Posted by John Amorosi, Ron Cami, and Louis Goldberg, Davis Polk & Wardwell LLP, on
Wednesday, October 11, 2017
John Amorosi, Ron Cami, and Louis Goldberg are partners at Davis Polk & Wardwell LLP. This post is based on a Davis Polk publication by Mr. Amorosi, Mr. Cami, and Mr. Goldberg.
Over the past 30 years, we have seen explosive growth in private equity, both in the number and types of funds and in the enormous allocation of capital to the asset class. Along the way, we have witnessed different cycles of M&A activity involving private equity businesses or teams. The first wave of M&A in private equity started in the early 2000s and generally involved the sale or spin-off of managers and funds owned and sponsored by banks, insurers and other non-manager owners (such transactions, the “Captive PE Deals”). These transactions typically involved the sale or divestment of control of the manager and were often driven by conflicts with the parent organization or (more recently and later in the cycle) regulatory considerations applicable to the parent (e.g., capital constraints or the Volcker Rule). Thereafter, many of the larger sponsors (e.g., Blackstone, Carlyle, etc.) sold passive stakes to sovereign wealth funds that were used to strengthen their balance sheets in anticipation of going public and expansion into other alternative asset management businesses (such transactions, the “Anchor PE Deals”).
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