Private equity in the 2000s represents one of the major growth periods in the

history of private equity and venture capital The history of private equity and venture capital and the development of these asset classes has occurred through a series of boom-and-bust cycles since the middle of the 20th century. Within the broader private equity industry, two distinct sub ...

. Within the broader

private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...

industry, two distinct sub-industries, leveraged buyouts and

venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...

expanded along parallel and interrelated tracks. The development of the

and venture capital asset classes evolved, from the middle of the 20th century, through a series of boom-and-bust

business cycles Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examini ...

. As the century ended, so, too, did the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compo ...

and the tremendous growth in venture capital that had marked the previous five years. Following the collapse of the dot-com bubble, a new "Golden Age" of private equity ensued, as

leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...

s reach unparalleled size and private equity firms achieved new growth levels of scale and institutionalization, an example of which is found in

The Blackstone Group Blackstone Inc. is an American alternative investment management company based in New York City. Blackstone's private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate b ...

's 2007

IPO An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...

Bursting the Internet Bubble and the private equity crash (2000–2003)

The Nasdaq crash and technology slump that started in March 2000 affected virtually the entire venture capital industry as valuations for startup technology companies collapsed. Over the next two years, many venture firms had been forced to write off large proportions of their investments and many funds were significantly " under water", leaving the values of a fund's investments below the amount of capital invested. Venture capital investors sought to reduce the size of commitments they had made to venture capital funds and, in numerous instances, investors sought to unload existing commitments for cents on the dollar in the secondary market. By mid-2003, the venture capital industry had shrunk to about half of its 2001 capacity. Two years later, the

PricewaterhouseCoopers PricewaterhouseCoopers is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounti ...

MoneyTree Survey showed that total venture capital investments held steady at 2003 levels through the second quarter of 2005."Venture Capital - The Indian Scenario", by Dr. A. Amruth Prasad Reddy and Dr. M. Venkata Subbaiah; ''International Journal of Entrepreneurship and Innovation Management''; 6. 477 - 486. 10.1504/IJEIM.2006.010378, 2006.
/ref> Although the post-boom years represent just a small fraction of the peak levels of venture investment reached in 2000, they still represent an increase over the levels of investment from 1980 through 1995. As a percentage of GDP, venture investment was 0.058 percent in 1994, peaked at 1.087 percent (nearly 19 times the 1994 level) in 2000, and ranged from 0.164 to 0.182 percent in 2003 and 2004. The revival of an

Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...

-driven environment (thanks to deals such as

eBay eBay Inc. ( ) is an American multinational e-commerce company based in San Jose, California, that facilitates consumer-to-consumer and business-to-consumer sales through its website. eBay was founded by Pierre Omidyar in 1995 and became ...

's purchase of

Skype Skype () is a proprietary telecommunications application operated by Skype Technologies, a division of Microsoft, best known for VoIP-based videotelephony, videoconferencing and voice calls. It also has instant messaging, file transfer, deb ...

, the

News Corporation News Corporation (abbreviated News Corp.), also variously known as News Corporation Limited, was an American multinational mass media corporation controlled by media mogul Rupert Murdoch and headquartered at 1211 Avenue of the Americas in New ...

's purchase of MySpace.com, and the very successful Google.com and

Salesforce.com Salesforce, Inc. is an American cloud-based software company headquartered in San Francisco, California. It provides customer relationship management (CRM) software and applications focused on sales, customer service, marketing automation, a ...

IPOs) have helped to revive the venture capital environment. However, as a percentage of the overall private equity market, venture capital has still not reached its mid-1990s level, let alone its peak in 2000.

Stagnation in the LBO market

Meanwhile, as the venture sector collapsed, the activity in the leveraged buyout market also declined significantly. Leveraged buyout firms had invested heavily in the telecommunications sector from 1996 to 2000 and profited from the boom which suddenly fizzled in 2001. In that year at least 27 major telecommunications companies, (i.e., with $100 million of liabilities or greater) filed for bankruptcy protection. Telecommunications, which made up a large portion of the overall high yield universe of issuers, dragged down the entire high yield market. Overall corporate default rates surged to levels unseen since the 1990 market collapse rising to 6.3 percent of high yield issuance in 2000 and 8.9 percent of issuance in 2001. Default rates on junk bonds peaked at 10.7 percent in January 2002 according to

Moody's Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides internationa ...

.SMITH, ELIZABETH REED.
Investing; Time to Jump Back Into Junk Bonds?
"

New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

, September 1, 2002. As a result, leveraged buyout activity ground to a halt. The major collapses of former high-fliers including

WorldCom MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunic ...

Adelphia Communications Adelphia Communications Corporation was an American cable television company with headquarters in Coudersport, Pennsylvania. It was founded in 1952 by brothers Gus and John Rigas after the pair purchased a cable television franchise for US$300. C ...

Global Crossing Global Crossing was a telecommunications company that provided computer networking services and operated a tier 1 carrier. It maintained a large backbone network and offered peering, virtual private networks, leased lines, audio and video con ...

and Winstar Communications were among the most notable defaults in the market. In addition to the high rate of default, many investors lamented the low recovery rates achieved through restructuring or bankruptcy. Among the most affected by the bursting of the internet and telecom bubbles were two of the largest and most active private equity firms of the 1990s:

Tom Hicks Thomas Ollis Hicks Sr. (born February 7, 1946), is an American private equity investor and sports team owner living in Dallas, Texas. ''Forbes'' magazine estimated Hicks' wealth at $1 billion in 2009, but it dropped to $700 million in 2010 ...

Hicks Muse Tate & Furst HM Capital Partners was a private equity firm in the United States that specialized in leveraged buyouts. The firm was previously known as Hicks, Muse, Tate & Furst. It was founded in 1989 by Tom Hicks and John Muse as Hicks, Muse & Co. and was c ...

and Ted Forstmann's

Forstmann Little & Company Forstmann, Little & Company was a private equity firm, specializing in leveraged buyouts (LBOs). At its peak in the late 1990s, Forstmann Little was among the largest private equity firms globally. Ultimately, the firm would suffer from the burs ...

