Private Equity 4.0: Reinventing Value Creation

Introduction

Private equity at the crossroads

The economic crisis of 2008–2009 will stay in the annals of private equity as Anni Horribili, the years in which the bill was passed for all the prior misdeeds of an industry that had come to believe it could “walk on water”. The downgrade to “villain” status was at the same time painful and immensely illuminating. This time, the very fundamental modus operandi of the industry was put under the limelight and seriously questioned. Was private equity really contributing to the strength of an economy? Were the various actors of the industry properly rewarded for their actions? Were the incentive structures properly aligning the various interests at play? Was it appropriate to let this important component of economic activity continue to operate with minimal levels of disclosure and regulation? Did it truly deserve the favourable tax treatment it had been able to engineer? And finally, was private equity truly delivering returns over the long term?

With private equity at a crossroads, the timing could not have been better to investigate its inner workings and provide some much needed direction for investors and industry watchers. The recent financial and economic crises have stopped private equity investments in their tracks, and forced a critical re-examination of the various business models and governance structures. Out of this extraordinary boom-to-bust cycle emerges a new understanding of the drivers of performance in the industry, ...