week7a - Governance and Private Equity Thomas Noe Overview...

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Governance and Private Equity Thomas Noe
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Overview Private Equity: Professionally managed equity investments in private and public companies Distinct from Angel finance Informal private equity Rule 144A market
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Overview Large market Pre 1960s province of wealth families, e.g. Whitney family. First large PE partnership: Warburg Pincus (late  1960s) Initial growth associated with LBO wave of late 80s. In 2005, > 150 Bil in PE capital raised in 2005 Currently association between high leverage  refinancing  and private equity is much weaker
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The players General Partner(s) Limited Partners Investee firms
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Investees Young firms Risky Human capital intense Mid-market private companies Stable-low tech firms Owner nearing retirement Public companies Distressed firms Poor performers seeking a major overhaul
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Limited partners Investors Institutional Pension funds Investment banks Hedge funds (fund of funds) Piggy-back private equity funds Wealthy individuals (100-500K min investment is standard)
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General Partners Independent partnerships E.g., Blackstone Partners, KKR Affiliates of Investment banks e.g., J.P. Morgan, Goldman Sachs) Commercial banks e.g., Banc of America Equity Partners VC firms e.g., First Analysis
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GP--Investee relation General Partner(s) Investee firms
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