. These firms were often cited as the highest profile private equity casualties, having invested heavily in technology and

telecommunications Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than that fe ...

companies. Hicks Muse's reputation and market position were both damaged by the loss of over $1 billion from minority investments in six telecommunications and 13 Internet companies at the peak of the 1990s stock market bubble. Similarly, Forstmann suffered major losses from investments in McLeodUSA and

XO Communications XO Communications, LLC (previously Nextlink Communications, Concentric Network Corporation and Allegiance Telecom, Inc.) was an American telecommunications company. Before being purchased by and later absorbed by Verizon Communications. XO provid ...

resigned from Hicks Muse at the end of 2004 and Forstmann Little was unable to raise a new fund. The treasure of the State of Connecticut, sued Forstmann Little to return the state's $96 million investment to that point and to cancel the commitment it made to take its total investment to $200 million. The humbling of these private equity titans could hardly have been predicted by their investors in the 1990s and forced fund investors to conduct due diligence on fund managers more carefully and include greater controls on investments in partnership agreements. Deals completed during this period tended to be smaller and financed less with high yield debt than in other periods. Private equity firms had to cobble together financing made up of bank loans and mezzanine debt, often with higher equity contributions than had been seen. Private equity firms benefited from the lower valuation multiples. As a result, despite the relatively limited activity, those funds that invested during the adverse market conditions delivered attractive returns to investors. Meanwhile, in Europe LBO activity began to increase as the market continued to mature. In 2001, for the first time, European buyout activity exceeded US activity with $44 billion of deals completed in Europe as compared with just $10.7 billion of deals completed in the US. This was a function of the fact that just six LBOs in excess of $500 million were completed in 2001, against 27 in 2000. As investors sought to reduce their exposure to the private equity asset class, an area of private equity that was increasingly active in these years was the nascent secondary market for private equity interests. Secondary transaction volume increased from historical levels of two or three percent of private equity commitments to five percent of the addressable market in the early years of the new decade. Many of the largest financial institutions (e.g.,

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...

, Abbey National,

UBS AG UBS Group AG is a multinational investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres as the largest Swis ...

) sold portfolios of direct investments and “pay-to-play” funds portfolios that were typically used as a means to gain entry to lucrative

leveraged finance A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...

and

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

assignments but had created hundreds of millions of dollars of losses. Some of the most notable (publicly disclosed) secondary transactions, completed by financial institutions during this period, include: *'' Chase Capital Partners'' sold a $500 million portfolio of private equity funds interests in 2000. *''

National Westminster Bank National Westminster Bank, commonly known as NatWest, is a major retail and commercial bank in the United Kingdom based in London, England. It was established in 1968 by the merger of National Provincial Bank and Westminster Bank. In 2000, i ...

'' completed the sale of over 250 direct equity investments valued at nearly $1 billion in 2000. *''

'' sold a $1.3 billion portfolio of private equity fund interests in over 50 funds in 2003. *''

'' sold a $2 billion investment portfolio as part of a spin-out of MidOcean Partners, funded by a consortium of secondary investors, in 2003. *'' Abbey National'' completed the sale of £748 million ($1.33 billion) of LP interests in 41 private equity funds and 16 interests in private European companies in early 2004. *''

Bank One Bank One Corporation was an American bank founded in 1968 and at its peak the sixth-largest bank in the United States. It traded on the New York Stock Exchange under the stock symbol ONE. The company merged with JPMorgan Chase & Co. on July 1, ...

'' sold a $1 billion portfolio of private equity fund interests in 2004.

The third private equity boom and the "Golden Age" of private equity (2003–2007)

As 2002 ended and 2003 began, the private equity sector, had spent the previous two and a half years reeling from major losses in telecommunications and technology companies and had been severely constrained by tight credit markets. As 2003 got underway, private equity began a five-year resurgence that would ultimately result in the completion of 13 of the 15 largest leveraged buyout transactions in history, unprecedented levels of investment activity and investor commitments and a major expansion and maturation of the leading

private equity firm A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including lev ...

s. The combination of decreasing interest rates, loosening lending standards and regulatory changes for publicly traded companies would set the stage for the largest boom private equity had seen. The

Sarbanes Oxley Sarbanes may refer to: *Paul Sarbanes (1933–2020), former United States Senator from Maryland * Janet Sarbanes, American writer *John Sarbanes (born 1962), Member of the U.S. House of Representatives from Maryland's 3rd district and son of Paul S ...

legislation, officially the Public Company Accounting Reform and Investor Protection Act, passed in 2002, in the wake of corporate scandals at

Enron Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional compani ...

, Tyco, Adelphia,

Peregrine Systems Peregrine Systems, Inc. was an enterprise software company, founded in 1981, that sold enterprise asset management, change management, and ITIL-based IT service management software. Following an accounting scandal and bankruptcy in 2003, Peregri ...

and

, Qwest Communications International, among others, would create a new regime of rules and regulations for publicly traded corporations. In addition to the existing focus on short term earnings rather than long term value creation, many public company executives lamented the extra cost and bureaucracy associated with Sarbanes-Oxley compliance. For the first time, many large corporations saw private equity ownership as potentially more attractive than remaining public. Sarbanes-Oxley would have the opposite effect on the venture capital industry. The increased compliance costs would make it nearly impossible for venture capitalists to bring young companies to the public markets and dramatically reduced the opportunities for exits via IPO. Instead, venture capitalists have been forced increasingly to rely on sales to strategic buyers for an exit of their investment. Interest rates, which began a major series of decreases in 2002 would reduce the cost of borrowing and increase the ability of private equity firms to finance large acquisitions. Lower interest rates would encourage investors to return to relatively dormant

high-yield debt In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a Bond (finance), bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default (finance), defau ...

and leveraged loan markets, making debt more readily available to finance buyouts. Additionally, alternative investments also became increasingly important as investors sought yield despite increases in risk. This search for higher yielding investments would fuel larger funds and in turn larger deals, never thought possible, became reality. Certain buyouts were completed in 2001 and early 2002, particularly in Europe where financing was more readily available. In 2001, for example,

BT Group BT Group plc ( trading as BT and formerly British Telecom) is a British multinational telecommunications holding company headquartered in London, England. It has operations in around 180 countries and is the largest provider of fixed-line, bro ...

agreed to sell its international yellow pages directories business (

Yell Group Hibu Inc. (styled hibü), formerly Yellowbook Inc., is a provider of digital marketing and advertising solutions to small- and medium-sized businesses across the US. Hibu’s specialties includes web development and hosting, digital listings and ...

) to

Apax Partners Apax Partners LLP is a British private equity firm, headquartered in London, England. The company also operates out of six other offices in New York, Hong Kong, Mumbai, Tel Aviv, Munich and Shanghai. As of December 2017, the firm, including its ...

and

Hicks, Muse, Tate & Furst HM Capital Partners was a private equity firm in the United States that specialized in leveraged buyouts. The firm was previously known as Hicks, Muse, Tate & Furst. It was founded in 1989 by Tom Hicks and John Muse as Hicks, Muse & Co. and was c ...

for £2.14 billion (approximately $3.5 billion at the time), making it then the largest non-corporate LBO in European history. Yell later bought US directories publisher McLeodUSA for about $600 million, and floated on London's FTSE in 2003.

