PRIVATE EQUITY, VENTURE CAPITAL AND GLOBAL ECONOMY

Authors

  • Trajanka Makrevska International Slavic University “Gavrilo Romanovich Derzhavin”

Keywords:

private equity, venture capital, global economy

Abstract

The world today is marked by economic, political, and social uncertainties. The economics speaks for them: massive deleveraging, a fall in consumer demand, and a freeze in bank lending are all apparent.

Although global economies are already on the mend, the story of the meltdown provides a backdrop for private equity and venture capital today and a lesson for all in the future. Much has already been written, much more will be written. It's a remarkable story. Behind the scenes, however, is a relatively simple story.

When the Bubble burst in 2008, the result was the massive destruction of wealth by systemic repayment. Consumer demand has dried up and corporate revenues have fallen. The financial world has gone from a period of extreme liquidity to extreme illiquidity.

In theory, private equity and venture capital can exist anywhere that an individual can raise money, invest it, and then dispose of the investment at a profit. Each has its own structures and communities.

They run on ambition, greed, talent, and the challenge of finding new ways to finance and run a company.

Financially, private equity and venture capital may well be one of the only institutions left standing.

Do private equity and the investment industry provide a model for successful corporate behavior?

Despite the current reliance on government intervention, private equity and venture nominally solve the problem of modern corporations by aligning the interests of owners and managers.

Their capital and investment horizons are premised on future goals. They are flexible in their approach to potential opportunities. Though resting on an illiquid base, they offer higher returns to their investors in good times. Although their portfolio companies are suffering from the same downturn afflicting the rest of the economy, the owners control both the balance sheet and the business.

The story is about the many challenges the industry faces: the plunge in distributions, looming government regulation, and the issues of succession and business models, among others.

Now that we have listed the players and described the playing field, there’s one final question worth asking: What is the purpose of private equity and venture capital? Why do it? The answer depends on whom you ask.

References

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Published

2021-12-15

How to Cite

Makrevska, T. (2021). PRIVATE EQUITY, VENTURE CAPITAL AND GLOBAL ECONOMY. KNOWLEDGE - International Journal , 49(5), 1119–1123. Retrieved from http://ikm.mk/ojs/index.php/kij/article/view/4530