Private Equity in Global Capital Markets: Redefining Corporate Ownership and Long-Term Value Creation (Jus Corpus Law Journal)

Summary

• Michael Jensen's 1989 argument posited that public corporations would give way to leveraged, privately held organizations, though the 1980s buyout wave experienced defaults from overleverage.p.3
• Empirical survey data indicates that private equity value creation since the 2000s relies increasingly on operational and governance interventions rather than leverage alone.p.3
• UK market metrics indicate holding periods of just under 5 years for companies still under ownership and a little over 6 years for those already exited.p.4
• Sir David Walker's 2007 review established a voluntary comply-or-explain disclosure regime for large UK portfolio companies to publish financial and governance information.p.6
• Average UK portfolio holding periods range from 5 to 6 years, reflecting a time horizon compressed relative to permanent capital models.p.8
• Singapore enacted the Variable Capital Companies Act 2018 to create a flexible corporate fund framework for asset managers.p.9

Key insights

1. Private equity functions as a private regulator of corporate behaviour by enforcing governance standards through contractual agreements rather than public listing mandates.p.2
2. Several major private equity sponsors, including Blackstone, KKR, Apollo, and Carlyle, have themselves listed as public companies.p.4
3. The unravelling of traditional public reporting requirements allows companies to raise significant capital in private markets without public listings.p.4
4. Private equity ownership resolves agency costs between operating managers and shareholders but shifts agency friction to the relationship between general partners and limited partners.p.6
5. Portfolio company boards frequently utilize operating partners affiliated with the sponsor rather than independent non-executive directors.p.6
6. Portfolio companies show higher subsequent citation rates for patents filed post-buyout, supporting focused operational innovation strategies.p.7
7. The European Union's AIFMD and SFDR frameworks regulate fund managers directly rather than mandating portfolio-level governance disclosures.p.8
8. General partner-led secondary transactions and continuation funds introduce conflict-of-interest challenges across fund lifecycles.p.10