Subtitle: reinventing value creation
By: Benoit Leleux, Hans van Swaay, Esmeralda Megally
Contributors: Swaay, Hans van, 1953-; Megally, Esmeralda, 1977-
Series: The Wiley finance series
Publisher: Wiley
Published: 2015
Place of publication: Hoboken, New Jersey
Language: eng
Number of pages: 258
ISBN-13: 9781118939734
Subjects: Private equity; BUSINESS & ECONOMICS / Finance
Description: "A multi-perspective look at private equity's inner workingsPrivate Equity 4.0 provides an insider perspective on the private equity industry, and analyzes the fundamental evolution of the private equity asset class over the past 30 years, from alternative to mainstream. The book provides insightful interviews of key industry figures, and case studies of some of the success stories in the industry. It also answers key questions related to strategy, fund manager selection, incentive mechanisms, performance comparison, red flags in prospectuses, and more.Private Equity 4.0 offers guidance for the many stakeholders that could benefit from a more complete understanding of this special area of finance.  Understand the industry's dominant business models  Discover how value is created and performance measured  Perform a deep dive into the ecosystem of professionals that make the industry hum, including the different incentive systems that support the industry's players  Elaborate a clear set of guidelines to invest in the industry and deliver better performance  Written by a team of authors that combine academic and industry expertise to produce a well-rounded perspective, this book details the inner workings of private equity and gives readers the background they need to feel confident about committing to this asset class. Coverage includes a historical perspective on the business models of the three major waves of private equity leading to today's 4.0 model, a detailed analysis of the industry today, as well as reflections on the future of private equity and prospective futures. It also provides readers with the analytical and financial tools to analyze a fund's performance, with clear explanations of the mechanisms, organizations, and individuals that make the system work.The authors demystify private equity by providing a balanced, but critical, review of its contributions and shortcomings and moving beyond the simplistic journalistic descriptions. Its ecosystem is complex and not recognizing that complexity leads to inappropriate judgments. Because of its assumed opacity and some historical deviant (and generally transient) practices, it has often been accused of evil intents, making it an ideal scapegoat in times of economic crisis, prodding leading politicians and regulators to intervene and demand changes in practices. Unfortunately, such actors were often responding to public calls for action rather than a thorough understanding of the factors at play in this complex interdependent system, doing often more harm than good in the process and depriving economies of one of their most dynamic and creative forces. Self-regulation has clearly shown its limits, but righteous political interventions even more so.Private equity investment can be a valuable addition to many portfolios, but investors need a clear understanding of the forces at work before committing to this asset class. With detailed explanations and expert insights, Private Equity 4.0 is a comprehensive guide to the industry ways and means that enables the reader to capture its richness and sustainability"--
Notes: Includes index.
Table of contents: title: Machine generated contents note:; title: INTRODUCTION 15 Private Equity at the Crossroads 15 An Historical Perspective to Gain Insights for the Future 15 Private Equity: All about People 17 The Best Capitalism has to Offer? The Conceptual Groundings 18 Empowering and Incentivizing: Partnering for Mutual Success 18 Focus, Focus, Focus 18 Strategy is Cheap; Operationalizing is Key 19 Alignment brings Cohesion 19 Flexibility as Strategic Value 20 Carrots and Sticks: The Value of Discipline 20 Leverage at all Levels 20 The Cash Flows Paradox 21 The buy-and-sell Approach: Capitalism on Speed 21 Believers, Sceptics and Cynics 22 CHAPTER 1 PRIVATE EQUITY: FROM "ALTERNATIVE" TO "MAINSTREAM" ASSET CLASS? 23 Moving into Mainstream 25 A Brief History 28 An Increasingly Global Industry 31 Private Equity in North America 344 Private Equity in Europe 35 Private Equity in Asia 34 Emerging Private Equity Players 34 An Industry in the Limelight 40 CHAPTER 2 PRIVATE EQUITY AS A BUSINESS SYSTEM 45 Setting the stage 47 The Raison d'etre of Private Equity Funds 47 Private Equity's Market Segments 50 The Fuel behind Private Equity: Investors 56 Portfolio Allocations by Investors 58 CHAPTER 3 VALUE CREATION IN PRIVATE EQUITY 87 The Art of Private Equity 90 Sourcing Deals 91 Creating Value in Private Equity 95 Exiting Investments 111 The Economic Impact of Private Equity 112 CHAPTER 4 PRIVATE EQUITY PERFORMANCE 120 The Best and the Rest 121 Measuring Performance 122 Performance Metrics 123 The internal rate of return (IRR) 123 The total value to paid-in capital ratio (TVPI) 124 Valuing realized and unrealized investments 125 Reporting fund performance 126 Industry performance data 126 Membership and self-reporting biases 127 Industry variability 129 Performance by segments 130 Performance by fund size 130 The Persistence Effect 131 The Timing Effect 134 Private Equity and Portfolio Diversification 133 Comparison against benchmarks 135 Correlation to other asset classes 140 CHAPTER 5 THE MAIN CHARACTERS IN PRIVATE EQUITY 143 Size Matters: Fund Sizes, Deal Sizes and other Dimension Issues! 143 Global Alternative Asset Managers 147 Example: The Carlyle Group 149 Example: Bain Capital 153 Regional, Domestic and Multi-Country Funds 160 Example: EQT Partners 157 Mid-Market Funds 160 Example: HIG Capital 161 Venture Capital Funds 165 Example: TVM Capital 167 Distressed private equity 169 Example: Cerberus Capital Management LP 17 Secondary Funds 173 Example: Coller Capital 175 Funds-of-funds 177 Example: Pantheon Ventures 178 Example: AlpInvest Partners 181 Institutional Limited Partners 182 Example: CalPERS (California Public Employees Retirement System) 182 CHAPTER 6 THE SUPPORTING CAST 187 London as European Centre of Gravity 188 The Private Equity Ecosystem: Follow the Fees? 189 Investment Banks 190 Lending banks 195 Accountancy Firms 196 Law Firms 196 Due Diligence Specialist Providers 197 Strategy consultants 198 Placement Agents 200 Fund Administrators 202 Recruitment Consultants 202 Public Relations Agencies 203 CHAPTER 7 INVESTING IN A FUND 210 The Private Equity game 207 The Decision to Invest 208 Choice of Investment Vehicle 212 Direct Investments 212 Indirect Investments 213 Funds-of-funds 214 Listed funds-of-funds, or Listed Private Equity (LPE) 215 Feeder funds 215 Nominee Structures 216 Segregated accounts 217 Investor clubs 217 Special Purpose Acquisitions Companies (SPACs) 217 Diversification in a Rich Marketplace 217 Stages of Investment 218 Geographic Focus 218 Sector and Size of Investments 219 Strategic Approach 219 Types of Private Equity Firms 219 Timing 219 The Pitch 221 Manager Selection 222 Due diligence 224 People 226 Investment strategy 227 Process 227 Track record 228 Terms, conditions & fee structures 229 Restrictions 230 Drawdowns & Distributions 231 Fees and Incentives 232 Investor Remedies 233 Other Terms 233 Fund Structure 234 Subscription to the fund 235 Capital calls 235 Monitoring 236 Distributions 237 Reporting 239 Fund Liquidation 240 CHAPTER 8 THE FUTURE OF PRIVATE EQUITY 244 Reports of Private Equity's Death were Highly Premature 244 Private Equity in a Changing World 246 Conclusion 251 APPENDIX 1: Sample Private Placement Memorandum 253 .