Private equity is a term that has developed over the 20th Century during various boom and bust cycles, and with this came the terming of various asset classes – namely the various kinds of private equity investment. Under this broad heading two major sub sectors came about in the form of leveraged buyouts and venture capital.
The first era of the private equity age came about from 1946 through to 1981, which saw relatively low levels of private equity investment – where the term still did not mean a great deal to the vast majority of investors. What is known as the First Boom and Bust Cycle took place from 1982 to 1993, which saw a large increase in leveraged buyouts climaxing in the huge buyout of the RJR Nabisco. This occurred just before the leverage buyout industry collapsed in the late 1980s and early 1990s.
The second boom and busts cycle occurred from 1992 through to 2002, which came about after a series of events including the savings and loan crisis, trading scandals of an insider nature, the collapse of the real estate market and the recession of the early 1990s. The dot com bubble brought this period to an end – when it burst in the collective face of investors.
The third boom and bust cycle took place after the dot com bubble, and saw unprecedented levels of leveraged buyouts up until 2007, when , as we all know by now, things started to go badly wrong.
Over the years North American private equity has been substantially ahead of the European counterpart. The liberalisation of institutional investors in Europe has lead to the maturing of the European market – making it one of the leading private equity markets in the world.
As the recession shows signs of those illusive green shoots, this business is back on track. Indeed, many would claim that a good time to get into private equity would have been very recently and indeed now. With so much upheaval in the markets, there have arguably been some very significant opportunities to be had, and many astute investors have grabbed the bull by the horn and made some serious killings.
There are of course numerous firms that help investors decide upon investment opportunities, as the whole business can sometimes be quite dauntingly complicated. These firms take into account a huge range of information, in many cases reducing the risk to investors a great deal.
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