Resurgence of the large buyout

Marked by the two-stage buyout of

Dex Media Thryv is a publicly traded software as a service (SaaS) company. It is headquartered in Dallas, Texas, and operates in 48 states across the United States of America with more than 2,400 employees. The company began as a conglomerate of Yellow P ...

at the end of 2002 and 2003; large multibillion-dollar U.S. buyouts could once again obtain significant high-yield debt financing, and larger transactions could be completed.

The Carlyle Group The Carlyle Group is a multinational private equity, alternative asset management and financial services corporation based in the United States with $376 billion of assets under management. It specializes in private equity, real assets, and ...

Welsh, Carson, Anderson & Stowe Welsh, Carson, Anderson & Stowe (WCAS), also referred to as Welsh Carson, is a private equity firm. WCAS was formed in 1979 and focuses on investing in two growth industries, technology and healthcare, primarily in the United States. WCAS has a ...

, and other private investors, led a $7.5 billion buyout of QwestDex, marking the third largest corporate buyout since 1989. QwestDex's purchase occurred in two stages: a $2.75 billion acquisition of assets known as Dex Media East, in November 2002, and a $4.30 billion acquisition of assets known as Dex Media West, in 2003. R. H. Donnelley Corporation acquired Dex Media in 2006. Larger buyouts followed, signaling a resurgence in private equity, including Burger King by

Bain Capital Bain Capital is an American private investment firm based in Boston. It specializes in private equity, venture capital, credit, public equity, impact investing, life sciences, and real estate. Bain Capital invests across a range of industry se ...

; Jefferson Smurfit by

Madison Dearborn Madison Dearborn Partners (MDP) is an American private equity firm specializing in leveraged buyouts of privately held or publicly traded companies, or divisions of larger companies; recapitalizations of family-owned or closely held companies; ...

;

Houghton Mifflin The asterisk ( ), from Late Latin , from Ancient Greek , ''asteriskos'', "little star", is a typographical symbol. It is so called because it resembles a conventional image of a heraldic star. Computer scientists and mathematicians often voc ...

, The Blackstone Group and

Thomas H. Lee Partners Thomas H. Lee Partners, L.P. is an American private equity firm based in Boston investing in middle market growth companies across financial technology and services, healthcare and technology & business solutions. History Founded in 1974 by ...

; and

TRW Automotive TRW Automotive Holdings Corp. was an American global supplier of automotive systems, modules, and components to automotive original equipment manufacturers (OEMs) and related aftermarkets. Tracing its roots from TRW Inc. it was originally h ...

by Blackstone. In 2006, ''

USA Today ''USA Today'' (stylized in all uppercase) is an American daily middle-market newspaper and news broadcasting company. Founded by Al Neuharth on September 15, 1982, the newspaper operates from Gannett's corporate headquarters in Tysons, Virgi ...

'' reported retrospectively on the revival of private equity: : ''LBOs are back, only they've rebranded themselves private equity and vow a happier ending. The firms say this time it's completely different. Instead of buying companies and dismantling them, as was their rap in the '80s, private equity firms… squeeze more profit out of underperforming companies.'' :''But whether today's private equity firms are simply a regurgitation of their counterparts in the 1980s… or a kinder, gentler version, one thing remains clear: private equity is now enjoying a "Golden Age." And with returns that triple the S&P 500, it's no wonder they are challenging the public markets for supremacy.'' By 2004 and 2005, major buyouts were once again becoming common and market observers were stunned by the leverage levels and financing terms obtained by financial sponsors in their buyouts. Some of the notable buyouts of this period include: *''

Dollarama Dollarama is a Canadian dollar store retail chain headquartered in Montreal. Since 2009 it is Canada's largest retailer of items for five dollars or less. Dollarama has over 1400 stores and has a presence in every province of Canada; Ontario has ...

'', 2004 :The U.S. chain of "dollar stores" was sold for $850 million to

. *''

Toys "R" Us Toys "R" Us is an American toy, clothing, and baby product retailer owned by Tru Kids (doing business as Tru Kids Brands) and various others. The company was founded in 1957; its first store was built in April 1948, with its headquarters loc ...

'', 2004 :A consortium of

, KKR and real estate development company

Vornado Realty Trust Vornado Realty Trust is a real estate investment trust formed in Maryland in 1982, with its primary office in New York City. The company invests in office buildings and street retail in Manhattan. Investments Notable properties owned by the ...

announced the $6.6 billion acquisition of the toy retailer. A month earlier,

Cerberus Capital Management Cerberus Capital Management, L.P. is an American private equity firm,Leaders Magazine"Providing Economic Opportunity: An Interview with The Honorable Dan Quayle, Chairman, Cerberus Global Investments, LLC". specializing in distressed investing. ...

, made a $5.5 billion offer for both the toy and baby supplies businesses. *''

The Hertz Corporation The Hertz Corporation is an American car rental company based in Estero, Florida. The company operates its namesake Hertz brand, along with the brands Dollar Rent A Car, Firefly Car Rental and Thrifty Car Rental. It is one of the three big re ...

'', 2005 :

Carlyle Group The Carlyle Group is a multinational private equity, alternative asset management and financial services corporation based in the United States with $376 billion of assets under management. It specializes in private equity, real assets, and ...

Clayton, Dubilier & Rice Clayton, Dubilier & Rice is an American private equity company. It is one of the oldest private equity investment firms in the world. Founded in 1978, CD&R has managed the investment of more than $30 billion in approximately 90 businesses, repre ...

and Merrill Lynch completed the $15.0 billion leveraged buyout of the largest car rental agency from

Ford Ford commonly refers to: * Ford Motor Company, an automobile manufacturer founded by Henry Ford * Ford (crossing), a shallow crossing on a river Ford may also refer to: Ford Motor Company * Henry Ford, founder of the Ford Motor Company * Ford F ...

. *''

Metro-Goldwyn-Mayer Metro-Goldwyn-Mayer Studios Inc., also known as Metro-Goldwyn-Mayer Pictures and abbreviated as MGM, is an American film, television production, distribution and media company owned by Amazon through MGM Holdings, founded on April 17, 1924 ...

