Executive summary - Udo Bullmann

30% equity to 70% borrowed capital.• Restructuring, merging or splitting the acquired business:For some - typically venture funds - the aim here is to increase the value of the business byimproving efficiency and productivity. But it can also mean that the sale of assets is made toprovide cash to be paid out. Operating costs, e.g. through job cuts, are reduced mainly toincrease cash flow. Cash flow may be used to borrow more debt in order to have cash forpayments to the PE fund.• Exiting the private equity company:In the final phase the investor attempts to sell his investment at a profit. The LBOsfrequently do this via an IPO. It is now also common practice to sell to another investor (a socalledsecondary buyout).2.5 Private equity is big and growing fastAt worldwide level, the US market is still by far the most mature and developed andaccounts for approximately 75% of the funds raised globally in the period 1983-2005(€990bn).However, Europe accounts for a large part of the remaining private equity transactions.European funds in the same period (1983-2005) raised €350bn. 55% of the global total(€550bn) has been raised in the last 5 years, with Europe seeing a new surge in fundraising in2005 (€72bn) following a slow fundraising period from 2002 to 2004 (see chart below). Thefund-raising i.e. the investor contributions to the PE-funds must, of course, also be seen inrelation to the real economy, the general macro-economic environment, the saving /consumption ratio etc.What could you do with 72billion euros? Well, with the right conditions it couldsignificantly fund the enormous need for investment in R&D if we are to realise our Lisbongoals. Compared with funds raised in Europe in 2005 (€72bn), business enterprise R&Dexpenditure in Germany in 2005 was approximately 39 billion euros 23 .23 http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136250,0_45572561&_dad=portal&_schema=PORTAL43