Mastering Private Equity Set - Shop (2022)

This set combines the definitive guide to private equity with its case book companion, providing readers with both the tools used by industry professionals and the means to apply them to real-life investment scenarios.

1) Mastering Private Equity was written with a professional audience in mind and provides a valuable and unique reference for investors, finance professionals, students and business owners looking to engage with private equity firms or invest in private equity funds. From deal sourcing to exit, LBOs to responsible investing, operational value creation to risk management, the book systematically distils the essence of private equity into core concepts and explains in detail the dynamics of venture capital, growth equity and buyout transactions.

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With a foreword by Henry Kravis, Co-Chairman and Co-CEO of KKR, and special guest comments by senior PE professionals.

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2) Private Equity in Action takes you on a tour of the private equity investment world through a series of case studies written by INSEAD faculty and taught at the world's leading business schools. The book is an ideal complement to Mastering Private Equity and allows readersto apply core concepts to investment targets and portfolio companies in real-life settings. The 19 cases illustrate the managerial challenges and risk-reward dynamics common to private equity investment.

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Written with leading private equity firms and their advisors and rigorously tested in INSEAD's MBA, EMBA and executive education programmes, each case makes for a compelling read.

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Claudia Zeisberger is an INSEAD Senior Affiliate Professor of Decision Sciences and Entrepreneurship and Family Enterprise. She is concurrently the Academic Director of INSEAD's Global Private Equity Initiative (GPEI), one of INSEAD's centers of excellence, which she founded in 2008 to focus the school's capabilities & achievements in Private Equity, increase its visibility and cater to specific industry needs in research and education. At INSEAD, she teaches in the MBA and EMBA programmes as well as in multiple Executive Education courses both in Singapore & in Fontainebleau.

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Michael Prahl is Adjunct Professor for Entrepreneurship & Family Enterprise at INSEAD, he is also Executive Director GPEI, oversees all research of the initiative and was instrumental in creating all its recent publications, its database project and outreach activities. His specific research interests are in the areas of risk and return in emerging markets, operational value creation and market entry strategies & portfolio allocation for limited partners.

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Bowen White is a Research Associate at GPEI. Bowen's research interests include private equity in emerging markets, the institutionalization of SE Asian financial markets, and project finance. Prior to moving to Singapore in 2009, Bowen spent five years in the New York hedge fund industry in trading and business development roles.

