The fascinating history of the modern private equity industry

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The modern private equity industry has an interesting history that dates back to 1946 when the very first venture capital firms were founded. One of them was the American Research and Development Corporation and the other was J.H. Whitney & Company. For 35 years until the late 1970s, several small volumes of investments focused on private equity were recorded.

But private equity, despite its early success among relatively smaller firms on Wall Street, became dormant for quite some time. However, the start of the 1980s gave way to headlines of several major buyouts that catapulted the industry into the frontlines.

For one, the story of Jerome Kohlberg, Jr. and Henry Kravis’ effort to form Kohlberg Kravis Roberts (KKR) followed by their famous purchase of the RJR Nabisco through a leveraged buyout became an inspiration for a book and a film, Barbarians at the Gate.

Although it was not the first LBO in history, the RJR Nabisco buyout was one of the largest at the time and the most phenomenal. Unfortunately, the KKR investment did not fare that long and ended in a substantial failure. From 1979 through 1989, thousands of leveraged buyouts were executed, recording a total transaction value of more than $250 billion.

The pre-2008 and the post-2008 eras of the private equity posed new challenges and advantages for the industry. During the early years of the 2000s, the changes in the liberal US monetary policy coupled with stronger credit markets make a blockbuster and large-scale buyouts possible for successful equity firms.

The years following 2008, however, introduced a new environment for private equity investing. The global economic crisis and the credit crunch as the primary obstacles prevented firms from obtaining debt financing and finding more attractive investments.

As the economy began to show signs of improvement, private equity buyouts also started to emerge and began their slow return to the financial scene. At present, the private equity industry is a booming environment that has become more acceptable to the public. Many modern-day investment companies, including those offshore such as LOM Financial, have capitalized on this sector’s potential as a viable investment option for portfolio diversification. They mostly have a long history of facilitating private placements in both listed companies or as-yet to be listed companies.