Private Equity and Venture Capital in Europe_2

About the Author Stefano Caselli is a Full Professor of Banking and Finance at Bocconi University where he is Director of the Masters of International Management for CEMS. He is the Head of Executive Education Custom Programs, Banks and Financial Institutions Division at SDA Bocconi School of Management. He specializes in corporate finance with specific attention to private equity and venture capital, SMEs and family firm financing, and corporate banking. He is the author of several books and publica-tions on these topics and serves as a strategic consultant to many financial institu-tions and corporations. xxv This page intentionally left blank PART General Framework This page intentionally left blank The fundamentals of private equity and venture capital CHAPTER 1 This chapter presents the fundamentals of private equity and venture capital. The first section covers private equity and venture capital, underlining impor-tant differences between American and European approaches to funding start-ups and the typical characteristics of the business. The second section explains how private equity finance is different from corporate finance, emphasizing the distinguishing elements. The third section analyzes private equity and venture capital from the entrepreneur’s perspective, while the last section discusses the views of all types of potential investors. 1.1 DEFINITION OF PRIVATE EQUITY AND VENTURE CAPITAL There is evidence that investing in the equity of companies started during the Roman Empire. However, the first suggestion of a whole structured organization that funded fi rms to improve and make their development easier was found dur-ing the fifteenth century, when British institutions launched projects dedicated to the increase and expansion of trade to and from their colonies. Modern private equity and venture capital have been around since the 1940s when it started to be useful and essential for financial markets and a firm’s development. Financing firms by private equity and venture capital has become increasingly more important, both strategically and financially. Because this type of business has been around so long, together with dif-ferences between firms and financial markets, one worldwide defi nition and classification for private equity and/or venture capital does not exist. However, Private Equity and Venture Capital in Europe: Markets, Techniques, and Deals Copyright © 2010 by Elsevier, Inc. All rights reserved. 3 ... - tailieumienphi.vn