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1 Mastering Private Equity 3 2 Contents 7 3 List of Contributors 9 4 Foreword 11 5 Preface 15 5.1 A Note from Claudia Zeisberger 16 6 How to Use This Book 19 7 Section I Private Equity Overview 21 7.1 Section Overview 23 7.2 1 Private Equity Essentials 25 7.2.1 Private Equity Funds Defined 26 7.2.2 The GP Perspective Life Cycle of a PE Fund 28 7.2.3 The LP Perspective Committing Capital and Earning Returns 31 The J-curve 32 7.2.4 The Fee Structure and Economics of PE or Who Earns What? 33 7.2.5 Closing 37 7.2.6 Relevant Case Sudies 38 7.2.7 References and Additional Reading 38 7.3 2 Venture Capital 39 7.3.1 Venture Capital Defined 39 7.3.2 Start-up Development Venture Capital Targets 41 7.3.3 The Venture Capital Investment Process Unique Elements 43 7.3.4 For the First-time Entrepreneur Raising Money from VCs 47 7.3.5 Closing 51 7.3.6 Relevant Case Studies 51 7.3.7 References and Additional Reading 52 7.4 3 Growth Equity 53 7.4.1 Growth Equity Defined 53 7.4.2 Growth Equity Targets 56 7.4.3 The Growth Equity Investment Process Unique Elements 58 Deal Sourcing and Due Diligence 58 Value Creation 58 Exit 59 7.4.4 Minority Shareholder Rights 60 7.4.5 Closing 61 7.4.6 Relevant Case Studies 62 7.4.7 References and Additional Reading 62 7.5 4 Buyouts 63 7.5.1 Buyouts Defined 63 7.5.2 Leveraged Buyout Funding 65 7.5.3 Management Teams in a Buyout 70 7.5.4 Types of Buyout Transactions 71 7.5.5 Closing 74 7.5.6 Relevant Case Studies 74 7.5.7 References and Additional Reading 74 7.6 5 Alternative Strategies 77 7.6.1 Distressed Private Equity 77 Turnaround Investing 77 Distressed Debt Investing 79 7.6.2 Real Assets 84 7.6.3 Closing 86 7.6.4 Relevant Case Studies 87 7.6.5 References and Additional Reading 87 8 Section II Doing Deals in PE 89 8.1 Section Overview 91 8.2 6 Deal Sourcing & Due Diligence 93 8.2.1 Generating Deal Flow 94 8.2.2 Due Diligence Considerations 98 8.2.3 The Due Diligence Process 99 Preliminary DD 99 Formal DD 100 8.2.4 Due Diligence Areas 102 8.2.5 Closing 104 8.2.6 Relevant Case Studies 105 8.2.7 References and Additional Reading 105 8.3 7 Target Valuation 107 8.3.1 The Valuation Toolkit 107 8.3.2 Venture Capital The Valuation of Early-stage Companies 108 8.3.3 Growth Equity and Buyouts The Valuation of Mature Companies 110 8.3.4 More on Valuation Multiples 114 Identifying Multiples 114 8.3.5 Closing 115 8.3.6 Relevant Case Studies 116 8.3.7 References and Additional Reading 116 8.4 8 Deal Pricing Dynamics 117 8.4.1 Bidding for a Deal Setting the Price and Winning the Deal 117 Two-stage Auction 119 8.4.2 Buyout Pricing Adjustments and Closing Mechanisms 122 Closing Mechanisms 123 8.4.3 Post-closing Price Adjustments and Remedies 124 8.4.4 Closing 127 8.4.5 Relevant Case Studies 127 8.4.6 References and Additional Reading 127 8.5 9 Deal Structuring 129 8.5.1 Buyout Funding Instruments Debt and Equity 129 Debt Instruments 130 Equity Instruments 133 8.5.2 Investment Structures and SPVs 135 Debt Considerations—Structural and Contractual Subordination 136 Equity Considerations 137 8.5.3 Closing 138 8.5.4 Relevant Case Studies 139 8.5.5 References and Additional Reading 139 8.6 10 Transaction Documentation 141 8.6.1 PE Transaction Documentation 141 8.6.2 Buyout Debt Documentation 146 Loan Agreements 146 Intercreditor Agreement 148 8.6.3 Equity Documentation For Majority and Minority Investments 149 Economics 150 Control 150 8.6.4 Closing 151 8.6.5 References and Additional Reading 152 9 Section III Managing PE Investments 153 9.1 Section Overview 155 9.2 11 Corporate Governance 157 9.2.1 Sense of Urgency 157 9.2.2 Private Equity as Active Owners 159 The Board in Buyouts and Majority Deals 160 PE Governance in Specific Settings 165 9.2.3 Alignment of Interest Management Incentives 166 9.2.4 Closing 166 9.2.5 Relevant Case Studies 166 9.2.6 References and Additional Reading 167 9.3 12 Securing Management Teams 169 9.3.1 Working with Management PE’s Perspective 169 9.3.2 Working with PE OWNERS Management’s Perspective 171 9.3.3 Management Compensation Plans in Buyouts 173 9.3.4 Aligning VC FUNDS and Entrepreneurs 178 9.3.5 Closing 179 9.3.6 Relevant Case Studies 179 9.3.7 References and Additional Reading 179 9.4 13 Operational Value Creation 181 9.4.1 The Value Creation Roadmap 181 