Private equity in the 2010s
| History of private equity and venture capital |
|---|
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| Early history |
| (origins of modern private equity) |
| The 1980s |
| (leveraged buyout boom) |
| The 1990s |
| (leveraged buyout and the venture capital bubble) |
| The 2000s |
| (dot-com bubble to the credit crunch) |
| The 2010s |
| (expansion) |
| The 2020s |
| (COVID-19 recession) |
In the 2010s Private equity massively grew.[1] As of 2019, there were nearly 7,000 private equity firms within the United States, nearly $2.5T globally in unspent cash (known as dry powder), and dealmaking in private equity accounted for 13% of global acquisitions.[2][3]
Largest deals
[edit]In February 2013, H.J. Heinz went private through 3G Capital and Berkshire Hathaway in a deal valued at $28 billion.[4] In 2015, the company merged with Kraft Foods to form Kraft Heinz, at which point 3G and Berkshire together owned approximately 50% of the merged entity.[5]
In October 2013, Dell was acquired by Michael Dell and Silver Lake (investment firm) for $21.5 billion, the largest technology buyout at the time.[6]
Proposed legislation and reaction
[edit]In 2019, Senator Elizabeth Warren introduced legislation aimed at regulating private equity firms. Co-sponsored by Senators Kirsten Gillibrand and Bernie Sanders, among others, the bill aimed to hold firms liable for the debts and pension obligations of portfolio companies, and restrict private equity firms' receipt of dividends and fees from acquired companies.[7] In response, the American Investment Council and the United States Chamber of Commerce conducted studies to analyze private equity’s economic benefits and the potential consequences of Warren’s legislation. An academic study by the University of Chicago, Harvard Business School and other institutions showed job losses following buyouts of public companies, and job gains after buyouts of private companies, casting doubts on "the efficacy of ‘one-size-fits-all’ policy prescriptions for private equity," according to report authors.[8]
ESG and impact investing
[edit]Many private equity firms embraced ESG and impact investing over the decade.[9] The integration of ESG criteria into company’s strategies has become a critical focus for financial institutions all over the world. The evolving regulatory landscape demands that these institutions not only comply with financial regulations but also incorporate sustainable practices into their operations. A clear example of this can be seen in ESG specific regulations in private equity and venture capital deals in which companies not only face legal obligations, but also investor pressure to not only comply but also be ahead of the curve in ESG related practices.[10] Such investing has been criticized as greenwashing, largely due to a lack of parameters and varying definitions of the practice.[11][12][13] The Impact Management Project, a protocol developed by 700 impact investing professionals to establish an evidence-based measurement of social and environmental returns, was launched in 2016.[14][15]
See also
[edit]References
[edit]- ^ "A Decade of Growth for U.S. Private Equity". insight.factset.com. Retrieved 2022-11-27.
- ^ Vandevelde, Mark (15 October 2021). "How private equity came to resemble the sprawling empires it once broke up". www.ft.com. Retrieved 10 April 2024.
- ^ Espinoza, Javier; Platt, Eric (27 June 2019). "Private equity races to spend record $2.5tn cash pile". Financial Times. Retrieved 10 April 2024.
- ^ Goldbacher, Ray; Krantz, Matt (14 February 2013). "Heinz agrees to buyout by Berkshire Hathaway, 3G". USA TODAY. Retrieved 10 April 2024.
- ^ Stempel, Jonathan; Ablan, Jennifer (25 February 2019). "Warren Buffett says Berkshire overpaid for Kraft Heinz". Reuters. Retrieved 10 April 2024.
- ^ Alden, William (February 5, 2013). "Dell's Record-Breaking Buyout". The New York Times. Retrieved 10 April 2024.
- ^ "Elizabeth Warren: "Private equity firms are like vampires"; proposes curbs on Wall Street in new bill - CBS News". www.cbsnews.com. 18 July 2019. Retrieved 10 April 2024.
- ^ Warmbrodt, Zachary (17 November 2019). "In battle with Warren, it's all about chicken". Politico. Retrieved 10 April 2024.
- ^ Bunker, Laura Kreutzer and Ted (2020-01-02). "Ten Trends That Shaped Private Equity Over the Past Decade". Wall Street Journal. ISSN 0099-9660. Retrieved 2022-11-27.
- ^ Prisco, M (2024). "The impact of ESG considerations on private equity and venture capital transactions: The western scenario". Business Law International. 25 (1): 532–578.
- ^ "What One Private Equity Investor Calls 'Greenwashing,' Another Calls ESG". Institutional Investor. Retrieved 2022-11-27.
- ^ KPEC, King's Private Equity Club-. "Greenwashing and its Implication in Venture Capital". The London Financial. Retrieved 2022-11-27.
- ^ "Scrutiny of ESG claims for private investments grows". Financial Times. 2022-07-03. Retrieved 2022-11-27.
- ^ Addy, Chris; Chorengel, Maya; Collins, Mariah; Etzel, Michael (1 January 2019). "Calculating the Value of Impact Investing". Harvard Business Review. Retrieved 10 April 2024.
- ^ Schultz, Abby (15 May 2018). "Accounting For Impact Alongside Market Returns". Barron's. Retrieved 10 April 2024.
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