The best books to explore private equity in practice and peek behind the scenes

It might seem odd, but there is no real better book than this one to illustrate the challenges of private equity. I use it as an example in my training sessions regularly.

The Merchant of Venice is not only one of the best plays on finance and ethics, but also the perfect illustration of the challenges of start-up investing before it became a profession. This play illustrates how venture financing differs in practice from bank financing. It also conveys the uncertainties associated with entrepreneurship, and how some capital providers are not able to take such a risk.

Shakespeare masters the art of contrasting the perspectives of an entrepreneur and a banker in a short and powerful format. It is a masterpiece and a must-read for anyone who wants to understand the philosophy of start-up investing. 

There is only one Silicon Valley – and there can only be one.

Harvard Professor Josh Lerner debunks enduring myths about replicating the success of this unique cluster dedicated to information technologies. He describes the different unsuccessful attempts of doing so by various public authorities and governments, and draws the lessons of such attempts.

He also identifies what are the conditions of successful local attempts to develop industrial clusters. In this context, this book provides a solid background to readers eager to understand the background of the emergence and development of private companies thanks to a complex web of interactions between public and private initiatives.

With every success story comes a cautionary tale.

Venture investing has become one of the recurring sources of multiple success stories, such as Apple, Microsoft, Google, and Facebook. However, the professionalisation of start-up investing is still a work in progress. Knowledge and experience are rare and difficult to acquire.

Venture capital investing is an art as much as a form of science. This book illustrates how the financing of the start-up Theranos became a story of excesses, lies, and neglect. Start-up investing goes far beyond providing capital.

The rise and fall of Theranos is a clear illustration in this masterful book: the start-up did not have good governance, was shrouded in secrecy, aggressively used litigation and was organised to avoid the disclosure of the lies it was based upon. Human lives were at stake. Investors and entrepreneurs failed the patients with dire consequences.  

Private market fund managers are, along with hedge fund managers, the magnates of the 21st century.

Although many come from a privileged background, quite a few are self-made men such as the founder of what was once the largest private equity fund management firm in the Middle East: Abraaj Capital. The rags-to-riches story of Arif Naqvi, his drive from his childhood in Pakistan to high international society is simultaneously mesmerizing and frightening.

A headlong rush starts as his ambition outpaces his already high success. The fall is crushing, not only for him, but also for his partners, his employees, and everyone who trusted him. The book is a perfect combination of factual analyses and storytelling.

This book describes the delisting of RJR Nabisco by KKR through what was the largest leveraged buyout in history for two decades and became an instant classic in 1989.

A movie was adapted from it and its title became forever attached to the practice of transferring the ownership of a company notably thanks to debt financing. The book meticulously describes the actors of this operation, the conflicts of interest that plague the operation, and the underlying hubris and greed lurking in the background.

Although now dated, as LBO has morphed and evolved at high speed, and is now a far cry from this type of operation, this book remains a must-read for anyone willing to understand the rise of some of the most powerful financial firms and wealthiest individuals in less than a generation.