9.4.2 Resources for Operational Value Creation 185 Management Advisory 186 Full Service Value Creation 186 9.4.3 Measuring Operational Value Creation 188 9.4.4 Closing 190 9.4.5 Relevant Case Studies 191 9.4.6 References and Additional Reading 191 9.5 14 Responsible Investment 193 9.5.1 Responsible Investment Defined 193 9.5.2 ESG in Today’s PE Industry 195 9.5.3 The Challenge of Measuring Impact 197 9.5.4 Emerging ESG Frameworks 198 9.5.5 ESG in Emerging Markets 200 9.5.6 Closing 202 9.5.7 Relevant Case Studies 203 9.5.8 References and Additional Reading 203 9.6 15 Exit 205 9.6.1 Exit Considerations 206 9.6.2 Preparation for Sale—Exit Shaping 206 9.6.3 Exit Paths 208 Sale to a Third Party 209 Initial Public Offering 211 Dividend Recapitalization 212 9.6.4 Closing 215 9.6.5 Relevant Case Studies 215 9.6.6 References and Additional Reading 215 10 Section IV Fund Management and the GP–LP Relationship 217 10.1 Section Overview 219 10.2 16 Fund Formation 221 10.2.1 Setting up a PE Fund 221 10.2.2 Fund Vehicles 222 10.2.3 Limited Partnership Agreement 224 Organization 224 Partners and Capital 224 Distributions Post-exit and Carried Interest 225 Rights and Duties of the GP 229 Other Provisions 230 Side Letters 232 10.2.4 Closing 233 10.2.5 Relevant Case Studies 234 10.2.6 References and Additional Reading 234 10.3 17 Fundraising 235 10.3.1 The GP Fundraising Process 235 10.3.2 Fundraising Documentation 239 10.3.3 The Fundraising Roadmap 241 10.3.4 Closing 243 10.3.5 Relevant Case Studies 244 10.3.6 References and Additional Reading 244 10.4 18 LP Portfolio Management 247 10.4.1 Deciding on an Allocation to PE 247 Benefits of Investing in the PE Asset Class 248 Challenges of Investing in the PE Asset Class 249 10.4.2 Portfolio Construction Considerations 250 10.4.3 PE Fund Manager Selection 253 10.4.4 Managing an Existing PE Portfolio 256 10.4.5 Closing 258 10.4.6 Relevant Case Studies 258 10.4.7 References and Additional Reading 258 10.5 19 Performance Reporting 261 10.5.1 Interim Fund Performance 261 Company Valuation 262 Gross Performance 263 Net Performance 264 10.5.2 The IRR Conundrum 266 Modified IRR (MIRR) 267 10.5.3 Closing 270 10.5.4 Relevant Case Studies 270 10.5.5 References and Additional Reading 270 10.6 20 Winding Down a Fund 273 10.6.1 Liquidating a PE Fund 273 10.6.2 End-of-Fund-Life Options 274 Steady-state Options 274 Distressed Options 276 10.6.3 Zombie Funds 276 LP Perspective 277 GP Perspective 278 10.6.4 Closing 281 10.6.5 References and Additional Reading 281 11 Section V The Evolution of PE 283 11.1 Section Overview 285 11.2 21 LP Direct Investment 287 11.2.1 Going Direct Ways to Market 287 11.2.2 Attractions of Co-investing 289 11.2.3 Risks of Co-investing 291 Selection Issues 291 Positioning 292 11.2.4 Implementation Challenges 293 11.2.5 Going Direct Institutional Investors Only? 294 11.2.6 Closing 297 11.2.7 Relevant Case Studies 297 11.2.8 References and Additional Reading 298 11.3 22 Listed Private Equity 299 11.3.1 Listed PE Firms 300 Benefits of Listing 301 New Challenges from Listing 301 11.3.2 Listed PE Funds 303 Benefits of a Listed Fund 304 Challenges of a Listed Fund 304 11.3.3 Closing 307 11.3.4 Relevant Case Studies 308 11.3.5 References and Additional Reading 308 11.4 23 Risk Management 309 11.4.1 Asset Class Risk 310 11.4.2 Portfolio Risk 311 11.4.3 Fund Manager Risk 313 11.4.4 Direct Investment Risk 314 11.4.5 Risk Management for GPs 315 Business Risk 315 Market Risk 316 11.4.6 Closing 318 11.4.7 Relevant Case Studies 319 11.4.8 References and Additional Reading 319 11.5 24 Private Equity Secondaries 321 11.5.1 Main Transaction Types 321 Limited Partnership Secondaries 322 Direct Secondaries 326 11.5.2 Deal Structuring 328 Structured Secondary Transactions 328 Total Return Swaps 329 11.5.3 Executing Secondaries Transactions Unique Elements 330 11.5.4 Closing 330 11.5.5 Relevant Case Studies 331 11.5.6 References and Additional Reading 331 11.6 25 Evolution of Private Equity 333 11.6.1 PE–How We Got Here By Bowen White 333 Private Equity versus the Other Equity 334 The Impact of Private Equity 335 11.6.2 PE—Can it Remain Attractive? By Michael Prahl 336 The Institutionalization of Private Equity 337 How Does the Industry Respond? 338 11.6.3 Private Equity—Quo Vadis By Claudia Zeisberger 340 Success Spawns Imitators: and Businesses Have Started to Pay Attention 340 LPs—A Tsunami of Capital? 