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Discussion of Hege, Palomino & Schwienbacher Acharya & Kehoe

Discussion of Hege, Palomino & Schwienbacher Acharya & Kehoe. Nicolas Véron 2 nd ECB-CFS Network Symposium Frankfurt, 14 February 2008. Hege, Palomino & Schwienbacher Venture Capital Performance: The Disparity between Europe and the US.

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Discussion of Hege, Palomino & Schwienbacher Acharya & Kehoe

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  1. Discussion ofHege, Palomino & SchwienbacherAcharya & Kehoe Nicolas Véron 2nd ECB-CFS Network Symposium Frankfurt, 14 February 2008

  2. Hege, Palomino & SchwienbacherVenture Capital Performance: The Disparity between Europe and the US • Measurement of gross return over successive rounds of VC investment • 146 company stories in Europe (half in UK), 233 in US • Results • Europe underperforms the US • More mature VC landscape in the US (specialisation, syndication, interaction with corporate investors) • US VCs in Europe don’t perform better than European VCs • Legal origin, tax environments make little difference • No clear picture on exit conditions

  3. Challenges • Limited time period observed, market upheavals • Limited size of samples overall • Different European sample for exits • Excess return definition • Valuation at first round • Observations often inconclusive

  4. Questions • Differentials between industries • Differentials between European countries • Differentials among VC actors • Differences Europe / US? • Typology of good / poor performers? • Other factors that affect post-entry growth • Size of US market • Labour rigidity • Culture… • Role of innovation ecosystems

  5. Acharya and KehoeCorporate Governance & Value Creation: Evidence from Private Equity • Work in progress • 59 large UK private equity transactions (aim is 80) • By 11 ‘large and mature PE houses’ • Decomposition of return into leverage, sector component, and ‘alpha’ • Correlated with ‘operational improvements’ • Measures of financial performance • Corporate governance changes

  6. A ‘rosy’ view of Private Equity • Not just asset-strippers or tax arbitrageurs • Effect on employment at beginning • Performance & growth correlated with alpha • Efficient use of capital • ‘Organic’ deals have highest alpha • Active corporate governance

  7. Investment Trends from: Lerner & al, ‘The Global Economic Impact of Private Equity Report 2008’, World Economic Forum

  8. Questions • How specific is the UK? • Including on corporate governance • Market downturn?

  9. Thank You For Your Attention +32 473 815 372 / n.veron@bruegel.org www.bruegel.org

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