Private equity in the 2010s

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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]

Contents

Largest deals

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

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

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

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Private equity (PE) is stock in a private company that does not offer stock to the general public. In the field of finance, private equity is offered instead to specialized investment funds and limited partnerships that take an active role in the management and structuring of the companies. In casual usage, "private equity" can refer to these investment firms, rather than the companies in which they invest.

<span class="mw-page-title-main">Berkshire Hathaway</span> American multinational conglomerate holding company

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<span class="mw-page-title-main">Kraft Foods</span> American food and beverage company

Kraft Foods Group, Inc. was an American food manufacturing and processing conglomerate, split from Kraft Foods Inc. on October 1, 2012, and was headquartered in Chicago, Illinois. It became part of Kraft Heinz on July 2, 2015.

<span class="mw-page-title-main">TPG Inc.</span> American investment company

TPG Inc., previously known as Texas Pacific Group and TPG Capital, is an American private equity firm based in Fort Worth, Texas. TPG manages investment funds in growth capital, venture capital, public equity, and debt investments. The firm invests in a range of industries including consumer/retail, media and telecommunications, industrials, technology, travel, leisure, and health care. TPG became a public company in January 2022, trading on the NASDAQ under the ticker symbol “TPG”.

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<span class="mw-page-title-main">History of private equity and venture capital</span>

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<span class="mw-page-title-main">Early history of private equity</span>

The early history of private equity relates to one of the major periods in the history of private equity and venture capital. Within the broader private equity industry, two distinct sub-industries, leveraged buyouts and venture capital experienced growth along parallel although interrelated tracks.

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DFO Management, LLC is an American family office that manages the capital of Michael Dell and his family. The firm, which is based in New York City and has offices in Santa Monica and West Palm Beach, was formed in 1998.

3G Capital is a global investment firm and private partnership built on an owner-operator approach to investing over a long-term horizon. Founded in 2004, 3G Capital evolved from the Brazilian investment office of Jorge Paulo Lemann, Carlos Alberto Sicupira, and Marcel Herrmann Telles. 3G Capital is led by Alex Behring, Co-Founder and Co-Managing Partner, and Daniel Schwartz, Co-Managing Partner.

Tracy Britt Cool is an American business executive and entrepreneur who was widely noted as a Warren Buffett protégé. She chaired four Berkshire Hathaway subsidiaries before co-founding Kanbrick, a private equity firm, in 2020.

Alex Behring is a Brazilian billionaire businessman. He is a co-founder and managing partner of 3G Capital, a global investment firm known for its investments in Anheuser-Busch InBev, Restaurant Brands International, Kraft Heinz, and Hunter Douglas. As of March 2024, Forbes estimated his net worth at US$6.2 billion.

References

  1. ↑ "A Decade of Growth for U.S. Private Equity". insight.factset.com. Retrieved 2022-11-27.
  2. ↑ 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.
  3. ↑ Espinoza, Javier; Platt, Eric (27 June 2019). "Private equity races to spend record $2.5tn cash pile". Financial Times. Retrieved 10 April 2024.
  4. ↑ Goldbacher, Ray; Krantz, Matt (14 February 2013). "Heinz agrees to buyout by Berkshire Hathaway, 3G". USA TODAY. Retrieved 10 April 2024.
  5. ↑ Stempel, Jonathan; Ablan, Jennifer (25 February 2019). "Warren Buffett says Berkshire overpaid for Kraft Heinz". Reuters. Retrieved 10 April 2024.
  6. ↑ Alden, William (February 5, 2013). "Dell's Record-Breaking Buyout". The New York Times. Retrieved 10 April 2024.
  7. ↑ "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.
  8. ↑ Warmbrodt, Zachary (17 November 2019). "In battle with Warren, it's all about chicken". Politico. Retrieved 10 April 2024.
  9. ↑ 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.
  10. ↑ 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. doi:10.1040/247304560.2021.178208 (inactive 9 December 2024).{{cite journal}}: CS1 maint: DOI inactive as of December 2024 (link)
  11. ↑ "What One Private Equity Investor Calls 'Greenwashing,' Another Calls ESG". Institutional Investor. 17 February 2022. Retrieved 2022-11-27.
  12. ↑ KPEC, King's Private Equity Club- (20 May 2021). "Greenwashing and its Implication in Venture Capital". The London Financial. Retrieved 2022-11-27.
  13. ↑ "Scrutiny of ESG claims for private investments grows". Financial Times. 2022-07-03. Retrieved 2022-11-27.
  14. ↑ Addy, Chris; Chorengel, Maya; Collins, Mariah; Etzel, Michael (1 January 2019). "Calculating the Value of Impact Investing". Harvard Business Review. Retrieved 10 April 2024.
  15. ↑ Schultz, Abby (15 May 2018). "Accounting For Impact Alongside Market Returns". Barron's. Retrieved 10 April 2024.
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