340 GPs and the PE Model 341 Not Just Private Equity—Private Capital 342 How May this Play Out in the Immediate Future? 343 12 Acknowledgments 345 13 About the Authors 347 14 Glossary 349 15 INDEX 361 16 Private Equity in Action: Case Studies from Developed and Emerging Markets 372 17 CONTENTS 374 18 PREFACE 376 18.1 Section Overview 377 18.2 INSEAD Context 377 19 SECTION I GP–LP Relationships 378 19.1 CASE 1 BERONI GROUP: MANAGING GP–LP RELATIONSHIPS 380 19.1.1 SYNOPSIS 380 19.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 380 19.1.3 SUGGESTED ASSIGNMENT QUESTIONS 380 19.1.4 ADDITIONAL RESOURCES 381 19.1.5 Beroni Group: Managing GP-LP Relationships 382 Introduction 383 Group History 384 Key Issues 384 19.2 CASE 2 GOING DIRECT: THE CASE OF TEACHERS’ PRIVATE CAPITAL 388 19.2.1 SYNOPSIS 388 19.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 388 19.2.3 SUGGESTED ASSIGNMENT QUESTIONS 388 19.2.4 ADDITIONAL RESOURCES 389 19.2.5 Going Direct: The Case of Teachers’ Private Capital 390 Introduction 391 Background 391 Investment Objectives and Asset Policy Mix 392 Phase 1: The Origins of Teachers’ Private Capital 393 Jim Leech: Tasked with Taking Teachers’ Global 395 Phase 2: Growing Ambition 395 Phase 3: The Peak – Leading the World’s Largest LBO 398 Challenges Emerge to the Largest LBO in History 400 Phase 4: Post-GFC Era 402 Evaluating the Success of Teachers’ Approach: Issues for Teachers’, Pension Funds and Other LPs 404 The Way Ahead 405 19.3 CASE 3 PRO-INVEST GROUP: HOW TO LAUNCH A PRIVATE EQUITY REAL ESTATE FUND 416 19.3.1 SYNOPSIS 416 19.3.2 PEDAGOGICAL OBJECTIVE OF THE CASE 416 19.3.3 SUGGESTED ASSIGNMENT QUESTIONS 416 19.3.4 ADDITIONAL RESOURCES 417 19.3.5 Pro-invest: How to Launch a Private Equity Real Estate Fund 418 April 2015 419 Background Pro-invest Group 419 Finding an Opportunity, 2012: Holiday Inn Express – Going ‘down under’? 420 First Steps – Building a Team 420 Which Structure? 421 Anchor Investor – First Commitment 422 The Search for Funding Options – Looking for the Right ‘Fit’ 423 The UHNWI 423 The IPO 423 The Mezzanine 424 Project Pony 424 The Managed Account 424 The Private Bank 425 Reverse IPO 425 Adriana Star Capital Appears . . . and Folds 425 Back to the Drawing Board 426 Onwards and Upwards 426 Challenges 427 19.4 CASE 4 HITTING THE TARGET: OPTIMIZING A PRIVATE EQUITY PORTFOLIO WITH THE PARTNERS GROUP 432 19.4.1 SYNOPSIS 432 19.4.2 PEDAGOGICAL OBJECTIVE OF THE CASE 432 19.4.3 SUGGESTED ASSIGNMENT QUESTIONS 432 19.4.4 ADDITIONAL RESOURCES 433 19.4.5 Hitting the Target: Optimizing a Private Equity Portfolio with Partners Group 434 Future Plan and the Legacy Portfolio, 2005–11 435 Pension Fund Background 435 Magnifying Returns – Allocating to Alternatives 436 Evolution of Future Plan’s PE Portfolio 437 Repositioning the PE Portfolio 437 Enter Stage Left: Partners Group and the Pitch 439 The Task at Hand 440 20 SECTION II Venture Capital 448 20.1 CASE 5 SULA VINEYARDS: INDIAN WINE?—CE N’EST PAS POSSIBLE! 450 20.1.1 SYNOPSIS 450 20.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 450 20.1.3 SUGGESTED ASSIGNMENT QUESTIONS 450 20.1.4 ADDITIONAL RESOURCES 450 20.1.5 Sula Vineyards: Indian Wine – “Ce n’est pas possible !” 452 Introduction 453 Sula Wines 453 GEM India Advisors 455 The Indian Wine Industry 455 The Global Wine Industry 456 Valuation 458 Conclusion 459 20.2 CASE 6 ADARA VENTURE PARTNERS: BUILDING A VENTURE CAPITAL FIRM 468 20.2.1 SYNOPSIS 468 20.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 468 20.2.3 SUGGESTED ASSIGNMENT QUESTIONS 468 20.2.4 ADDITIONAL RESOURCES 469 20.2.5 Adara Venture Partners: Building a Venture Capital Firm 470 Starting Out: The Origins 471 First Fundraising: Tough but Straightforward 472 Investing the First Fund: Off to the Races 473 Second Fund: First Attempt 473 The ‘Dark Ages’ 474 Renaissance 474 Second Fund: All or Nothing 476 June 2013: A Time to Decide 478 20.3 CASE 7 SIRAJ CAPITAL: INVESTING IN SMEs IN THE MIDDLE EAST 484 20.3.1 SYNOPSIS 484 20.3.2 PEDAGOGICAL OBJECTIVE OF THE CASE 484 20.3.3 SUGGESTED ASSIGNMENT QUESTIONS 484 20.3.4 ADDITIONAL RESOURCES 485 20.3.5 Siraj Capital: Investing in SMEs in the Middle East 486 Private Equity in the Middle East North Africa (MENA) Region 487 Siraj Capital 488 Background 488 Network & Expertise 489 The Investment Approach 490 Tower 491 Background 491 Tower’s Marketplace 492 Financial Performance 492 Growth Potential 493 21 SECTION III Growth Equity 504 21.1 CASE 8 PRIVATE EQUITY IN EMERGING MARKETS: CAN OPERATING ADVANTAGE BOOST VALUE IN EXITS? 