Private equity: sector shows signs of increasing maturity

Article Abstract:

The UK private equity market developed in the early 1980s and initially saw good returns for investors though later institutional investors did not always have such a happy experience. The industry has since matured and there is greater awareness of risks and benefits involved in these investments. The British Venture Capital Association reported a peak of investment in 1989 followed by a drop to less than 400 million pounds sterling in 1991 and a rise to 2.6 billion pounds in 1994.

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Private equity: political uncertainty concentrates minds

Article Abstract:

The UK private equity sector is considering the impact of elections and a possible new government. Capital gains tax (CGT) is perceived as too high and this affects managers as well as those selling companies. Venture-backed companies have a good record for job creation in the early 1990s and they have grown faster than the economy as a whole. Tax avoidance schemes could be set up if CGT differed greatly from income tax, and this could also occur if two-tier CGT were set up.

Capital gains tax

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Deal structure

Article Abstract:

UK managers considering a buy-out have to assess a number of factors. These include potential competitors whom may have an alternative management team. The potential value of the company when an exit is planned should also be estimated. Deals may involve equity, mezzanine finance, and senior debt. Debt to equity ratios have fallen as a result of the earlt 1990s recession. Ratchet mechanisms may be used as an incentive to improve the performance of managers.

Management buyouts

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