Chapter 20 - Private Equity Issues and Opportunities

Abstract

From 2002 to 2007, the private equity industry grew dramatically. Assets under management increased more than 10-fold and individual transaction values increased to more than $40billion. This remarkable period came to an abrupt halt during the second half of 2007, as the world entered the worst credit crisis in over 75years. Many of the private equity deals that closed during 2005–07 became big disappointments. During 2008 and 2009, bankruptcy courts became busy focusing on private equity portfolio company failures and investors became more cautious in channeling money into private equity funds. Although the industry experienced a rebound in 2010 and 2011, transaction size remained relatively low and private equity funds found it difficult to invest at the same rate as during the 2003–07 period. While investment returns have improved since the financial crisis in 2008 and large private equity firms such as Carlyle have reported solid profits again, raising new funds has been difficult for the private equity industry because of a cautious credit and investment environment. This chapter discusses the various activities of private equity firms in the postcrisis environment and provides a global ranking of the top 100 private equity firms by assets under management, as well as statistics about the largest funds. The chapter concludes with a discussion of factors affecting the private equity industry going forward.