The general approach towards private equity investments has shifted substantially, in part to conform with the tougher market conditions prevailing after the financial shocks of the last few years. Gone are the days of earning profits largely through financial engineering … Continue reading →

Private equity (PE) has gotten more attention recently thanks to the end of easy credit for LBOs, the rise of the Chinese Dragon and the Indian Elephant, LP reallocations and an increasing focus on small and medium enterprises (SMEs). Today, no PE discussion is complete without touching on emerging markets. Within these regions, SMEs have become the flavor of the month given the smaller deal sizes available, a robust pipeline of family-owned businesses and the lack of leverage for large LBOs. Yet, 2011 saw currencies spiraling downward, country deficits climbing and even the likes of India and China lowering their GDP outlook. To help sort it all out, this study looks at Asia, and particularly SMEs, to identify capital deployment trends and the macroeconomics of developing geographies beyond routine macro-indicators such as demographics. It develops a framework for two of the most critical areas involving SME-EM deals: proprietary deal sourcing and operational value-addition.

Jean-Philippe de Schrevel is CEO and co-Founder of BlueOrchard Investments, and also founder and CEO of Bamboo Finance and the Oasis Fund. His companies specialize in asset management and microfinance projects that target positive social impact and produce “market” returns … Continue reading →

In the boom years of 2006 and 2007, European and North American private equity firms acquired significantly larger businesses, financing the deals with record levels of debt. The borrowings often consisted of four- and five-year term loans. When the credit freeze followed the banking crisis in 2008, many predicted a flood of defaults when the “wall of maturity” arrived in 2011 and 2012. Fast-forward to today and it appears as if the industry has sidestepped a crisis. Most PE firms proactively addressed the problem by paying down debt, renegotiating terms, or turning to the high-yield bond market and other sources to refinance, extending debt maturity dates by several years. But that begs a new question: How will the industry fare if economic and sovereign debt problems in Europe and the United States drag on?

What good is private equity, anyway?

As its critics see it, these investment pools make money the wrong way — buying “target companies,” slashing jobs, piling on debt and selling the prettied-up remnants, which by then are doomed to fail. To make matters worse, private equity firms get a stunning tax break, paying 15% on profits instead of 35%.

After toppling long-standing regimes, destabilizing others and grabbing the world’s attention, the Arab Spring’s protestors most likely remain amazed at the far-reaching effects of their actions in early 2011. Although their demands in Tunisia and Egypt were focused squarely on long-term economic and political betterment, they also had an immediate impact on investment prospects in two countries that are geographic bookends of the Middle East — Morocco and Iraq.

Economies in Europe and North America are struggling to avoid another recession. Financial markets are shaky. Uncertainties overhang businesses as policy makers in both regions wrestle with nettlesome issues like government debt and regulatory models. In a troubled economic environment, it would be easy to assume the private equity (PE) industry is on the ropes. In fact, the industry continues its post-recession recovery, and private equity portfolios have outperformed public markets, a development largely attributed to the ability to create value during tough economic cycles as well as good ones. While the industry has suffered its share of setbacks, its recovery during the recession demonstrates that PE continues to represent a good option for investors seeking solid long-term returns, though perhaps not as solid as in the past.

During his first stint in India, Steven Wisch, founder and managing partner of private equity firm India Equity Partners, was struck by the quality of the entrepreneurs there, even though at the time it was “a very tough place to do business.” In a conversation with India Knowledge@Wharton, Wisch discussed the lingering challenges and frustrations of the Indian market and what Indian companies and managers have to offer the world.

For Colombia’s young private equity (PE) industry, the country’s decaying, investment-starved infrastructure is a call to action. Having grown from two funds in 2005 to a total of 20 today, industry players are on the collective lookout for investment gaps, like in infrastructure, that they are ready to fill. But regional competition is stiff and Colombia, still synonymous until recently with drug trafficking and violent clashes between leftist guerrillas and its military, has only a small portion of the region’s PE fundraising, and replicating the large deals of Latin America’s more mature markets won’t happen overnight.

Like most in the under-30 crowd, China’s venture capital market is in a hurry. Since 1985, when the State Science and Technology Commission joined the Ministry of Finance to establish the country’s first venture capital firm — called China New Technology Startup Investment Company — some 2,500 private and state-run firms have sprouted up, according to Zero2IPO, a Chinese venture capital and private equity market research firm.