506 21.1.1 SYNOPSIS 506 21.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 506 21.1.3 SUGGESTED ASSIGNMENT QUESTIONS 506 21.1.4 ADDITIONAL RESOURCES 507 21.1.5 PE in Emerging Markets: Can Mekong Capital’s Operating Advantage Boost the Value in its Exit from Golden Gate Restaurants? 508 Private Equity in Asia 510 Background: Mekong Capital 510 Shift to a Consumer-Focused Strategy 511 Evolution to a Hands-on Operating Improvement Strategy 511 VOB is Formed 511 Deal Origination 512 Reading the Tea Leaves 512 Courtship Inspires a Deal 512 Golden Gate and Growth 513 The Opportunity 513 Meagre Beginnings 514 Adaptability and Expansion 514 Building Talent 515 Missed Target 516 Maximizing Value and Creating a Profitable Pathway for Future Owners 516 Growth vs. Value: Changing Tack? 516 Operating Advisors and External Visits 517 More Expansion Now? 518 Preparing to Exit 519 The Board Meeting 519 Exit Advice Prior to the Board Meeting 519 Anxious Moments Preparing for the Debate 520 21.2 CASE 9 SLALOM TO THE FINISH: CARLYLE’S EXIT FROM MONCLER 532 21.2.1 SYNOPSIS 532 21.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 532 21.2.3 SUGGESTED ASSIGNMENT QUESTIONS 532 21.2.4 ADDITIONAL RESOURCES 533 21.2.5 Slalom to the Finish: Carlyle’s Exit from Moncler 534 Moncler: Background 535 Carlyle’s Investment in Moncler: The 2008 Transaction 536 Carlyle’s Investment in Moncler: Value Creation 537 Carlyle Exit Considerations 538 The IPO Option 538 The Trade Sale Option 540 The Dual Track Process 540 Decision Time 542 21.3 CASE 10 INVESTOR GROWTH CAPITAL: THE BREDBANDSBOLAGET INVESTMENT 554 21.3.1 SYNOPSIS 554 21.3.2 PEDAGOGICAL OBJECTIVE OF THE CASE 554 21.3.3 SUGGESTED ASSIGNMENT QUESTIONS 554 21.3.4 ADDITIONAL RESOURCES 554 21.3.5 Investor Growth Capital: The Bredbandsbolaget Investment 556 The Swedish Broadband Market 557 Competitors 558 The Offering 559 Building the Company, 1998–2002 559 Investor Growth Capital 561 Sentiments Among Investors 561 Anti-Dilution Provisions in the Shareholders’ Agreement 562 Options Facing the Majority Investors 563 Further Articles on Bredbandsbolaget 576 22 SECTION IV Leveraged Buyouts (LBOs) 578 22.1 CASE 11 CHIPS ON THE SIDE (A): THE BUYOUT OF AVAGO TECHNOLOGIES 580 22.1.1 SYNOPSIS 580 22.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 580 22.1.3 SUGGESTED ASSIGNMENT QUESTIONS 580 22.1.4 ADDITIONAL RESOURCES 581 22.1.5 Chips on the Side (A): The Buyout of Avago Technologies 582 Chips on the Side (A): The Buyout of Avago Technologies 583 Agilent Technologies 584 The Semiconductor Industry 585 The Semiconductor Group (SPG) 586 Agilent’s Management Approach 587 Customer and Distribution Considerations 587 Growth Opportunities for SPG 588 SPG Cost Structure 588 Other Transaction Considerations 589 22.2 CASE 12 CHIPS ON THE SIDE (B): THE BUYOUT OF AVAGO TECHNOLOGIES 606 22.2.1 SYNOPSIS 606 22.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 606 22.2.3 SUGGESTED ASSIGNMENT QUESTIONS 606 22.2.4 ADDITIONAL RESOURCES 607 22.2.5 Chips on the Side (B): The Buyout of Avago Technologies 608 Chips on the Side (B): The Buyout of Avago Technologies 609 The Broad Set-Up 609 The Financing Structure 610 22.3 CASE 13 GOING PLACES: THE BUYOUT OF AMADEUS GLOBAL TRAVEL DISTRIBUTION 622 22.3.1 SYNOPSIS 622 22.3.2 PEDAGOGICAL OBJECTIVE OF THE CASE 622 22.3.3 SUGGESTED ASSIGNMENT QUESTIONS 622 22.3.4 ADDITIONAL RESOURCES 622 22.3.5 Going Places: The Buyout of Amadeus Global Travel Distribution 624 The Target: Amadeus 625 Pre-Acquisition Challenges 626 The Suitor: BC Partners 627 The Process 627 The Strategic Options for Amadeus 627 Option A: A travel distribution company focused on geographical expansion 628 Option B: Develop the IT Solutions division and position Amadeus as a fully-fledged IT supplier to travel providers 628 23 SECTION V Turnarounds and Distressed Investing 638 23.1 CASE 14 CRISIS AT THE MILL: WEAVING AN INDIAN TURNAROUND 640 23.1.1 SYNOPSIS 640 23.