Q&A With Steve Kaplan, Co-author of New Academic Book on Private Equity

Steve Kaplan

Private equity has become an increasingly popular investment vehicle as it outperforms other asset classes and access expands to the broader investing public.

What’s been missing, said Steve Kaplan, one of the world’s foremost private equity scholars, is a comprehensive academic book on the topic.

Kaplan, the Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at Chicago Booth and Kessenich E.P. Faculty Director of the Polsky Center, has co-authored a new book with Paul A. Gompers, Eugene Holman Professor of Business Administration at Harvard Business School, that aims to fill that gap.

“Advanced Introduction to Private Equity,” published in late summer by Edward Elgar Publishing, delves into the history, academic research, and practice of private equity, including offering a set of actionable frameworks for driving value creation in private equity investments. It is a must-read for anyone working in or with private equity, from MBA students to policy makers.

To learn more about the book, Chris McGowan, adjunct professor of entrepreneurship at Chicago Booth, an investor in residence at the Polsky Center, and general partner of CJM Ventures, posed several questions to Kaplan.

What inspired you and your co-author, Prof. Paul Gompers, to write this book?

Over the years, Paul and I both accumulated a lot of the relevant material in teaching our courses. We did not believe that there was one book that explained what private equity did and why private equity did it in a way that was accessible.

Prof. Gompers credits you with getting him into the field of business economics. Can you tell us more about your long-term collaboration with him?

I met Paul when he was an undergraduate and I was a graduate student advisor in his dorm.  He was studying biology. After he graduated from college, he realized he did not want to spend the rest of his life in a lab, but he did like analyzing data and doing research.

I suggested he might enjoy studying economics and business.  He decided to try it and it was a great choice for him.

He was successful as a Ph.D. student, so we hired him as an assistant professor at Booth. After a few years here, his wife and he decided to go back to Boston and HBS.

Who is “Advanced Introduction to Private Equity” written for?  

It has many audiences. First, it is useful for anyone who will interact with private equity firms including (1) new and potential PE firm employees; (2) investment bankers; (3) management teams; (4) business reporters; and (5) policymakers. Second, it can be used as a resource for any MBA course in private equity.

What would you recommend for those who need a more basic introduction before they read your book?

The title “Advanced” is perhaps a bit misleading. We think it is useful for anyone who is interested in private equity and has a basic understanding of business and finance.

What was your favorite part of the writing process for this book?  And least favorite?

The favorite part was working with Paul and our research assistants.  The least favorite (as is true with most writing) was buckling down and doing the revisions of the first draft.

I was fascinated by the data on SPACs (Special Purpose Acquisition Corporations). Do you have any short-term and longer-term predictions on that market?

The SPAC market today is fairly discredited.  That is because many of the SPACs that bought companies have subsequently experienced very poor performance.  The economics were too good for the sponsors and gave them incentives to complete deals, whether they were good or not. By the way, this was predictable and some, myself included, predicted this would not end well.

Going forward, we will see fewer SPACs.  However, they can serve a useful purpose for some companies and some investors so I wouldn’t expect them to disappear.

Will there be a 2nd edition or sequel?

We hope so.

Where can we purchase your book?

It is available here on Amazon.

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