Private Equity: Episode 6 - History of PE: The 1940s to the 1970s

Let’s continue our journey through the history of Private Equity!

Its modern form emerged in the 1940s in the USA and expanded significantly with the country's economic growth. The creation of the American Research & Development Association in 1946 marked the birth of the sector, with a notable Frenchman, Georges Doriot, playing a key role. He is now recognized as one of the pioneers of Private Equity.

In the 1950s, key players in the sector financed innovative companies like Technicolor, Digital Equipment Corporation, and Minute Maid. In 1958, the United States authorized the creation of Small Business Investment Companies (SBICs), dedicated to supporting innovation funding. This move greatly accelerated the growth of the industry, which continued to thrive throughout the 1960s and 1970s. Major firms were founded during this period, including Sequoia Capital in 1972.

Venture Capital was the first part of the sector to gain momentum, but other types of Private Equity quickly followed. In the 1960s, individual investors such as Warren Buffet with Berkshire Hathaway and Victor Posner with DWG Corporation made their first buy-out transactions, targeting companies like American Express and Coca-Cola.

This was followed by the formation of the first management firms, particularly by three former Bear Stearns bankers—J. Kohlberg, H. Kravis, and G. Roberts—who founded KKR.

In France, one of the first companies was Multinational Management Group, founded in 1972, which later became Seven2.

The 1980s would further solidify and expand the sector’s development.