Private Equity

Douglas Cumming (Toronto, Canada), B.Com. (Hons.) (McGill), M.A. (Queen's), J.D. (University of Toronto Faculty of Law), Ph.D. (Toronto), CFA, is an Associate Professor of Finance and Entrepreneurship and the Ontario Research Chair at the Schulich School of Business, York University. Cummings' work has been presented at the American Finance Association, the Western Finance Association, the European Finance Association, the American Law and Economics Association, the European Law and Economics Association, and other leading international conferences. His recent publications have appeared in numerous journals: American Law and Economics Review, Journal of Business, Journal of Corporate Finance, and Review of Financial Studies. He is coauthor of Venture Capital and Private Equity Contracting: An International Perspective (Elsevier Science Academic Press), and has been reviewed in Canadian Business, the Financial Post, and The New Yorker, among others. He was the recipient of the 2004 Ido Sarnat Award and received the 2008 AIMA Canada-Hillsdale Research Award.? He is a research associate with numerous financial and educational groups, and consults for a variety of governmental and private organizations, most recently has been working with Wilshire Associates.

• 1 Introduction to Private Equity. Introduction.Notes.References.About the Editor.PART I The Structure of Private Equity Funds and Fund-Raising.2 Institutional Investment in Private Equity:Motivations, Strategies, and Performance.Introduction.Institutional Investment: Motivations and Behavior.Structure and Strategies.Performance.3 IPOs and Other Nontraditional Fund-Raising Methods of Private Equity Firms.Introduction.Recent Trends in the Private Equity Industry.Traditional Fund-Raising Methods.Nontraditional Fund-Raising Methods.Private Equity IPOs: Performance and Implications for the Future.Sovereign Wealth Funds Complementing and Substituting for Private Equity Investments.4 Listed Private Equity.Introduction.Listed Private Equity: Definitions and Categorization.Terms and Definitions.Further Empirical Insights on Listed Private Equity.Investments.5 The Syndication of Private Equity.Introduction.Motives for Syndication.Partner Selection.Structuring and Managing the Syndicate.Syndication and Performance.The Future of Syndication Research.6 The Structure of Venture Capital and Private Equity Fund Portfolios.Why the Structure of Venture Capitalists' Portfolios Matters.Optimal Effort Levels.Optimal Portfolio Size and Profit-Sharing Rule.Empirical Tests.7 The Rise of the PIPEMarket.Introduction.What Is a PIPE?Contract Terms in PIPE Offerings.Firms Issuing PIPEs.Investors in the PIPE Market.The Role of Placement Agents.Issues in the PIPE Market and SEC Regulations.The PIPE Market Down the Road.8 Private Placements by Small Public Entities: Canadian Experience.Introduction.The Canadian Context.Private Placements and the Issuers.Returns Surrounding Private Placements.Discounts.9 Hedge Funds' Activism: A New Trend of Convergence toward Private Equity in Public Firms?Introduction.Hedge Funds and Private Equity: Market Data and Trends toward Convergence.Hedge Funds’ Approach to Activism.Features of Targeted Companies.How Hedge Funds Engage a Fight against Incumbent Management.Clinical Study of Carl Icahn versus Time Warner, Inc.PART III Financial and Real Returns to Private Equity.10 Projection of Private Equity Fund Performance: A Simulation Approach.Introduction.Related Literature.A Simulation Approach for Venture Capital Performance Projection and Risk Management.Simulation Results for Two Fictitious Venture Capital Funds.11 Value Creation in Middle-Market Buyouts: A Transaction-Level Analysis.Introduction.Background, Context, and Prior Literature.Regression Results.12 Risk and Return of Private Equity: An Overview of Data, Methods, and Results.Introduction.The Data.Results.Additional Discussion.13 Private Equity Fund Selection: How to Find True Top-Quartile Performers.Introduction.Hypothesis Development.The Research Approach.Measurement and Operationalization.Which Factors Correlate with Future Performance?Random Choice versus the Crystal Ball: An Approach to Measuring PE Fund Selection Efficiency.The Peracs Private Equity Selection Efficiency Measure.The Selection Efficiency of Performance-Based Fund Selection Rules.Shortcomings of the Traditional Benchmarking Approach.Using and Interpreting the Right Public Market Benchmarks.Advanced Private Equity Benchmarking Based on Deal-Level Benchmarks.Quantitative Due Diligence Case Study: Advanced Private Equity Benchmarking.The Fund Selection Efficiency of Advanced Private Equity Benchmarking Techniques.14 Real Effects of Private Equity: Empirical Evidence and a Research Agenda.Introduction.Evidence of the Real Effects of Private Equity.Research Agenda.15 Employment,Wage, and Productivity Effects of Private Equity Transactions.The Universe of Private Equity Transactions.Task of the Chapter.Employment and Productivity Identities.Employment, Wage, and Productivity Effects.PART IV International Perspectives on Private Equity and Regulation.16 Valuation and (Financial) Disclosure in the Private Equity Industry: Institutional Set-Up, Incentives, and Empirical Analysis.Introduction.Institutional Setup.Main Problems and Conflicts of Interest.Incentives for Voluntary Disclosure versus Mandatory Disclosure.Disclosure and Reporting Patterns of Venture-Backed Portfolio Firms.17 Private Equity Regulation: A Comparative Analysis.Introduction.The Growth of Private Equity.Dealing with Agency Problems: Contractual Arrangements.Regulation of Private Equity Funds.18 International Private Equity Flows.Introduction.A Brief Overview of International Fund-Raising.International Investments of Private Equity Funds in Western Europe, North America, and Australia.Private Equity in Emerging Markets.Conclusion and Avenues for Research.19 Private Equity in Emerging Markets.Introduction.International Comparison.What Determines Emerging Market PE Activity?Survey among Institutional Investors on the Importance of Emerging Markets’ Allocation Criteria.20 Private Equity in Europe.Introduction.History.The Structure of Private Equity Funds.Private Equity Investment.Internationalization of Private Equity.Private Equity Performance.21 Private Equity and Leveraged Buyouts in Italy: To Prohibit or Not to Prohibit, That Is the Question.Introduction.The Buyout Market and Its Puzzling Trend.The LBO Scheme and Related Criticisms.The LBO Legal Environment: Past, Present, and Future Trends.The Economic Impact of the 2004 Reform.22 Venture Capital and Private Equity in Germany.Introduction.The Development of the German Venture Capital Industry.Going Public as an Exit Route for Venture Capital and the Performance of Venture-Backed IPOs in Germany.23 Private Equity in Denmark: Capital Structure and Taxes.Introduction.Consequences for Capital Structure of Portfolio Companies.Implications for Tax Payments.24 Venture Capital and Private Equity in Canada: Phasing Out an Inefficient Tax Credit.Introduction.Description of 2008 YORKbiotech Survey Data.Multivariate Regression Evidence.Index.