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Private equity and venture capital
The term private equity is used for investments in non-quoted stock. Private equity covers both investments in young, rapidly growing (technology) companies – also referred to as venture capital – and investments in mature companies. This fact sheet is limited to the latter group.
Private equity-portfolio
Private equity-investors or venture capital firms use money from pension funds and other large investors. Dutch venture capitalists have a total of € 23,3 billion invested (at year-end 2008). This money is invested in more than 1,300 companies, with 75% of these located in the Netherlands. These companies have a combined turnover of € 84 billion and have together almost 325,000 employees. 25 companies having solely foreign private equity firms as shareholders, have joint revenues of € 28,5 bn and 130.000 employees, of which 31.000 in The Netherlands. In total private equity represents 19% of GDP and about 6% of total employment in the Dutch private sector.
A private equity firm is a partner for the medium-long term
- A private equity firm invests in non-quoted companies where it sees opportunities for improvement.
- It will usually acquire a majority interest or at least a large minority stake.
- The firm will draw up a plan together with the company's management and will remain involved until that plan has been executed, on average after five years.
- In the majority of cases, this results in growth in both employment and turnover.
A private equity firm is, therefore, entirely different from a hedge fund, which acquires a minor stake in a listed company, convinces the management to make a certain move and subsequently sells the shares at a profit.
A private equity firm works together with companies on their future
- 49% of private equity investments is made in sold-off, non-core activities of large companies. These are generally business units that had to fight for the attention of the parent company top executives and were at the back of the line when investment budgets were distributed. Examples include: Bols, Daalderop, Gazelle, IHC Holland Merwede, Mosa, Raet, Wavin.
- 17% of the investments is related to (a lack of) company succession. Examples include: Bever Zwerfsport, Grozette, Peijnenburg.
- Private equity provides these companies with a future. Research shows that they invest more in marketing, R&D, training and capital goods.
Private equity creates jobs
- Employment grows at the majority of the companies (57%). Employment remains unchanged at 25% of companies.
- Two-thirds of the companies expands the number of products and/or opens new branches.
Private equity has its own codes and rules
The members of the NVP and the European Venture Capital & Private Equity Association have their own code of conduct and various detailed guidelines for:
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