Market conditions are now providing opportunities for private equity managers and their investors in selective areas of the market according to new research produced by global professional services company Towers Watson (NYSE, NASDAQ: TW). The research asserts that portfolio company operating performance is stabilizing, pricing for new deals is becoming more compelling from a buyer’s perspective and financing packages are increasingly available for the right businesses.

These two studies by academics from the London School of Economics and London Business School look at the long-term stock price performance of initial public offering (IPO) firms in the UK and Germany that were previously owned by leveraged buyout (LBO) funds.

The analysis suggests that LBO-backed IPOs beat the stock market and outperform non-LBO-backed IPOs. The analysis also identifies some of the factors driving outperformance.

‘Private equity demystified’ is written by John Gilligan and Mike Wright, and published by the Institute of Chartered Accounts in England and Wales (ICAEW) Corporate Finance Faculty. The report sheds light on different parts of a typical private equity transaction, their risks and rewards. The publication also analyses an example of a UK-specific transaction to illustrate its operating model. The report takes into consideration academic studies on private equity transactions from around the world, which along with practical analysis shows the impact of private equity on the economy, the companies involved, and other stakeholders .

In the last 30 years of US VC history, commitments to the sector have on average been 0.13% of the total value of the stock market. Last year however saw VC commitments fall to 0.1% of of the total value of the stock market. This paper by two prominent US academics, Steven N. Kaplan and Josh Lerner, suggests that this is not the time for US institutional investors to be shunning VC from their portfolios.

Global private equity cleantech investments have seen significant growth between 2005 and 2008 according to a recent report by Preqin. Despite the GFC, pure cleantech-focused private equity funds have grown from 78 in 2008 to 91 in 2009, representing 5.7% of all private equity vehicles currently raising funds. Majority of firms in the private equity cleantech space are considered to be venture capital firms. The greatest part of private equity cleantech funds are based in North America followed by Europe and Asia.

Click on the link below to view the summary of the Preqin Private Equity Cleantech report.

A recent publication by Bain & Company discusses the sudden changes to the global private equity industry during the GFC, resulting in adjustments in deal structure, fund raising, performance and other key factors. These changes forced several major PE houses to change their portfolio management strategy to accommodate for the stress on their resources, to help their investee companies handle the downturn and to lay the investment foundation for when conditions improve.

Private Equity backed companies in China have performed better than their public listed peers. With a particular focus of the social and economic impact of PE-backed companies in China, this recent study by the European Union Chamber of Commerce in China and US business consultancy Bain & Company have illustrated:

PE-backed companies in China result in –

-        better financial performance

-        higher company tax payments, and

-        the expansion of China’s domestic consumer goods and retail  industry

The most recent volume of the WEF series of working papers on Globalisation of Alternative Assets looks into the governance structure of the LBO business model, employment within PE-backed companies and the maturing alternative asset sector in emerging economies.

This study looks into the affects of the sub prime crisis on the private equity business model. Was high leverage the only reason why private equity firms were successful or was there real value created due to noticeable operational changes in portfolio companies, producing high returns. As a result, how will the private equity model behave in the face of significant reduction in debt issuance over the coming cycle?

Click on the link below to read more.