Introduction to Private Equity: Venture, Growth, LBO and Turn-Around Capital, 2nd Edition

4

The Universe of Investment

Private equity belongs to the world of finance, even though it remains far from being only a financial asset class. The analysis of the universe of investments shows the specific nature of private equity, which is probably the only financial instrument able to follow a company through each of the steps of its existence. Moreover, whether in the investment process, the methods of investment or in investment monitoring, what distinguishes private equity is the importance of the qualitative analysis over quantitative data. In that respect, individuals are really the core component of private equity (see Chapter 5).

Private equity offers a financing solution through equity or quasi-equity, from creation (see section 4.1), to development (see section 4.2) and restructuring of a company (see section 4.3). The border between different sectors of investment is relatively undefined. For example, venture capital funds and growth capital funds can sometimes invest together in the same company. In some respects, growth capital and LBO can also appear to be closely related.

Private equity and employment

Though venture and growth capital are necessarily net creators of employment, LBO is sometimes accused of destroying employment. If the subject is still regularly debated,1 a VP Bank analysis shows that this is not the case. According to Figure 4.1, switching the control from a family owned to an institutionally owned company (through an LBO), is actually creating ...