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Private Equity: History, Governance, and Operations, Second Edition by ADAM A. WADECKI, JAMES P. MARTIN, LOUIS W. PETRO, HARRY CENDROWSKI

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Chapter 3

Trends in Private Equity

Harry Cendrowski

James P. Martin

Introduction

Private equity (PE) investments have garnered significant attention in recent times as the industry raised vast sums of capital from 2005 to 2007 and now faces increased regulatory scrutiny. This chapter presents a summary of selected topics facing the industry and provides the reader with a comparison of how the current PE environment compares and contrasts with the 2005 to 2007 “golden age” of PE.

A Changing Tide

Many important PE milestones have been set in the past several years as the industry has experienced exuberance, pessimism, and recovery. In 2007, buyout firms were raising record amounts of capital, and VC funds saw fundraising levels increase from post-dot-com era lows. (See Exhibit 3.1.)

Exhibit 3.1 Historical Venture Capital and Buyout Annual Fundraising Levels, 1980–2010

Source: Thomson ONE Banker.

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Although first used by the Fortress Investment Group, the 2007 initial public offering (IPO) of The Blackstone Group drew wide publicity, as the event seemed to coincide with what may be seen as the zenith of PE. Even though many home investors were effectively boxed out of the Blackstone IPO, the event was nonetheless an important milestone in the history of PE: It further opened the doors to everyday investors wishing to invest in PE funds. Blackstone sold 133.3 million shares—10 percent ...

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