'', 2005 :A consortium led by

Sony , commonly stylized as SONY, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan. As a major technology company, it operates as one of the world's largest manufacturers of consumer and professiona ...

and

TPG Capital TPG Inc., previously known as Texas Pacific Group and TPG Capital, is an American investment company based in Fort Worth, Texas. The private equity firm is focused on leveraged buyouts and growth capital. TPG manages investment funds in growth c ...

completed the $4.81 billion buyout of the film studio. The consortium also included media-focused firms Providence Equity Partners and

Quadrangle Group Quadrangle Group is a private investment firm focused on private equity. The firm invests in middle-market companies within the media, communications and information-based sectors. The firm, which is based in New York City, was founded in 2000, ...

as well as

DLJ Merchant Banking Partners aPriori Capital Partners is a private equity investment firm focused on leveraged buyout transactions. The firm was founded as an affiliate of Credit Suisse and traces its roots to Donaldson, Lufkin & Jenrette, the investment bank acquired by ...

. *'' SunGard'', 2005 :SunGard was acquired by a consortium of seven private equity investment firms in a transaction valued at $11.3 billion. The partners in the acquisition were Silver Lake Partners, which led the deal as well as

Goldman Sachs Capital Partners Goldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally. The group, which is based in New York City, was founded in 1986. As of 2019, GS Capital Partners had ...

, KKR, Providence Equity Partners, and

Texas Pacific Group TPG Inc., previously known as Texas Pacific Group and TPG Capital, is an American investment company based in Fort Worth, Texas. The private equity firm is focused on leveraged buyouts and growth capital. TPG manages investment funds in growth ...

. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard would be the largest buyout of a technology company in history, a distinction it would cede to the buyout of

Freescale Semiconductor Freescale Semiconductor, Inc. was an American semiconductor manufacturer. It was created by the divestiture of the Semiconductor Products Sector of Motorola in 2004. Freescale focused their integrated circuit products on the automotive, embe ...

. The SunGard transaction is also notable in the number of firms involved in the transaction. The involvement of seven firms in the consortium was criticized by investors in private equity who considered cross-holdings among firms to be generally unattractive.

Age of the mega-buyout

As 2005 ended and 2006 began, new "largest buyout" records were set and surpassed several times with nine of the top ten buyouts at the end of 2007 having been announced in an 18-month window from the beginning of 2006 through the middle of 2007. Additionally, the buyout boom was not limited to the United States as industrialized countries in Europe and the Asia-Pacific region also saw new records set. In 2006, private equity firms bought 654 U.S. companies for $375 billion, representing 18 times the level of transactions closed in 2003. Additionally, U.S. based private equity firms raised $215.4 billion in investor commitments to 322 funds, surpassing the previous record set in 2000 by 22 percent and 33 percent higher than the 2005 fundraising total. However, venture capital funds, which were responsible for much of the fundraising volume in 2000 (the height of the

), raised only $25.1 billion in 2006, a two percent decline from 2005 and a significant decline from its peak. The following year, despite the onset of turmoil in the credit markets in the summer, saw yet another record year of fundraising with $302 billion of investor commitments to 415 funds. *Georgia-Pacific Corp, 2005 :In December 2005,

Koch Industries Koch Industries, Inc. ( ) is an American privately held multinational conglomerate corporation based in Wichita, Kansas and is the second-largest privately held company in the United States, after Cargill. Its subsidiaries are involved in the ...

, a privately owned company controlled by Charles G. Koch and

David H. Koch David Hamilton Koch ( ; May 3, 1940 – August 23, 2019) was an American businessman, political activist, philanthropist, and chemical engineer. In 1970, he joined the family business: Koch Industries, the second largest privately held c ...

, acquired pulp and paper producer Georgia-Pacific for $21 billion. The acquisition marked the first buyout in excess of $20 billion and largest buyout overall since RJR Nabisco and pushed

ahead of Cargill as the largest privately held company in the US, based on revenue. *''

Albertson's Albertsons Companies, Inc. is an American grocery company founded and headquartered in Boise, Idaho. With 2,253 stores as of the third quarter of fiscal year 2020 and 270,000 employees as of fiscal year 2019, the company is the second-large ...

'', 2006 :Albertson's accepted a $15.9 billion takeover offer ($9.8 billion in cash and stock and the assumption of $6.1 billion in debt) from SuperValu to buy most Albertson's grocery operations. The drugstore chain CVS Caremark acquired 700 stand-alone Sav-On and Osco pharmacies and a distribution center, and a group including

and the Kimco Realty Corporation acquired some 655 underperforming grocery stores and a number of distribution centers. *''

EQ Office EQ Office is a real estate investment company that owns 80 office properties comprising 40 million square feet. The company is owned by funds managed by The Blackstone Group. The company was formerly known as Equity Office. History The company w ...

'', 2006 – The Blackstone Group completed the $37.7 billionSource:

Thomson Financial Thomson Financial was an arm of the Thomson Corporation, an information provider. When the Thomson Corporation merged with Reuters to form Thomson Reuters in April 2008, Thomson Financial was merged with the business of Reuters to form the Market ...

acquisition of one of the largest owners of commercial office properties in the US. At the time of its announcement, the EQ Office buyout became the largest in history, surpassing the buyout of HCA. It would later be surpassed by the buyouts of TXU and

BCE Common Era (CE) and Before the Common Era (BCE) are year notations for the Gregorian calendar (and its predecessor, the Julian calendar), the world's most widely used calendar era. Common Era and Before the Common Era are alternatives to the or ...

(announced but as of the end of the first quarter of 2008 not yet completed). *''

'', 2006 :A consortium led by Blackstone and including the

Permira Permira is a global investment firm. Founded in 1985, the firm advises funds with assets under management of €60+ billion. The Permira funds have made approximately 300 private equity investments in four key sectors: Technology, Consumer, Ser ...

and the

completed the $17.6 billion takeover of the semiconductor company. At the time of its announcement, Freescale would be the largest leveraged buyout of a technology company ever, surpassing the 2005 buyout of SunGard. *'' GMAC'', 2006 : General Motors sold a 51 percent majority stake in its financing arm, GMAC Financial Services to a consortium led by

, valuing the company at $16.8 billion. Separately, General Motors sold a 78 percent stake in GMAC (now

Ally Financial Ally Financial is a bank holding company organized in Delaware and headquartered in Detroit, Michigan. The company provides financial services including car finance, online banking via a direct bank, corporate lending, vehicle insurance, mor ...

