The December issue of PEI Manager looks at the growing number of firms that have ?gone global,? and at how these firms have structured themselves to do business across borders. These structures are all over the map, literally and figuratively.
While in some respects best practices have emerged to make business models of private equity firms standardized around the world, in many more respects idiosyncrasies are the rule. This is especially true with regard to how firms have structured their global ?back office,? to use a slightly limiting term. When a Boston-based firm opens a San Francisco office, there arises financial and operational considerations, but not nearly as many as what happens when, for example, a Chicago-based firm opens an office in Shanghai. Or when a Shanghai-based firm opens an office in Chicago.
Firms in Europe, and in particular the cluster of pan-European firms based in London, tend to have significant experience operating an investment platform across multiple legal, regulatory and tax regimes. Now international expansion is becoming the norm, even among domestically focused US firms and other country-specific firms.
Indeed, as Rob Kotecki reports in this issue, not only are private equity firms in the emerging markets beginning to become ?regional champions? by expanding to neighboring markets, but some of these firms are finding it effective to have an office (or a person) in the West. Each of these firms has adopted a structure that best fits its unique circumstances and goals.
Wanching Leong reports in ?Central station? (see page 26), primarily Western firms expanding abroad are faced with a myriad of choices as to how they pay local bills, pay local employees and pay local taxes. They must choose the degree to which they centralize these tasks at the headquarters. They also need to decide what gets outsourced and what gets done by people on the payroll.
Being global is hard work, but for most firms, the work is no longer optional.
Enjoy the issue,
By David SnowDavid.firstname.lastname@example.org