Cambridge Business Association
A Mile Wide or a Mile Deep?
Report

A Mile Wide or a Mile Deep?

The Diversification Opportunity Facing Private Equity

Antoon Schneider, Jens Riedl and Jeanne Chen
Boston Consulting Group, 2015
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Editorial Rating

8

Qualities

  • Innovative

Recommendation

Several large private equity (PE) firms have widened both the scope of their activities and the volume of their assets under management through diversification. But expansion is not necessarily a panacea for all PE firms, and some may be better off remaining “pure-play” shops in a particular area. Consultants Antoon Schneider, Jens Riedl and Jeanne Chen of the Boston Consulting Group succinctly lay out the trends in private equity and what they mean for PE firms and their investors. getAbstract recommends this instructive article to financial services professionals and private equity specialists.

Summary

Some large private equity (PE) firms have taken a number of different routes to diversification, including expanding into minority stakes, venture capital, new geographic regions and industries, and alternative asset classes. Simultaneously, they’ve lessened their positions in leveraged buyouts (LBOs). A study of four big firms showed that LBOs as a share of their assets under management (AUM) dropped from 46% in 2010 to 27% in 2014.

PE firms diversify for multiple reasons, among them the “search for growth,…the synergies achievable from being present...

About the Authors

Antoon Schneider, Jens Riedl and Jeanne Chen are professionals with the Boston Consulting Group.

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