) Commercial Holding Corporation, renamed Capmark, its real estate venture, to a group of investors headed by

Kohlberg Kravis Roberts KKR & Co. Inc., also known as Kohlberg Kravis Roberts & Co., is an American global investment company that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strate ...

and

in a $1.5 billion deal. In June 2008, GMAC completed a $60 billion refinancing aimed at improving the liquidity of its struggling mortgage subsidiary, Residential Capital (

GMAC ResCap GMAC ResCap, Inc. was a residential mortgage loan originator and servicer based in Minneapolis, United States. As a result of its exposure to subprime lending during the subprime mortgage crisis, the company filed for bankruptcy protection in 201 ...

) including $1.4 billion of additional equity contributions from the parent and Cerberus. *'' HCA'', 2006 :

and

, together with Merrill Lynch and the Frist family (which had founded the company) completed a $31.6 billion acquisition of the hospital company, 17 years after it was taken private for the first time in a management buyout. At the time of its announcement, the HCA buyout would be the first of several to set new records for the largest buyout, eclipsing the 1989 buyout of RJR Nabisco. It was later surpassed by the buyouts of

, TXU and

(announced but as of the end of the first quarter of 2008 not yet completed). *'' Kinder Morgan'', 2006 :A consortium of private equity firms including

and

Riverstone Holdings Riverstone Holdings is a multinational private equity firm based in New York City focused on leveraged buyout, growth capital, and credit investments in the energy industry and electrical power industry sectors. The firm focuses on oil and gas ...

completed a $27.5 billion (including assumed debt) acquisition of one of the largest pipeline operators in the US. The buyout was backed by Richard Kinder, the company's co-founder and a former president of

. *''

Harrah's Entertainment Harrah's Entertainment (later named Caesars Entertainment Corporation, previously The Promus Companies) was an American casino and hotel company founded in Reno, Nevada, and based in Paradise, Nevada, that operated over 50 properties and seven g ...

'', 2006 : Apollo Global Management and

completed the $27.39 billion (including purchase of the outstanding equity for $16.7 billion and assumption of $10.7 billion of outstanding debt) acquisition of the gaming company. *''

TDC A/S TDC Holding A/S or TDC Group (formerly Tele Danmark Communications) is a Danish telecommunications company dating back to 1879. TDC Group is the largest telecommunications company in Denmark. The company's headquarters are located in Copenhagen ...

'', 2006 :The Danish phone company was acquired by

, Providence Equity Partners and

for €12.2 billion ($15.3 billion), which at the time made it the second largest European buyout in history. *''

Sabre Holdings Sabre Corporation is a travel technology company based in Southlake, Texas. It is the largest global distribution systems provider for air bookings in North America. American Airlines founded the company in 1960, and it was spun off in 2000. I ...

'', 2006 :

and Silver Lake Partners announced a deal to buy

, which operates

Travelocity Travelocity.com is an online travel agency owned by Expedia Group. It has 12.4 million monthly unique visitors, making it the third most popular website owned by Expedia Group, after Expedia.com and Hotels.com. One of the pioneers of web-based ...

, Sabre Travel Network and Sabre Airline Solutions, for approximately $4.3 billion in cash, plus the assumption of $550 million in debt. Earlier in the year, Blackstone acquired Sabre's chief competitor

Travelport Travelport Worldwide Ltd provides distribution, technology, payment solutions for the travel and tourism industry. It is the smallest, by revenue, of the top three global distribution systems (GDS) after Amadeus IT Group and Sabre Corporation. ...

. *''

'', 2006 :Travelport, which owns

Worldspan Worldspan is a provider of travel technology and content and a part of the Travelport GDS business. It offers worldwide electronic distribution of travel information, Internet products and connectivity, and e-commerce capabilities for travel agenci ...

and Galileo as well as approximately 48 percent of Orbitz Worldwide was acquired from

Cendant Cendant Corporation was an American provider of business and consumer services, primarily within the real estate and travel industries. In 2005 and 2006, it broke up and spun off or sold its constituent businesses. Although it was based in New Yo ...

by The Blackstone Group, One Equity Partners and

Technology Crossover Ventures TCMI, Inc. better known by the name TCV (Technology Crossover Ventures) is an American investment firm based in Menlo Park, California. The firm mainly invests in public and private growth-stage companies in the technology industry. Background ...

in a deal valued at $4.3 billion. The sale of Travelport followed the spin-offs of Cendant's real estate and hospitality businesses,

Realogy Corporation Anywhere Real Estate Inc., formerly Realogy (), is an American publicly owned real estate services company. It owns and franchises several real estate brands and brokerages, and offers consumer programs, lead generation, relocation, and title ...

and Wyndham Worldwide Corporation, respectively, in July 2006. Later in the year, TPG and Silver Lake would acquire Travelport's chief competitor

. *''

Alliance Boots Alliance Boots GmbH was a multinational pharmacy-led health and beauty group with corporate headquarters in Bern, Switzerland and operational headquarters in Nottingham and Weybridge, United Kingdom. The company had a presence in over 27 coun ...

'', 2007 :

and Stefano Pessina, the company’s deputy chairman and largest shareholder, acquired the UK drug store retailer for £12.4 billion ($24.8 billion) including assumed debt, after increasing their bid more than 40 percent amidst intense competition from

Terra Firma Capital Partners Terra Firma Capital Partners Ltd. (TFCP) is a UK-based private equity firm. Financier Guy Hands founded the firm in 2002 through the spin-off of Nomura Principal Finance Group. The firm, which traces its roots to the formation of its predecess ...

and

Wellcome Trust The Wellcome Trust is a charitable foundation focused on health research based in London, in the United Kingdom. It was established in 1936 with legacies from the pharmaceutical magnate Henry Wellcome (founder of one of the predecessors of Glaxo ...

. The buyout came only a year after the merger of Boots Group plc (Boots the Chemist), and Alliance UniChem plc. *'' Biomet'', 2007 :The Blackstone Group,

and

acquired the medical devices company for $11.6 billion. *'' Chrysler'', 2007 :

completed the $7.5 billion acquisition of 80.1 percent of the U.S. car manufacturer. Only $1.45 billion of proceeds were expected to be paid to Daimler and does not include nearly $600 million of cash Daimler agreed to invest in Chrysler. With the company struggling, Cerberus brought in former

Home Depot The Home Depot, Inc., is an American multinational home improvement retail corporation that sells tools, construction products, appliances, and services, including fuel and transportation rentals. Home Depot is the largest home improvement r ...

CEO,

Robert Nardelli Robert Louis Nardelli (born May 17, 1948) is an American businessman who was the CEO of Freedom Group from September 2010 to March 2012. Prior to that role, Nardelli served as chairman and CEO of Chrysler from August 2007 to April 2009 and CEO ...

as the new chief executive of Chrysler to execute a turnaround of the company. *''

First Data First Data Corporation is a financial services company headquartered in Atlanta, Georgia, United States. The company's STAR Network provided nationwide domestic debit acceptance at more than 2 million retail POS, ATM, and Online outlets for nea ...

