The Impact of the Performance of UK Private Equity Funds

by

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION1

Introduction1

Why firms are attracted towards private equity investments?2

Research Questions4

CHAPTER 2: LITERATURE REVIEW6

Defining Private Equity6

Organization of Private Equity Market6

Entrepreneurs and Venture-capital Investment7

CHAPTER 3: METHODOLOGY10

Research Method10

Research Approach10

Data collection procedure10

Validity11

Reliability12

Ethical Considerations13

REFERENCES14

CHAPTER 1: INTRODUCTION

Introduction

A dynamic private equity and venture capital sector is extremely important for the growth of the British economy. A buoyant, efficient and highly performing private equity market can provide equity financing to various small and medium UK businesses, which form an important competitive, innovative and entrepreneurial driver of the UK economy (EVCA, 2010).

The UK PE sector has experienced significant growth in recent years and is becoming an important source of expertise and finance for ambitious British firms that seek to develop and expand their operations(Olsen & Eschen, 2010).With the most common fund structure for PE investments in the UK being limited partnership, members of this sector are increasingly aiming to improve their effectiveness, both in their choice of firms and the ways in which they can help such firms to expand and increase their wealth(Olsen & Eschen, 2010).

The Private Equity industry is playing an extremely important role in assisting the UK economy through the current phase of unprecedented uncertainty. The British Private Equity and Venture Capital Association regularly provides figures on UK private equity funds, which cover various aspects of their working as also the implications of taxation and dividend policies (BVCA, 2011).An independent investigation into the performance of PE funds can reveal the ways in which such firms perform in comparison to other asset classes, the impact of their investments in target firms and different aspects of their growth and activity in recent years.

Private equity give a platform for long-term investment and investment in share capital for helping the non-quoted companies to succeed and grow. If an entrepreneur wants to start up a business, buy a business, buy-out a division or part of a parent company, expand his or her business or revitalize a company, then the best option is a private equity.

Acquiring private equity is quite different from taking a loan from the bank or raising a debt. In case of taking a loan, the lender will be having a legal right to charge interest on the given loan and on the repayment amount of the capital, whether the company gains profit or loss (Anson, 2007, 114). On the other hand, private equity is provided or the investment is made against a stake in the company as a shareholder. The returns and gains of the investor depend upon the profitability and growth of the business.

The concept of private equity originated in United Kingdom in late-18th century, when the companies and entrepreneurs seek for wealthy and rich individuals for providing a back to their projects and businesses. In those times, this kind of financing was done informally and it transformed into an industry in late- 1970's and early 180's, during which numerous private equity firms were established. Hence, in the current era, private equity is a ...