Master-Arbeit Univ. St. Gallen, 2009.

Master-Arbeit Univ. St. Gallen, 2009.

Bachelor-Arbeit Univ. St. Gallen, 2008.

Master-Arbeit Univ. St. Gallen, 2008.

Academic literature on the analysis of value creation in private equity industry is still in its infancy. The approach to value attribution is still a contended subject by both academic and professional writers. The purpose of this research was to determine how South African Private Equity industry generates value in portfolio companies. This was achieved by gathering 24 transactions from institutional investors and private equity firms and disaggregating their returns into value drivers. Identified value drivers were financial leverage, revenue growth, EBITDA multiples and EBITDA margin. Contrary to the common belief that the private equity model is more dependent on cutting costs and less on growing businesses, the findings of the study revealed that revenue growth was the biggest relative driver of value while operational efficiency, the least. Results regarding the importance of financial leverage in value creation in the last 10 years could not confirm the popular argument which states that as the private equity model matures the industry is moving towards other value levers. While descriptive statistics confirmed that the level of gearing and size of companies influence the relative importance of EBITDA margin and revenue growth, results from statistical tests were in several cases inconclusive. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

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Private equity fund managers (PEM, or the general partner/GP) exhibit certain performance persistence, or lack thereof, over time. Most scholarly research to date examines inter-fund performance persistence, or the performance at a fund level across multiple specific funds over time. This dissertation examines intra-fund performance, i.e., performance within a specific fund, and posits that investments made later in a specific private equity fund’s lifespan will perform worse than earlier investments, reflecting agency cost in terms of residual loss to principals as a result of the direct and indirect compensation structures. Using ROIC (Return on Invested Capital) and the sequence in which investments are made in a fund as empirical evidence of these negative effects of the compensation and contractual arrangements common throughout the industry. This performance analysis will be done within each specific fund in consideration of the effects of both direct compensation from the current fund and indirect compensation expectations of the PEM from future funds. This dissertation relies on agency theory to explain the incentives and costs that lead to a negative relationship between the sequence of an investment in a fund’s life and the ROIC of the specific investment. Concepts of risk sharing and information asymmetry, specifically from an agency theory perspective, and the misalignment of interested between investors and PEM support this hypothesis. The most notably areas impacted by this research relate to governance (both investors and public policy), compensation, and incentive structure of private equity funds. / Business Administration/Finance

This paper presents an empirical study of the determinants that drive the investment performance of China’s venture capital (VC) and private equity (PE) funds. Using data on VC/PE funds backed initial public offerings (IPOs) from ChiNext between October 2009 to October 2011 and the internal rate of return (IRR) as the measurement for investment performance, this paper finds that fund experience has a positive influence on investment performance whereas investment scale and investment duration have a negative influence on investment performance.

The private equity industry has had a fluctuating history. In the years between 2003 and  2007 the private equity industry expanded tremendously, yet in 2008 a financial turmoil  caused significant deviation in the activity of the industry. During the credit crunch the  liquidity in the market decreased affecting the sources of capital available. When several  firms compete about the capital available, fundraising becomes increasingly difficult and  competition intensifies. Sweden is one of the largest private equity markets in Europe and  has among the Nordic countries been able to raise the largest amount of funds. The  purpose of this study is to examine the fundraising process implemented by private equity  firms, nevertheless the relationship that emerges between the fund manager and the  investor. The authors’ objective is to provide an adequate interpretation of the private  equity industry in Sweden.   The authors have implemented a qualitative method, as the objective has been to obtain a  profound picture of how private equity firms manage their fundraising. The abductive  approach has been used in order to collect empirical data and semi-structured interviews  have been carried out with representatives from four private equity firms. In addition, a  smaller survey has been performed with two institutional investors to add to the objectivity.  Subsequently, the empirical data has been analysed in regards to theory and compared in  relation to the sources to end up in a conclusion.  The authors have through the study concluded that private equity firms in Sweden with a  focus in buyouts not have a common fundraising model. Private equity funds are selective  in their choice of investors and prefer professional, loyal investors with a long-term  perspective and strong capital base. It has from the analysis emerged that good reputation,  history, team and experience is valuable in fundraising. Firms that are successful in their  operations and management appeal to investors. The investors are typically institutionalised  and invest in different asset classes, hence the diversification is mainly in the hands of the  investor.

This dissertation examines the effect of career concerns on the pattern of investments selected by venture capital fund managers. I propose a simple model in which managers strategically adjust the variance of their portfolio to maximize the probability of raising a follow-on fund. The model demonstrates that career concerns can encourage venture capital fund managers to inefficiently select investments that are too conservative. The influence of these career incentives declines following good initial fund performance, leading to a positive correlation between early fund performance and late fund risk-taking. Using a unique data set of company-level cash flows from 181 venture capital funds, I demonstrate that the intra-fund patterns of investment in venture capital broadly match the predictions of the model. First, I show that the characteristics of career concerns in the venture capital industry are consistent with the assumptions which drive the model. Funds who perform well in their initial investments raise a new fund more quickly, and the size of their next fund is concave with respect to the existing fund's performance. Second, using a maximum likelihood methodology I show that venture capital fund managers select more risky portfolio companies following good performance and tend to be less diversified. / text