'', 2007 :

and

completed the $29 billion buyout of the credit and debit card payment processor and former parent of

Western Union The Western Union Company is an American multinational financial services company, headquartered in Denver, Colorado. Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the company cha ...

Michael Capellas, previously the CEO of

MCI Communications MCI Communications Corp. (originally Microwave Communications, Inc.) was a telecommunications company headquartered in Washington, D.C. that was at one point the second-largest long-distance provider in the United States. MCI was instrumen ...

and

Compaq Compaq Computer Corporation (sometimes abbreviated to CQ prior to a 2007 rebranding) was an American information technology company founded in 1982 that developed, sold, and supported computers and related products and services. Compaq produced ...

was named CEO of the privately held company. *'' TXU'', 2007 :An investor group led by KKR and

and together with

completed the $44.37 billion buyout of the regulated utility and power producer. The investor group had to work closely with

ERCOT The Electric Reliability Council of Texas, Inc. (ERCOT) is an American organization that operates Texas's electrical grid, the Texas Interconnection, which supplies power to more than 25 million Texas customers and represents 90 percent of the st ...

regulators to gain approval of the transaction but had significant experience with the regulators from their earlier buyout of

Texas Genco Texas Genco was a power generation company that came about as part of the deregulated Texas electricity market and owned numerous power plants in the Houston area that serve area power needs. The Company was created in 2001 as part of the Tex ...

. *''

'', 2008 :On July 4, 2008, BCE announced that a final agreement had been reached on the terms of the purchase, with all financing in place, and Michael Sabia left BCE, with George Cope assuming the position of CEO on July 11. The deal's final closing date was scheduled for December 11, 2008 with a value of $51.7 billion (Canadian). The company failed a solvency test by KPMG that was required for the merger to take place. The deal was canceled when the results of the test were released.

Publicly traded private equity

Although there had previously been certain instances of publicly traded private equity vehicles, the convergence of private equity and the public equity markets attracted significantly greater attention when several of the largest private equity firms pursued various options through the public markets. Taking private equity firms and private equity funds public appeared an unusual move since private equity funds often buy public companies listed on exchange and then take them private. Private equity firms are rarely subject to the quarterly reporting requirements of the public markets and tout this independence to prospective sellers as a key advantage of going private. Nevertheless, there are fundamentally two separate opportunities that private equity firms pursued in the public markets. These options involved a public listing of either: *A ''

'' (the management company), which provides shareholders an opportunity to gain exposure to the

management fee In the investment advisory industry, a management fee is a periodic payment that is paid by an investment fund to the fund's investment adviser for investment and portfolio management services. Often, the fee covers not only investment advisory serv ...

s and

carried interest Carried interest, or carry, in finance, is a share of the profits of an investment paid to the investment manager specifically in alternative investments (private equity and hedge funds). It is a performance fee, rewarding the manager for enhanc ...

earned by the investment professionals and managers of the private equity firm. The most notable example of this public listing was completed by The Blackstone Group in 2007 *A '' private equity fund'' or similar investment vehicle, which allows investors that would otherwise be unable to invest in a traditional private equity limited partnership to gain exposure to a portfolio of private equity investments. In May 2006,

raised $5 billion in an initial public offering for a new permanent investment vehicle ( KKR Private Equity Investors or KPE) listing it on the Euronext exchange in Amsterdam (ENXTAM: KPE). KKR raised more than three times what it had expected at the outset as many of the investors in KPE were hedge funds seeking exposure to private equity but could not make long term commitments to private equity funds. Because private equity had been booming in the preceding years, the proposition of investing in a KKR fund appeared attractive to certain investors. However, KPE's first-day performance was lackluster, trading down 1.7 percent and trading volume was limited. Initially, a handful of other private equity firms and hedge funds had planned to follow KKR's lead but shelved those plans when KPE's performance continued to falter after its IPO. KPE's stock declined from an IPO price of €25 per share to €18.16, a 27 percent decline, at the end of 2007, and a low of €11.45, a 54.2 percent decline, per share in Q1 2008. KPE disclosed in May 2008 that it had completed approximately $300 million of private equity secondary market, secondary sales of selected limited partnership interests in and undrawn commitments to certain KKR-managed funds in order to generate liquidity and repay borrowings. On March 22, 2007, The Blackstone Group filed with the SEC to raise $4 billion in an initial public offering. On June 21, Blackstone traded a 12.3 percent stake in its ownership for $4.13 billion in the largest U.S. IPO since 2002. Traded on the New York Stock Exchange under the ticker symbol BX, Blackstone priced at $31 per share on June 22, 2007. Less than two weeks after The Blackstone Group IPO, rival firm

filed with the SEC in July 2007 to raise $1.25 billion by selling an ownership interest in its management company. KKR had previously listed its KKR Private Equity Investors (KPE) private equity fund vehicle in 2006. The onset of the credit crunch and the shutdown of the IPO market would dampen the prospects of obtaining a valuation that would be attractive to KKR and the flotation was repeatedly postponed. Meanwhile, other private equity investors were seeking to realize a portion of the value locked into their firms. In September 2007, the

sold a 7.5 percent interest in its management company to Mubadala Development Company, which is owned by the Abu Dhabi Investment Authority (ADIA) for $1.35 billion, which valued Carlyle at approximately $20 billion. Similarly, in January 2008, Silver Lake Partners sold a 9.9 percent stake in its management company to the CalPERS, California Public Employees' Retirement System (CalPERS) for $275 million. Additionally, Apollo Global Management completed a private placement of shares in its management company in July 2007. By pursuing a private placement rather than a public offering, Apollo would be able to avoid much of the public scrutiny applied to Blackstone and KKR. In April 2008, Apollo filed with the SEC to permit some holders of its privately traded stock to sell their shares on the New York Stock Exchange. In April 2004, Apollo raised $930 million for a listed business development company, Apollo Investment Corporation (NASDAQ: AINV), to invest primarily in middle-market companies in the form of mezzanine debt and secured loan, senior secured loans, as well as by making direct equity investments in companies. The Company also invests in the securities of public companies. Historically, in the United States, there had been a group of publicly traded private equity firms that were registered as business development companies (BDCs) under the Investment Company Act of 1940. Typically, BDCs are structured similar to real estate investment trusts (REITs) in that the BDC structure reduces or eliminates corporate income tax. In return, REITs are required to Distribution (economics), distribute 90 percent of their income, which may be taxable to its investors. As of the end of 2007, among the largest BDCs (by market value, excluding Apollo Investment Corp, discussed earlier) are: American Capital Strategies (NASDAQ:ACAS), Allied Capital Corp (NASDAQ:ALD), Ares Capital Corporation (NASDAQ:ARCC), Gladstone Investment Corp (NASDAQ:GAIN) and Kohlberg & Company, Kohlberg Capital Corp (NASDAQ:KCAP).