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 640 23.1.3 SUGGESTED ASSIGNMENT QUESTIONS 640 23.1.4 ADDITIONAL RESOURCES 641 23.1.5 Crisis at the Mill: Weaving an Indian Turnaround 642 Allegations… 643 The Groundwork 644 Action… 644 The Takeover 645 New Day, New Team 645 The Challenges Ahead 645 The Textile Company 646 Production Process 646 Raw Material 646 Sales 647 Operations 647 Financial Position of the Company 647 Capital Expenditure Plan 648 Setting the Stage for Turnaround 648 23.2 CASE 15 VENDEX KBB: FIRST HUNDRED DAYS IN CRISIS 656 23.2.1 SYNOPSIS 656 23.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 656 23.2.3 SUGGESTED ASSIGNMENT QUESTIONS 656 23.2.4 ADDITIONAL RESOURCES 657 23.2.5 Vendex KBB: First Hundred Days in Crisis 658 A Colourful History 659 Vendex International 660 Koninklijke Bijenkorf Beheer (KBB) 661 Vendex KBB Is Born 661 The Stamps Don’t Stick! 662 V&D – Part of Dutch Heritage 662 Other Formats in the Vendex KBB Portfolio 665 Time to sell 665 The First 100 Days 667 Changing Management 667 Change – Tony DeNunzio 668 Day 1 668 23.3 CASE 16 TURNING AN ELEPHANT INTO A CHEETAH: THE TURNAROUND OF INDIAN RAILWAYS 682 23.3.1 SYNOPSIS 682 23.3.2 PEDAGOGICAL OBJECTIVE OF THE CASE 682 23.3.3 SUGGESTED ASSIGNMENT QUESTIONS 682 23.3.4 ADDITIONAL RESOURCES 683 23.3.5 Turning an Elephant into a Cheetah: The Turnaround of Indian Railways 684 Indian Railways 685 The Looming Crisis in 2001 686 Recommendations of the Expert Group 687 Lalu Prasad 688 Sudhir Kumar 689 The Complexity of the Turnaround 689 The Main Issues 691 Axle Load and Safety 691 Unions and the Parcel Service 691 Customers’ Side Tracks 692 Bibliography 692 24 SECTION VI Private Equity in Emerging Markets 702 24.1 CASE 17 RICE FROM AFRICA FOR AFRICA: RICE FARMING IN TANZANIA AND INVESTING IN AGRICULTURE 704 24.1.1 SYNOPSIS 704 24.1.2 PEDAGOGICAL OBJECTIVE OF THE CASE 704 24.1.3 SUGGESTED ASSIGNMENT QUESTIONS 704 24.1.4 ADDITIONAL RESOURCES 705 24.1.5 Rice from Africa for Africa: Duxton Asset Management and its Investment in Tanzanian Rice Farming 706 Background and History of Duxton AM 707 Duxton’s Investment Philosophy 708 Benefits and Risks of Farmland Investments 709 Duxton and Socially Responsible Investing (SRI) 710 Africa as an Investment Destination 711 The Kapunga Rice Project Limited (KRPL) 712 Duxton’s Initial (Top Down) Assessment of KRPL 713 KRPL Business Highlights and Plans 714 Management’s Five-year Business Plan 715 Key Risks for the Deal 716 Proposed Deal Structure 717 Final Assessment and Approval 718 A Change in Circumstances 718 A Meeting in Istanbul Airport 719 24.2 CASE 18 PRIVATE EQUITY IN FRONTIER MARKETS: CREATING A FUND IN GEORGIA 732 24.2.1 SYNOPSIS 732 24.2.2 PEDAGOGICAL OBJECTIVE OF THE CASE 732 24.2.3 SUGGESTED ASSIGNMENT QUESTIONS 732 24.2.4 ADDITIONAL RESOURCES 732 24.2.5 Private Equity in Frontier Markets: Creating a Fund in Georgia 734 February 2013 735 Background 735 Social and Political Environment 735 The Business Environment 736 Investment Environment 737 Setting up a New Investment Vehicle 739 Potential LPs – Regional or Global 739 Which LP? 739 Structural Options 740 Investment Strategy 742 The Challenge 743 Foreign Direct Investment 747 Development Finance Institutions 747 Georgian Government-backed Fund 748 Strategic Investors 748 Financial Investors 749 Energy 750 Hydro 750 Thermal 751 Biomass 751 Solar 751 Wind 751 Agriculture 751 Wine 753 Hospitality and Real Estate 753 Manufacturing 754 Financial Services 755 24.3 CASE 19 ASIAN PRIVATE EQUITY: A FAMILY OFFICE’S QUEST FOR RETURN 756 24.3.1 SYNOPSIS 756 24.3.2 PEDAGOGICAL OBJECTIVEOF THE CASE 756 24.3.3 SUGGESTED ASSIGNMENT QUESTIONS 756 24.3.4 ADDITIONAL RESOURCES 757 24.3.5 Asian Private Equity (A): The Quest for Return 758 A Multi-family Office’s Approach to Private Equity 759 A History of Asian Private Equity 761 The Early Days 761 After the Asian Crisis 761 The Seeds of Greatness 762 Asian Private Equity Today 762 Asian Private Equity Growth Drivers 763 Macroeconomic Growth 763 Broad Set of Investment Opportunities 764 Higher Quality Management and Increased Awareness of Private Equity 764 Asian Private Equity Risks 765 Asian Private Equity Returns 766 25 ACKNOWLEDGEMENTS 776 26 ABOUT THE AUTHORS 778 27 EULA 780
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How hard is it to break into private equity? ›

