The Seventh Phase: 2001: The Collapse and Its Aftermath

Abstract

Many times a collapse in one market brings with it unexpected beneficiaries. The bursting of the dotcom bubble in 2001, and the fall from grace of venture capital, had some spill-over into the area of private equity. For a while, the rise of the stock markets helped the development of private equity, particularly in Germany, where for the first time, there was a feeling that the options for exits were growing. But at the peak of the bubble, old economy deals were suffering. Few people were interested in the IPO of a long-standing business with a modest growth rate, even if it was well-positioned and international. Hordes of professionals were upping sticks to move over to ventures, either to set up new companies, service them as principles, or to act for them in an advisory capacity. So while the events of 2001 had negative side-effects for private equity, the impact was not all negative. Indeed, after a brief fall back in the number of buyouts closed in 2001, private equity activity was to enjoy its own boom, reaching undreamed of heights of activity and valuations by the spring of 2007.