Private Equity Finance in the Twenty First Century: Liquidity and the Credit Crunch

The growth of PEF funds and acquisition activity in the twenty first century reached new heights in 2006 and early 2007. The scope of funds and the focus of activity had not, however, been restricted to the US and UK. It had become a more global phenomenon, based on regional and global funds. By 2007 the database of the industry advisory service organisation Private Equity Intelligence (Preqin) contained almost 10,000 PEF funds managed by more than 5,200 firms in 93 countries (Preqin 2008: 12). In 2005 $26 billion was raised for use in emerging markets defined as investments outside of the US, UK, and the core of Europe (Preqin 2006: 1). This was a 300% increase on 2004. In 2005 Permira opened an office in Japan and in 2006 TPG opened one in Moscow.1 Many of the main firms now had Asia-focused funds and the industry based trade journals were increasingly reporting on the potential in Eastern Europe, India and China (e.g. Tannon 2006; Hane 2006; Subhash 2006).2 Activity in Europe also grew. By 2005 the European Venture Capital Association (EVCA) database was tracking 1,600 PEF firms managing 2,600 European focused funds. From 2000 to 2005, PEF investment in Europe, including the UK, rose from 17% to 43% of the global total, whilst the proportion of solicited funds rose from 17% to 38% (Maslakovic 2006a: 1). Despite an underlying trend for activity to be more geographically dispersed, however, the UK and US continued to dominate as sources of funding and the origin of firms, and remained in combination the focus for around 60% of the total activity of PEF (Jenkinson 2006; Maslakovic 2006).3 Global, therefore, still meant a mainly US and UK phenomena.