Your odds at landing a Private Equity job at a top 10 firm is 1 in 300. As of October 2019, the US college population size of students pursing business degrees is 3.9 million,3 according to the National Center for Education Statistics.

How do you prepare for a PE case study? ›

Day #1: Read the document, understand the PE firm's strategy, and pick a company to analyze. Days #2 – 3: Gather data on the company's industry, its financial statements, its revenue/expense drivers, etc. Days #4 – 6: Build a simple LBO model (<= 300 rows), ideally using an existing template to save time.

Why do people go into private equity? ›

Investors seek out private equity (PE) funds to earn returns that are better than what can be achieved in public equity markets. But there may be a few things you don't understand about the industry. Read on to find out more about private equity (PE), including how it creates value and some of its key strategies.

What should I study for private equity? ›

Candidates should have an bachelor's degree in an analytical major like finance, accounting, statistics, mathematics, or economics. Private equity fund management requires technical ability to analyze financial performance and estimate the value of a private company.

Is working in private equity prestigious? ›

Private equity is extremely prestigious. Compensation for both careers is very high, but the work/life balance in private equity is better, it is often the preferred exit route for investment bankers who have a few years of experience.

How much do private equity guys make? ›

Private Equity Associate Salary + Bonus: Your salary + bonus will probably be in the $150K to $300K range, depending on the size of the firm and your performance. Some of the large funds may pay more than $300K, but we're using the 25th percentile to 75th percentile range as a reference here.

How do you pitch to private equity? ›

These techniques can help you pitch your private equity fund more effectively immediately:
  1. #1: Tell stories.
  2. #2: Don't turn the pages of a PowerPoint.
  3. #3: Ask questions first.
  4. #4: Have a great elevator pitch.
  5. #5: Test their interest early.
  6. #6: Finish with next steps.
29 Aug 2019

What is growth equity in private equity? ›

What is Growth Equity? Growth equity (also known as growth capital or expansion capital) is a type of investment opportunity in relatively mature companies that are going through some transformational event in their lifecycle with potential for some dramatic growth.

What is Moic? ›

Multiple on Invested Capital (“MOIC”) is a metric used to describe the value or performance of an investment relative to its initial cost, commonly used within private markets. MOIC is among the most relevant metrics to be assessed while conducting fund due diligence. It is also often referred to as Equity Multiple.

What is private equity in simple terms? ›

Private equity refers to the debts and shares of companies that are not publicly traded on a stock exchange. The term may also refer to venture capital that is invested in newly started businesses, known as startups.

Does private equity pay well? ›

Private Equity Associate Salary + Bonus

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

What is the difference between equity and private equity? ›

To go back to first principles, equity is a stake of a company's value. Public equity is a share in a company that is publicly traded on a stock exchange. Private equity is a stake in any company that is not publicly traded.

How much does a VP in private equity make? ›

How much does a Vice President, Private Equity make? The average Vice President, Private Equity in the US makes $366,700. The average bonus for a Vice President, Private Equity is $179,200 which represents 49% of their salary, with 100% of people reporting that they receive a bonus each year.

How many hours do you work in private equity? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Which private equity firm pays the most? ›

Apollo Global Management: Apollo Global Management is frequently reputed to be the highest-paying firm on the street in terms of all-in compensation, paying their Associates upwards of $400k per year. They have an enormous fund and have an incredible track record of success.