Secondary market and the evolution of the private equity asset class

In the wake of the collapse of the equity markets in 2000, many investors in private equity sought an early exit from their outstanding commitments. The surge in activity in the secondary market, which had previously been a relatively small niche of the private equity industry, prompted new entrants to the market, however the market was still characterized by limited liquidity and distressed prices with private equity funds trading at significant discounts to fair value. Beginning in 2004 and extending through 2007, the secondary market transformed into a more efficient market in which assets for the first time traded at or above their estimated fair values and liquidity increased dramatically. During these years, the secondary market transitioned from a niche sub-category in which the majority of sellers were distressed to an active market with ample supply of assets and numerous market participants. By 2006 active portfolio management had become far more common in the increasingly developed secondary market and an increasing number of investors had begun to pursue secondary sales to rebalance their private equity portfolios. The continued evolution of the private equity secondary market reflected the maturation and evolution of the larger private equity industry. Among the most notable publicly disclosed secondary transactions (it is estimated that over two-thirds of secondary market activity is never disclosed publicly): *''CalPERS'', in 2008, agrees to the sale of a portfolio of a $2 billion portfolio of legacy private equity funds to a consortium of secondary market investors. *''Ohio Bureau of Workers' Compensation'', in 2007, reportedly agreed to sell a $400 million portfolio of private equity fund interests *''MetLife'', in 2007, agreed to sell a $400 million portfolio of over 100 private equity fund interests. *''Bank of America'', in 2007, completed the spin-out of BA Venture Partners to form Scale Venture Partners, which was funded by an undisclosed consortium of secondary investors. *''Mellon Financial Corporation'', following the announcement of its merger with Bank of New York in 2006, sold a $1.4 billion portfolio of private equity fund and direct interests. *''American Capital Strategies'', in 2006, sold a $1 billion portfolio of investments to a consortium of secondary buyers. *''Bank of America'', in 2006, completes the spin-out of BA Capital Europe to form Argan Capital, which was funded by an undisclosed consortium of secondary investors. *''JPMorgan Chase'', in 2006, completed the sale of a $925 million interest in JPMP Global Fund to a consortium of secondary investors. *''Temasek Holdings'', in 2006, completes $810 million securitization of a portfolio of 46 private equity funds. *''Dresdner Bank'', in 2005, sells a $1.4 billion private equity funds portfolio. *''DPL Inc., Dayton Power & Light'', an Ohio-based electric utility, in 2005, sold a $1.2 billion portfolio of private equity fund interests

The credit crunch and post-modern private equity (2007–2008)

In July 2007, turmoil that had been affecting the Subprime mortgage crisis, mortgage markets, spilled over into the

and

markets. The markets had been highly robust during the first six months of 2007, with highly issuer friendly developments including PIK loan, PIK and PIK Toggle (interest is "''P''ayable ''I''n ''K''ind") and Cov-lite, covenant light debt widely available to finance large leveraged buyouts. July and August saw a notable slowdown in issuance levels in the high yield and leveraged loan markets with only few issuers accessing the market. Uncertain market conditions led to a significant widening of yield spreads, which coupled with the typical summer slowdown led to many companies and investment banks to put their plans to issue debt on hold until the autumn. However, the expected rebound in the market after Labor Day 2007 did not materialize and the lack of market confidence prevented deals from pricing. By the end of September, the full extent of the credit situation became obvious as major lenders including Citigroup and

announced major writedowns due to credit losses. The leveraged finance markets came to a near standstill. As a result of the sudden change in the market, buyers would begin to withdraw from or renegotiate the deals completed at the top of the market: *Harman International (announced and withdrawn, 2007) :

and

announced the $8 billion takeover of Harman International, Harman, the maker of JBL (company), JBL speakers and Harman Kardon, in April 2008. In a novel part of the deal, the buyers offered Harman shareholders a chance to retain up to a 27 percent stake in the newly private company and share in any profit made if the company is later sold or taken public as a concession to shareholders. However, in September 2007 the buyers withdrew from the deal, saying that the company’s financial health had suffered from a material adverse change. *''Sallie Mae'' (announced 2007; withdrawn 2008) :SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, announced plans to be acquired by a consortium of private equity firms and large investment banks including JC Flowers, Friedman Fleischer & Lowe, Bank of America and JPMorgan Chase With the onset of the credit crunch in July 2007, the buyout of Sallie Mae encountered difficulty. *''Clear Channel Communications'', 2007 :After pursuing the company for over six months

and

finally won the support of shareholders to complete a $26.7 billion (including assumed debt) buyout of the radio station operator. The buyout had the support of the founding Mays family but the buyers were required initially to push for a proxy vote before raising their offer several times. As a result of the credit crunch, the banks sought to pull their commitments to finance the acquisition of Clear Channel. The buyers filed suit against the bank group (including Citigroup, Morgan Stanley,

, Credit Suisse, the Royal Bank of Scotland and Wachovia) to force them to fund the transaction. Ultimately, the buyers and the banks were able to renegotiate the transaction, reducing the purchase price paid to the shareholders and increasing the interest rate on the loans. *''

'', 2007 :The Ontario Teachers' Pension Plan, Providence Equity Partners and

announced a C$51.7 billion (including debt) buyout of BCE in July 2007, which would constitute the largest leveraged buyout in history, exceeding the record set previously by the buyout of TXU. Since its announcement, the buyout has faced a number of challenges including issues with lenders and courts in Canada. The credit crunch prompted buyout firms to pursue a new group of transactions in order to deploy their massive investment funds, including private investment in public equity, Private Investment in Public Equity (PIPE) transactions, as well as purchases of debt in existing leveraged buyout transactions. Some of the most notable of these transactions completed in the depths of the credit crunch include: *''Citigroup Loan Portfolio'', 2008 :As the credit crunch reached its peak in the first quarter of 2008, Apollo Global Management,

and The Blackstone Group completed the acquisition of $12.5 billion of bank loans from Citigroup. The portfolio was composed primarily of secured loan, senior secured leveraged loans that had been made to finance leveraged buyout transactions at the peak of the market. Citigroup had been unable to syndicate the loans before the onset of the credit crunch. The loans were believed to have been sold in the "mid-80 cents on the dollar" relative to face value. *''Washington Mutual'', 2008 :An investment group led by

invested $7 billion—of which TPG committed $1.5 billion—in new capital in the struggling savings and loan to shore up the company's finances.

