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Chapter 2: Overview of Historical Trends > Private Equity at the Turn of the Ce...

Private Equity at the Turn of the Century

PE market fluctuations from the mid-1990s through current day can largely be broken into four time periods: (1) dot-com boom (1995 through first quarter of 2000); (2) dot-com bust (second quarter of 2000 through 2004); (3) buyout boom (2004 through first quarter of 2008); and (4) buyout bust (second quarter of 2008 through today). Commitments to U.S. VC and buyout funds from 1995 through 2010 are presented in Exhibit 2.4.

Exhibit 2.4 Historical Venture Capital and Buyout Annual Fundraising Levels, 1995–2010

Source: Thomson ONE Banker.

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In the mid-1990s, an economic recovery was in the making. After remaining flat in the early 1990s, real U.S. GDP grew at a compound annual growth rate (CAGR) of 3 percent from 1992 through 1995 (see Exhibit 2.3), and many thought the U.S. economy was fast approaching a new era of growth. The IPO market gained steam, and investors appeared particularly enamored with IPOs centered on the “new economy” of high technology and the Internet: dot-com companies. New issues were delivering first-day returns near 100 percent to investors in the midst of this euphoria. This level of first-day returns had not been seen in nearly 20 years. (See Exhibit 2.5.)


  

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