2018 sees the first investment company celebrate 150 years since its launch. In 1868, the first investment company was launched to give individuals access to a diversified portfolio of quoted companies. 108 years later, in 1976, the first private equity investment company launched, giving individuals access to a diversified portfolio of unquoted companies.
The Private Equity sector is the second largest AIC sector, with £14.7 billion total assets under management1. However, despite its size, there are still many investors that feel they don't fully understand the sector, its specific terminology or the types of businesses private equity investment companies invest in.
To help overcome these barriers, the Association of Investment Companies has created a series of videos with managers from the Private Equity sector to develop investors' knowledge and understanding of the sector, and to help inform their investment decisions.
Over the next few pages, we will answer the question 'What is private equity?', explain terminology that's specific to the Private Equity sector and show the types of businesses that attract investment from private equity investment companies and why they are appealing investment opportunities.
Chief Executive, Association of Investment Companies
1 Source: AIC. Correct as at 31 December 2017
How private equity managers invest
In this video, Hamish Mair, Head of Private Equity at BMO Global Asset Management, managers of F&C Private Equity, discusses why he invested in caravan site operator Park Holidays and reveals the outcome of the investment.
Hamish works with companies with the aim of making them more profitable over the long term:
"This involves helping the management with operational and strategic planning and ensuring the best chance that these plans will bear fruit by providing clear milestones and incentives for management."
Hamish Mair, Head of Private Equity, BMO Global Asset Management, managers of F&C Private Equity
In the next video, Rebecca Gibson, Partner at Oakley Capital explains how they helped online dating company Parship Elite Group double its profits and transform its business.
"Oakley acquired Parship, the number one online match making service in Germany, Austria and Switzerland, in 2015 and has seen its profits double in the following two years.
"Private equity not only provides an investee company with capital to grow and evolve, but also expertise that can assist with strategy, operations, strengthening reporting functions and exploring M&A opportunities."
Steven Tredget, Partner, Oakley Capital, managers of Oakley Capital Investments
Watch Hg’s Andrew Land explain why HgCapital invested in insurance broker A-Plan and his vision for the partnership in the following video.
“We identified A-Plan as one of the most attractive insurance distribution platforms in the UK, on which we could build a much larger multi-channel business through strategic M&A and investing in technology.
"We have now completed more than 15 acquisitions including the creation of underwriting, digital and online capabilities, as well as upgrading the entire data and IT system.
"This has more than doubled our policy count and revenue base, and we see this only accelerating in the future.”
Andrew Land, Partner, Hg
Here, Felix Haldner, Partner at Partners Group explains how Princess Private Equity Holding enabled Swiss technology company The VAT Group to expand and create hundreds of jobs.
"In contrast to investing in listed companies in which minority shareholders delegate control of a company to management, private equity typically acquires controlling stakes, taking Board seats and working closely with management. Free from the distractions of short-term earnings figures, private equity is able to take a long-term perspective and focus on creating value in portfolio companies."
Felix Haldner, Partner, member of the Board of Directors of Princess Private Equity Holding
Helen Steers, Partner at Pantheon Ventures (responsible for Pantheon International) speaks to Mads Larsen on how private equity helped Swedish healthcare company Attendo to grow and make a successful stock market flotation.
"Private equity can give investors access to a wide range of high quality, well-managed companies globally that are not available to them via the public markets. The best private equity managers are able to use their expertise and sector knowledge to help those companies implement strategic and operational improvements, leading to value creation over the long term."
Andrew Lebus, Partner at Pantheon Ventures, responsible for Pantheon International plc