Question 7.RQ.1: UK private-equity firms have been criticised for the low lev...
UK private-equity firms have been criticised for the low level of funding invested in business start-ups by comparison with the levels invested by their US counterparts. Can you think of possible reasons why such a difference may exist?
Various reasons have been put forward to explain the difference in the proportion of total investment made in business start-ups by UK and US private-equity firms. These include:
- UK firms are more cautious than their US counterparts. Start-ups are more risky and UK private-equity firms may be less willing to take on these risks.
- UK firms have a shorter-term investment perspective that makes them prefer financing existing businesses.
- There is greater competition for good investment opportunities among US private-equity firms, which leads them to invest in business start-ups to achieve the required returns.
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