A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

INDUSTRY OVERVIEW

Consolidation Transmission Company value Figure 1: Private equity and companies’ lifecycles

Stock- exchange listing Industrial transfer Transfer of capital to another investment fund Transfer of capital to management

Expansion Growth

Buy-out of distressed companies

Innovation Creation

Time

Venture Capital Expansion Capital Buy-out Capital

Turnaround

Exits

Source: AFIC (French private equity association), 2009

1.1.2 A brief history of private equity

This section aims at relating the history and development of private equity across time, which actually occurred through a series of boom and bust cycles since the middle of the twentieth century, as illustrated hereafter.

Figure 2: Major events in the history of private equity (1950-2009)

The 2nd VC & private equity boom and the internet bubble

The 3rd private equity boom and the golden age of private equity

The credit crunch and the ensuing economic downturn

The first private equity boom

The burst of the internet bubble

Early private equity and the growth of Silicon Valley

1960

1990

2000

2003

2007

1980

2009

Pre-history and origins of modern private equity

Copyright CACEIS, 2009

P re - history and origins of modern private equity Investors have been acquiring businesses and making minority investments in privately held companies since the dawn of the industrial revolution. However, it was not until after World War II that what is considered today to be true private equity investments began to emerge. In the United States, one of the first steps towards a professionally-managed ven- ture capital industry was the Small Business Investment Act of 1958.

page 10 | A thorough understanding of PE