Trends and taxes

This issue of Private Equity Manager is accompanied by our second annual PEM Yearbook, a look back at the trends of the year just passed. In it, we identified six trends that characterized the year 2006 for managers of private equity firms. These six trends will continue to be on the minds of managers this year, as well:

Franchise value: Those fortunate enough to have built a successful private equity management company have the opportunity to richly reward themselves beyond the mere fruits of investment activity, but selling a stake in a GP comes with complications the likes of which the industry is just beginning to understand.

LP due diligence: Those who provide capital to private equity funds want better information, more information, they want it right now, and they all have entirely different questionnaires to fill out. This takes time and manpower.

Global administration: Being successful locally means being active globally, whether you are a middle-market buyout fund or a venture capital fund. Most private equity firms have never managed an overseas office, or even a second office. The ones that will thrive are learning how.

Co-investing: The LPs want it, your employees want it, and various third-party fund managers want it. Managing it is a headache, but it’s a headache that’s here to stay.

Risk multiplication: As firms go global, and as locals get wind of private equity’s success, regulators everywhere will ponder stepping forward to ?help? GPs keep disciplined, which could spell major challenges for the industry.

European vehicles: No region has been more active than Europe in creating and improving investment vehicles in an effort to capture private equity business. It’s a trend to monitor.

Finally, you’ll note that this issue of PEM is dedicated to taxes. It’s the one topic that remains perennially important, complex, exasperating, but if done right, rewarding.

All the best,

David Snow
David.s@us.investoraccess.com