Summary of Private-Equity Minority Investments

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Private-Equity Minority Investments summary
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Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

Taking a minority shareholding is becoming more common for large private equity (PE) funds, according to Boston Consulting Group professionals Antoon Schneider and Cristina Henrik. As PE firms seek to deploy roughly $1.2 trillion of uninvested capital, they’re more open to atypical deals, while sellers like the control they retain and the know-how they gain from minority investors. However, PE funds need to do their homework to ensure the success of their minority stakes. getAbstract recommends this study’s insights on this little-reported phenomenon to private equity investors as well as to companies considering working with them.

About the Authors

Antoon Schneider is a managing director at the Boston Consulting Group, where Cristina Henrik is a principal.

 

Summary

Large private equity (PE) funds are increasingly taking minority stakes in target companies. Since 2008, the proportion of deals involving minority investments has averaged 27%, compared to 13% between 2004 and 2007. In Asia and Europe, minority ownership appeals to the large number of family-owned businesses that wish to maintain control. In many countries, foreign investors are restricted by law from taking over a local concern.

Sellers of minority positions cite three main reasons for agreeing to such deals: First, more than 90% said they needed capital, especially to fund growth. About one-third considered...


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