Private Equity and Industry Performance

The growth of the private equity industry has spurred concerns about its potential impact on the economy more generally. This analysis looks across nations and industries to assess the impact of private equity on industry performance. Industries where PE funds have invested in the past five years have grown more quickly in terms of productivity and employment. There are few significant differences between industries with limited and high private equity activity. It is hard to find support for claims that economic activity in industries with private equity backing is more exposed to aggregate shocks. The results using lagged private equity investments suggest that the results are not driven by reverse causality. These patterns are not driven solely by common law nations such as the United Kingdom and United States, but also hold in Continental Europe.

Private Equity and Industry Performance

The growth of the private equity industry has spurred concerns about its potential impact on the economy more generally. This analysis looks across nations and industries to assess the impact of private equity on industry performance. Industries where PE funds have invested in the past five years have grown more quickly in terms of productivity and employment. There are few significant differences between industries with limited and high private equity activity. It is hard to find support for claims that economic activity in industries with private equity backing is more exposed to aggregate shocks. The results using lagged private equity investments suggest that the results are not driven by reverse causality. These patterns are not driven solely by common law nations such as the United Kingdom and United States, but also hold in Continental Europe.

Money chasing deals and chasing money - the impact of supply and demand on buyout performance

This paper analyzes the impact of differences in supply of and demand for private equity financing on the performance of buyouts. Using a unique and proprietary sample of 684 buyout investments in North America and Europe, we show that buyout performance decreases when large volumes of private equity commitments are looking for suit-able acquisition targets and (b) increases when macroeconomic conditions are such that demand for private equity financing is high. These findings remain unchanged if we control for the idiosyncrasies of individual investment periods, transaction size, holding period and industry sector of individual investment and the vintage year, the size or the age of the investing private equity fund. Our results support the view that the market for buyout target companies is not necessarily efficient, but that instead acquisition prices (and thereby transaction performance) depend on the competition by a limited number of private equity fund managers for a limited number of attractive investment opportuni-ties.Private Equity funds; buyouts; performance; investment behavior

An Empirical Analysis of Relationship between Private Equity Investments and Exits in India

During the last decade the growth in the private equity industry in India has been phenomenal, especially in the recent five years. Private equity industry has become the prime interest area for many researchers and academicians in India. Private equity industry in India is burgeoning area of research, which inherits many explorations and untapped potential areas of research. One such untapped area of research is the empirical research is relationship between Private equity investments and exits in India. The research question which has leaded the study is that Private equity industry being in its transition stage, does the performance and opportunities created by the early starters has proven the potential and invites more investors and investments? In this line, this study is an attempt to assess the interrelationship and causal effect in the relationship using VECM (Vector Error Correction Model) and Granger causality model. The results of the study confer that existence of long run causal relation between Private Equity Investments and Private Equity Exits. Thereby, the study emphasis the impact of private equity exits on private equity investments in India. Private Equity Exit opportunities for the investments made plays crucial role in attracting Private Equity investments in India

Are Lower Private Equity Returns the New Normal?

U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary

Update: Are Lower Private Equity Returns the New Normal?

This report updates a version released in June 2016.U.S. private equity fundraising had its best year ever in 2015 -- raising $185 billion. But is the enthusiasm of investors warranted? Do PE buyout funds deliver outsized returns to investors and will they do so in the future? This report answers this question by reviewing the most recent empirical evidence on buyout fund performance; the answer is no. While median private equity buyout funds once beat the S&P 500, they have not done so since 2006 -- despite industry claims to the contrary

Profitability of venture capital investment in Europe and the United States

This paper examines the profitability of venture capital investment in Europe and the United States. It highlights the unfavourable profitability differential of European venture capital investment in comparison with the United States. The investment performance measures used are the internal rate of return (IRR) and investment multiples. The analysis covers aggregated industry returns and venture capital funds' returns aggregated by vintage year. It relies on the VentureXpert private equity and venture capital performance database, maintained by Thomson Venture Economics. It also considers developments in the private equity and venture capital markets in Europe and the United States.venture capital, profitability, performance, IRR, capital investment, Dantas Machado Rosa, Raade

Competitors’ stock price reactions in response to private equity placements: evidence from a transitional economy

This paper examines whether information conveyed by private equity placement decisions transfers to non-applying companies within the same industry. In particular, it investigates the impact of a company’s announcements of the application for, withdrawal, rejection, approval and completion of private equity placement, while examining the cross-sectional differences of the market performance of their industry counterparts, both in the short- and long-term. It was found that an intra-industry reaction exists; competitors experience a decrease in stock prices in response to the announcement of the application for, approval and completion of private equity placement and an increase in stock prices around the announcement of the withdrawal or rejection of applications. Further, it was found that competitors experience a decrease in their long-term stock performance following private placements. A higher discount on private equity placement is detrimental for private equity (P.E.) issuing companies in the long-term. This study, therefore, provides evidence of the existence of a contagion effect in the long-term while a competitive effect dominates in the short-term

The performance of private equity funds

Using a unique and comprehensive dataset, the authors show that the sample of mature private equity funds used in previous research and as an industry benchmark is biased towards better performing funds. They also show that accounting values reported by these mature funds for non exited investments are substantial and they provide evidence that they mostly represent living dead investments. After correcting for sample bias and overstated accounting values, average fund performance changes from slight over performance to substantial underperformance of -3.83% per year with respect to the S&P 500. Assuming a typical fee structure, they find that gross-of-fees these funds outperform by 2.96% per year. The authors conclude that the stunning growth in the amount allocated to this asset class cannot be attributed to genuinely high past performance. They discuss several potentially misleading aspects of standard performance reporting and discuss some of the added benefits of investing in private equity funds as a first step towards an explanation for our results.Private equity funds; performance

Private equity funds : european industry returns and performance benchmarking

Through the use of publicly available information and data I have investigated the performance of the European Private Equity Industry versus that of the Stoxx 600 stock index in order to create investment alternatives that are generally considered in the investment decision making of market participants that consider the opportunities in Private Equity investment. Performance of private equity funds, as disclosed on the Thomson Reuters Eikon Platform via information shared by Cambridge Associates, have demonstrated continuous outperformance versus that of stock market indices that follow the biggest European companies’ prices. I have gone on to further discriminate the various categories within the Private Equity space and considered only Venture Capital funds and Buyout funds. Buyout funds produced far superior results to the equity markets. However, with regards to the Venture Capital funds, performance was not straight forward, with periods where they lagged behind other benchmarks (including the stock market indices)