Those that strike the right balance between recapturing the entrepreneurial approach adopted by PE's pioneers and managing their firms and stakeholders effectively will be tomorrow's winners.
PE's entrepreneurial style will be vital to its success
The PE model has proven itself resilient and highly adaptable in difficult times. In partnership with top quality management teams, PE has strengthened portfolio companies' balance sheets and directed fundamental changes to ensure that businesses were focused on key growth opportunities.
It has managed relationships with investors effectively and adapted to ensure that their increasingly complex needs are met. PE has expanded its reach to source the best and most exciting growth prospects both in traditional and new markets. And it is improving its internal management systems to ensure that it is complying with the rising tide of regulation and managing risk appropriately.
It has achieved this through a passion for what it does and laser focus — the dogged determination to improve businesses and the ability to spot new opportunities that are the hallmarks of entrepreneurial endeavor. Not all firms have managed to recapture this spirit.
We have witnessed some weaker players struggle to adapt to the shifting tides, and we will undoubtedly see more swept away. In last year's report, we said that 2011 would be the start of a process from which PE winners would emerge. Today's bifurcated fund-raising market, in which successful firms are raising at or above target over the period of a few months while others struggle or fail altogether, is evidence of the changing landscape.
Economies undergoing change or shock require entrepreneurs to find new avenues for growth and transform business failure into success. We are in such a period now, and the best PE firms have shown themselves more than equal to these tasks. PE and its investors benefit from this, but so does the economy at large.
The instability of the capital markets over recent times has proved more than ever that PE is an essential part of the funding ecosystem. PE directs capital to the world's most promising companies and, together with highly talented management teams, shapes them to become market and global leaders, creating wealth, jobs and further opportunity. PE's entrepreneurial nature will ensure that it continues to grow, but it will also mean that it will play an integral role in elevating the world's economic growth prospects.