Structuring European Private Equity Edited by Iggy Bassi and Jeremy Grant E U R M N E Y B K S
Foreword by Mark B. Fuller Author biographies ix xi Introduction 1 Iggy Bassi and Jeremy Grant Part I - The market 5 1 'Partnering with the large caps': The private equity opportunity for industry 7 David Latter and Shashank Singh, Apax Partners Limited The new model for private equity 7 Summary 17 2 European venture capital: The path to maturity 18 Iggy Bassi, Monitor Group and Vesa Jormakka, Argo Global Capital Introduction 18 Current VC market 19 Key industry trends 20 A note on limited partners 29 Summary: Seizing the opportunity 30 Part II - Fund structure and governance 35 3 Fund structures: New developments in general partner-limited partner terms 37 Jonathan Blake and Stephanie Biggs, SJ Berwin LLP Introduction 37 Economic terms 38 Corporate governance 39 Freedom of information 41 Secondaries transactions 43 Practical implications 43
4 The limits of limited liability: How key jurisdictions differ 45 Matthew H. Hurlock and David Patrick Eich, Kirkland & Ellis International LLP Introduction 45 Delaware 45 England 47 Cayman Islands 49 Channel Islands: Jersey and Guernsey 51 Conclusion 54 5 The governance of private equity owned firms 70 Carsten Bienz, Financial Markets Group, London School of Economics and Centre for Financial Studies, JW Goethe Universitat Frankfurt Jeremy Grant and Thomas Kirchmaier, Financial Markets Group, London School of Economics Introduction 70 Corporate governance in public companies 71 Governance in private equity financed firms 71 Board of directors 72 Contractual governance 73 Differences compared with public firms 78 Advice 79 Conclusion 79 Annex: Model heads of terms agreement between private equity firm and founders of Company X 80 Part III - Investment strategies and performance 85 6 Private equity funds of funds 87 Joe Sovran, Capvent AG Introduction 87 Why funds of funds exist 87 Investing in a fund of funds versus in GP funds 89 Different types of funds of funds 91 How to choose a fund-of-funds manager 93 Future directions for funds of funds 97 Conclusions 98 7 Where next for the secondaries market? 99 Christophe Nicolas, Greenpark Capital Introduction 99 Drivers of growth in the secondaries market 99 vi
Increasing diversity of assets traded in the secondaries market 103 Types of secondaries transactions and their increasing sophistication 104 The hurdles to overcome in a successful secondaries transaction 105 Growth expectations for secondaries 107 8 Beyond financial engineering: Value-added investing 109 liver Markl, Monitor Clipper Partners Threats to the traditional LB fund business model 109 LB key value drivers 111 Utilising best practices 113 Less common best practice differentiators 115 rganising for success 115 Summary 117 9 Private equity performance and public equity returns 119 Didier Guennoc, EVCA and rigo Management Introduction 119 Comparing private and public equity returns: A difficult exercise 120 Comparing private and public equity returns: The quest for solutions 123 Impact of valuation methodologies on performance measurement 126 Comparison of the returns of an illiquid versus a liquid asset class: What does it mean in terms of risk management? 126 Conclusion 127 10 Measuring private equity fund performance: The limited partner perspective 130 Andre Frei and Michael Studer, Partners Group Private equity performance measures 130 Measuring GP performance 136 Measuring LP performance 137 Conclusion 141 Part IV - New frontiers for private equity 143 11 The emergence of private equity in eastern Europe 145 Sylvia Gansser-Potts, European Bank for Reconstruction and Development Dmitry Bosky, Berkeley Capital Partners Introduction 145 verview of private equity in eastern Europe 145 Private equity: Facts and figures 146 The EBRD's role 147 vn
Evolution of private equity investing 149 Private equity in Russia: A case study 153 Regional macroeconomic environment 156 Conclusion 160 12 The rise of venture philanthropy: Private capital and public benefit 161 Rob John, The Skoll Centre for Social Entrepreneurship, SaTd Business School, University of xford Introduction 161 Engaged philanthropy 162 Returns on social investing 163 Three innovations in social investment 164 Is exit possible? 172 The European dimension 173 via