Contemporary reflections of private equity and private equity controversies

Carlyle group featured prominently in Michael Moore, Michael Moore's 2003 film ''Fahrenheit 9-11''. The film suggested that

exerted tremendous influence on U.S. government policy and contracts through their relationship with the president’s father, George H. W. Bush, a former senior adviser to the Carlyle Group. Additionally, Moore cited relationships with the Bin Laden family, Bin Laden family. The movie quotes author Dan Briody claiming that the Carlyle Group "gained" from September 11 because it owned United Defense, a military contractor, although the firm’s $11 billion Crusader artillery rocket system developed for the U.S. Army is one of the few weapons systems canceled by the Bush administration. Over the next few years, attention intensified on private equity as the size of transactions and profile of the companies increased. The attention would increase significantly following a series of events involving The Blackstone Group: the firm's initial public offering and the birthday celebration of its CEO. ''The Wall Street Journal'' observing Blackstone's Steve Schwarzman's 60th birthday celebration in February 2007 described the event as follows:Sender, Henny and Langley, Monica.
Buyout Mogul: How Blackstone's Chief Became $7 Billion Man – Schwarzman Says He's Worth Every Penny; $400 for Stone Crabs
." The Wall Street Journal, June 13, 2007.

The Armory's entrance hung with banners painted to replicate Mr. Schwarzman's sprawling Park Avenue apartment. A brass band and children clad in military uniforms ushered in guests. A huge portrait of Mr. Schwarzman, which usually hangs in his living room, was shipped in for the occasion. The affair was emceed by comedian Martin Short. Rod Stewart performed. Composer Marvin Hamlisch did a number from "A Chorus Line." Singer Patti LaBelle led the Abyssinian Baptist Church choir in a tune about Mr. Schwarzman. Attendees included Colin Powell and New York Mayor Michael Bloomberg. The menu included lobster, baked Alaska and a 2004 Louis Jadot Chassagne Montrachet, among other fine wines.

Schwarzman received a severe backlash from both critics of the private equity industry and fellow investors in private equity. The lavish event which reminded many of the excesses of notorious executives including Bernie Ebbers (

) and Dennis Kozlowski (Tyco International). David Rubenstein, the founder of

remarked, "We have all wanted to be private – at least until now. When Steve Schwarzman's biography with all the dollar signs is posted on the web site none of us will like the furor that results – and that's even if you like Rod Stewart." Rubenstein's fears would be confirmed when in 2007, the Service Employees International Union launched a campaign against private equity firms, specifically the largest buyout firms through public events, protests as well as leafleting and web campaigns. A number of leading private equity executives were targeted by the union members however the SEIU's campaign was not nearly as effective at slowing the buyout boom as the credit crunch of 2007 and 2008 would ultimately prove to be. In 2008, the SEIU would shift part of its focus from attacking private equity firms directly toward the highlighting the role of sovereign wealth funds in private equity. The SEIU pushed legislation in California that would disallow investments by state agencies (particularly CalPERS and CalSTRS) in firms with ties to certain sovereign wealth funds. Additionally, the SEIU has attempted to criticize the treatment of Taxation of private equity and hedge funds, taxation of carried interest. The SEIU, and other critics, point out that many wealthy private equity investors pay taxes at lower rates (because the majority of their income is derived from

, payments received from the profits on a private equity fund's investments) than many of the rank and file employees of a private equity firm's portfolio companies. In 2009, the Canadian regulatory bodies set up rigorous regulation for dealers in exempt (non-publicly traded) securities. Exempt-market dealers sell securities that are exempt from prospectus requirements and must register with the Ontario Securities Commission.Other ways to get yield
Financial Post, May 29, 2010.

Notes

References

* *Bance, A. (2004)
Why and how to invest in private equity
European Private Equity and Venture Capital Association (EVCA). Accessed May 22, 2008. *Bruck, Connie. ''Predator's Ball''. New York: Simon and Schuster, 1988. *Burrill, G. Steven, and Craig T. Norback. The Arthur Young Guide to Raising Venture Capital. Billings, MT: Liberty House, 1988. *Burrough, Bryan. ''Barbarians at the Gate.'' New York : Harper & Row, 1990. *Craig. Valentine V
Merchant Banking: Past and Present
FDIC Banking Review. 2000. *Fenn, George W., Nellie Liang, and Stephen Prowse. December, 1995. The Economics of the Private Equity Market. Staff Study 168, Board of Governors of the Federal Reserve System. *Gibson, Paul. "The Art of Getting Funded." Electronic Business, March 1999. *Gladstone, David J. Venture Capital Handbook. Rev. ed. Englewood Cliffs, NJ: Prentice Hall, 1988. *Hsu, D., and Kinney, M (2004)
Organizing venture capital: the rise and demise of American Research and Development Corporation
1946-1973. Working paper 163. Accessed May 22, 2008 * *Loos, Nicolaus
Value Creation in Leveraged Buyouts
Dissertation of the University of St. Gallen. Lichtenstein: Guttenberg AG, 2005. Accessed May 22, 2008. *National Venture Capital Association, 2005, The 2005 NVCA Yearbook. *Schell, James M. ''Private Equity Funds: Business Structure and Operations.'' New York: Law Journal Press, 1999. *Sharabura, S. (2002)
Private Equity: past, present, and future
GE Capital Speaker Discusses New Trends in Asset Class. Speech to GSB 2/13/2002. Accessed May 22, 2008. *Trehan, R. (2006)
The History Of Leveraged Buyouts
December 4, 2006. Accessed May 22, 2008. *Cheffins, Brian.
THE ECLIPSE OF PRIVATE EQUITY
. Centre for Business Research, University Of Cambridge, 2007.
{{Corporate finance and investment banking , state=collapsed Private equity, Venture capital, Private equity firms, Venture capital firms, Private equity and venture capital investors, History of banking History of private equity and venture capital 2000s economic history

Bursting the Internet Bubble and the private equity crash (2000–2003)

Stagnation in the LBO market

The third private equity boom and the "Golden Age" of private equity (2003–2007)

Resurgence of the large buyout

Age of the mega-buyout

Publicly traded private equity

Secondary market and the evolution of the private equity asset class

The credit crunch and post-modern private equity (2007–2008)

Contemporary reflections of private equity and private equity controversies

See also

Notes

References