What's inside - BVCA admin

areas for future research. The authors review evidence on employment growth, financial and
non-financial indicators of employment in a total of 49 studies. The analysis of similarities and
differences of the studies revealed manifold consequences of private equity on employment.
Their review reveals that the impact varies across different employment indicators and between
geographies. The authors therefore conclude that it is not possible to label private equity firms
either positively or negatively – as ‘angels or demons’ – as this would not take account of their
complex and heterogeneous effects on employees post-buyout.
The Economic and Social Impact of Private Equity in Europe: Summary of Research
Findings- P. Stromberg – Working paper July 2009
The private equity industry has found itself caught up in the prevailing political debate concerning
the need for reform in financial services regulation. However, much of the debate about private
equity tends to be based on hearsay or, at best, isolated examples, with little reference to the
real impact of the industry on the European economic model. The purpose of this short research
summary is to bring some clarity to the areas of the private equity model that have been most
debated. The report presents the main features of the private equity model and summarises the
empirical evidence relating to a number of economic and social impact questions.
Is U.S. Small Cap a Viable Alternative to U.S. Private Equity? – Brandes Institute –
Working paper August 2009
A number of academic papers have indicated that returns for private equity funds, on average,
have not outperformed public equities in the United States. This contradicts the risk premium
one might expect with private equity, given the liquidity, transparency limitations, and additional
origination costs associated with private equity investments.
In this paper, Brandes Institute Advisory Board member Bruce Grantier examines the academic
research and historical performance (both on an asset class and manager value-added basis) to
evaluate small cap as an alternative investment to private equity.
Private Equity, Buy-Outs, Leverage and Failure – N. Wilson, M. Wright and A. Altanlar
– Working paper June 2009
The authors study the determinants of failure, defined as entering the bankruptcy process, in
a unique dataset comprising the population of over 6.5 million private firms in the UK over the
period 1995-2008, of which over 102,000 had failed. They focus on the role of leverage, whether
the firm involved a management buyout or management buy-in, and whether the buy-out/buy-in
was private equity backed. Controlling for a range of financial and non-financial factors, companies
with higher leverage, whether a buyout or not, are significantly more likely to fail. Importantly, the
authors found that controlling for other factors including leverage, buyouts have a higher failure
rate than non-buyouts with MBIs having a higher failure rate than MBOs which in turn have a
higher failure rate than private equity backed buyouts. However, MBOs and private equity backed
deals completed post 2003 are not riskier than the population of non buyouts if controlling for
other factors.
2009 Preqin Private Equity Cleantech Review
The cleantech industry has grown significantly over the past five years, with increases in the
number of funds making investments, funds in market seeking capital, fund managers and LPs.
Preqin’s data shows that between 2004 and 2008, the number of private equity funds that
commenced their investment periods with cleantech as part of their mandates nearly quadrupled,
going from 30 to 117. Out of the 117 funds that began investing in 2008, 39 focus solely on cleantech,
compared with just nine of the vintage 2004 funds that did so. The total aggregate capital raised in
2008 totalled $6 billion a slight decline from the $6.3 billion raised the previous year.
Preqin’s database shows that 45% of fund managers that invest in cleantech are based in North
America. The region is also the focus of the most target capital for funds currently seeking
commitments, with North America focused cleantech funds targeting an aggregate $9 billion, out
of the $19.9 billion aggregate target of all cleantech funds globally.
In terms of investors, 48% of LPs with a preference for cleantech are based in Europe, 34% in
North America and 18% in Asia and Rest of World. Its broad appeal also means that it is attracting
attention from a wide range of investor types.
Summer 2009 BVCA Quarterly Brief 11