Private Equity Globalisation: Ethical Business Challenges

Maria Alejandra Madi
UNICAMP, Brazil; The Green Economics Institute, UK

Series: Business Issues, Competition and Entrepreneurship
BISAC: BUS008000

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Edited by I Leslie Rubin, Robert J Geller, Abby Mutic, Benjamin A Gitterman, Nathan Mutic, Wayne Garfinkel, Claire D Coles, Kurt Martinuzzi, and Joav Merrick

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This book aims to fill a gap in existing literature in order to contribute to the understanding of the main features and outcomes of the private equity business model that has already been spread around the world. Private equity funds have been drivers of the financialisation of the global economy. Lying at the juncture of the real economy and the shadow banking system, private equity funds draw upon capital and debt to acquire stakes in companies that are intended to be sold for profit after a number of years. Indeed, these institutional investors have a key role in the diversification of global investments. Although US private equity firms are still dominant, the global private equity industry has been mainly moving toward Europe and the Asia-Pacific region.

The process of financialisation has contributed to unprecedented social, political, and environmental challenges. In this setting, the complexity of social and economic policy problems of the 21st century requires the recognition of the role of private equity globalization in the selection of investments and in the creation of new business structures. The shifts in corporate ownership, trough waves of mergers and acquisitions, have created new business structures where companies are considered bundles of assets and liabilities to be traded in order to get short-term returns. Indeed, new investment and portfolio management practices have been overwhelmed by the financialisation of wealth and “short-termism” in American and European business. While private equity investors aim to maximize their short-term returns, private equity funds turn to be major transnational employers.

The outcomes of the global financial crisis of 2007-2008 made clear the need to redress and redesign business models and re-balance corporate power in order to broaden the dialogue on social responsibility. Maria Alejandra Madi’s book aims to foster a deeper understanding of the ethical challenges related to the private equity financial engineering model. In short, the book aims to prepare the reader for participating in a fruitful debate. The main target is the transformation of the global economy to a more just and sustainable one.

This book is recommended for a broad interdisciplinary audience. Not only students in economics, management and international business, but also policy makers, regulators, managers and investors. Reading this book will benefit all those who seek to better understand the complex stakes in the evolution of the capitalist system, in the tensions between short-term profit targets, regulatory policies, and participatory openings in governance and social inclusion.
(Imprint: Nova)

Introduction

Part I

Chapter 1. Financialisation and the Private Equity Expansion

Chapter 2. The Private Equity Business Model

Part II

Chapter 3. Private Equity Fundraising

Chapter 4. Private Equity Portfolio Companies: Investment and Divestment

Chapter 5. Private Equity Business and Labour

Chapter 6. Private Equity Global Expansion

Part III

Chapter 7. Private Equity Today and Tomorrow

Chapter 8. Conclusion: The End of Private Equity as We Know It?

References

Index

"A thoroughly researched and engaging book, where a strong and innovative quest is made for bridging economics and ethics." - Dr. Arturo Hermann, Senior Research Fellow at the Italian National Institute of Statistics (Istat), Rome, Italy

"From Schumpeter to Minsky, passing through the Austrian School of Economics, economists have dealt with the influence of financial instruments on the real economy cyclical evolution. A lesson that too many have forgotten. The Global Financial Crisis has forced us to rediscover the links between financial development and business cycles. Professor Madi’s book leads us to a better understanding of such links at the light of those ethical considerations that should never abandon the economic reflection." - Dr. Carmelo Ferlito, Institute for Democracy and Economic Affairs and INTI International College Subang, Malaysia

"This book is a welcome addition to our economic resources. It enhance our understanding of the financial challenges in the new global economy of the 2 P1 century. Indeed, her new book fills a scholarly vacuum in the current economic literature. READ MORE... - Constantine E. Passaris, Ph.D, Professor of Economics, Dobbin Scholar & Onassis Foundation Fellow, University of New Brunswick, Canada

Audience:
Private Equity Globalisation: ethical business challenges will provoke the readers to think about the transformations in corporate ownership and the global expansion of the private equity business model. The 2008 global financial crisis made clear there is the need to readdress and redesign business models and re-balance corporate power in order to broaden the dialogue on responsible investment. In short, the book aims to prepare the reader for participating in a fruitful debate. The main target is the transformation of the global economy to a more just and sustainable one.
The book aims to motivate the general public interested in economics and business. In addition, its well fits to a broad interdisciplinary audience that is willing to read about the “new normal” in the private equity industry and the current ethical business challenges.

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