A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

CONCLUSION

CONCLUSION: NEED FOR EXPERTS

Private equity is an expert market where the right skills, experience and resources are vital to succeed.

As we have seen, private equity funds deeply differ from regular funds and their operational models have little in common. Private equity is a complex and unique activity requiring spe- cific skills from all players involved; An appropriate understanding of the various key private equity processes - such as fund raising and capital calls, distributions, complex illiquid port- folio valuation methods, reporting to investors in accordance with the industry associations’ guidelines, etc.- is crucial. In addition, the environment is rapidly evolving: There are today increasing sophisticated private equity deals in a cross-border environment, with larger private equity funds holding more complex investments and covering more jurisdictions, as well as an increased inves- tor and public scrutiny focusing on proper governance, valuation and reporting issues. As a result, private equity firms need specialised services, which go over and above tradi- tional fund structuring, custody, fund administration, accounting, corporate and risk moni- toring services, and cover their needs. Thus, besides the choice of private equity vehicles, the selection of expert service providers, able to deliver tailored and highly professional services (particularly in terms of reporting and performance ratios, investment monitoring and compliance with legislation), is a key element and bring a significant competitive ad- vantage to these vehicles. Moreover, choosing the right service provider enables the client to focus on its front office investment management activities rather than focusing on opera- tional and back office administrative issues, as well as to benefit from a single entry point able to answer all questions. However, such specialists are hard to find. Bringing together the right competences into one dedicated team is a genuine challenge for private equity service providers. Indeed, fund administrators, depositaries or transfer agents often face difficulties in putting together the right skills and the right people to efficiently service their clients. Given the closed-ended nature of private equity funds, the stability of the service providers’ staff is a must, as the cli- ent relationship should last for a minimum of ten years provided that no major issue arises. A combination of investment fund and corporate experience is highly recommended for this staff, since even packaged as a fund, private equity structures use a number of special pur- pose vehicles or acquisition vehicles assimilated to commercial companies in their corpo- rate governance and life, accounting and financing aspects. This has a direct impact on the profile of accountants sought, as a pure fund accounting experience is far from sufficient: Corporate and commercial accounting is necessary, local GAAPs, IFRS and consolidation culture a must. Besides, an extremely high level of responsiveness to investment and corporate events is commonly required by GPs as those often small-sized organisations are mostly concentrat- ed on their business and investment pipeline. It becomes then counter-productive to fully segregate tasks and a real “coordinator” is required to dispatch information on transactions and organise the service rendered. Relationship managers or business unit managers fulfill

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