1 Concepts Underlying the Role of Private Equity Firms in Forming Alliances

In this chapter, we explain the notions and concepts that are required to understand our problem. We begin by introducing the concept of private equity (PE) in section 1.1. In section 1.2, we consider the concept of a strategic alliance, as used in this book. In section 1.3, we present French private equity firms (PEFs) more specifically and the formation of strategic alliances.

1.1. Private equity

Let us begin with an introduction to the main characteristics of PE (section 1.1.1), followed by a presentation of the features that are specific to the French market (section 1.1.2).

1.1.1. Main characteristics

PEFs are vehicles that enable individuals or institutions to operate in the PE market [PEN 07, p. 2]. These vehicles often invest large amounts in equity, typically in small-or medium-sized unlisted companies. They often occur in several stages and over several years [DES 01a, DES 01b, PEN 07].

Depending on the lifecycle phase in which PEFs are involved in SME financing (Figure 1.1), one can distinguish between:

  • – venture capital associated with the start-up of innovative companies with high potential;
  • – growth capital and leveraged buy-outs (LBOs), which finance the transfer or acquisition of unlisted companies;
  • – turnaround capital, which concerns firms that are experiencing temporary difficulties [BAN 07, p. 115];
  • – more recently, intervention in companies wishing to unlist [GLA 08, p. 7].

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