Are private equity workers happy? ›

The results echo another recent compensation study, by executive recruiting firm Heidrick & Struggles, which found that 62 percent of associates and senior associates at private equity firms were “not happy” with their salaries and bonuses.

Does PE pay more than IB? ›

Analysts at all types of private equity firms earn significantly less than Associates, just as Analysts in IB earn significantly less than Associates. In fact, PE Analysts often earn less than IB Analysts! So, you might initially make less money if you start in private equity.

Is private equity fun? ›

Similar to a mutual fund or hedge fund, a private equity fund is a pooled investment vehicle where the adviser pools together the money invested in the fund by all the investors and uses that money to make investments on behalf of the fund.

What is the highest paying job in finance? ›

Highest paying finance jobs
  • Investment banker.
  • Information technology auditor.
  • Compliance analyst.
  • Financial advisor.
  • Insurance advisor.
  • Financial analyst.
  • Senior accountant.
  • Hedge fund manager.

How much do first year private equity analysts make? ›

Analysts can expect to earn a total cash compensation (base salary and bonus) in the range of $100,000 to $150,000, with most of it coming from the base salary and the bonus averaging around 70% of the base.

How much do private equity CEOs make? ›

The median base compensation among US CEOs surveyed for this report was $476,000 in 2021, and the median cash bonus received in 2020 was $294,000, for a total median cash compensation of $800,000. (Eleven percent of CEOs said they received no cash bonus in 2020.)

What is equity pitch? ›

Definition: A stock pitch is a short write-up or presentation that argues for or against investing in a public company's stock, and which is backed by a strong investment thesis, data, valuation metrics, catalysts, and an assessment of the risk factors.

How do you pitch an institutional investor? ›

Six tips for effectively pitching to institutional investors
  1. 1 Create a game plan that prioritizes prospects.
  2. 2 Know your audience.
  3. 3 Invest time preparing for meetings.
  4. 4 Know what separates you from the pack.
  5. 5 Beware of clichés.
  6. 6 Come across as a fiduciary.
14 Nov 2018

What's the difference between growth equity and private equity? ›

With growth equity, the money invested has a clear purpose of being used to fund some sort of expansion or development strategy. With PE, investors also want the company to grow but aren't specifically focused on any specific growth activities.

What is the cheapest source of capital? ›

Retained earnings are the part of funds which are available within the business and is hence a cheaper source of finance.

What makes a good growth equity target? ›

Growth equity investments

Significant revenue that is growing quickly (e.g. 30% or higher) Strong bias toward tech-enabled products and services, given high growth. Proven business model (established offerings with customers)

What does 3x Moic mean? ›

In the example above, if an investor's $100 investment has a total value of $300 after 5 years, the investor will have tripled their investment, otherwise known as 3x MOIC.

Which is more important IRR or Moic? ›

MOIC and IRR are both valuable to investors. MOIC's simplistic calculation clearly tells investors how much money they're ultimately receiving from an investment. On the other hand, IRR allows for investors to understand the impact of varying hold periods on investment returns.

What is a good IRR private equity? ›

Depending on the fund size and investment strategy, a private equity firm may seek to exit its investments in 3-5 years in order to generate a multiple on invested capital of 2.0-4.0x and an internal rate of return (IRR) of around 20-30%.

What is private equity with example? ›

Private equity is the category of capital investments made into private companies. These companies aren't listed on a public exchange, such as the New York Stock Exchange. As such, investing in them is considered an alternative.

How does private equity make money? ›

Key Takeaways. Private equity firms buy companies and overhaul them to earn a profit when the business is sold again. Capital for the acquisitions comes from outside investors in the private equity funds the firms establish and manage, usually supplemented by debt.

What is the goal of private equity firms? ›

The purpose of private equity firms is to provide the investors with profit, usually within 4-7 years. It comprises companies or investment managers that acquire capital from wealthy investors to invest in existing or new companies.

Who makes more money hedge fund or private equity? ›

Hedge fund compensation is more variable than private equity salaries + bonuses, but at the junior levels, you'll most likely earn a bit more in private equity. At the top levels, a star hedge fund PM who has a great year could easily earn more than an MD in private equity – depending on the fund size and structure.

Does private equity have work life balance? ›

Work/life balance.

In private equity, you can have very quiet periods followed by very intense weeks when your team is working on a deal. The 'peaky' nature of workload is similar to the one investment bankers face.

Where do I go after private equity? ›

These options include going to a hedge fund, venture capital firm or even a family office is not unheard of. For the hedge fund route, it may make sense if you like public markets more than working on (mostly) private transactions.

Is private equity better than public? ›

Generally, public equity investments are safer than private equity. They are also more readily available for all types of investors. Another advantage for public equity is its liquidity, as most publicly traded stocks are available and easily traded daily through public market exchanges.

How long do private equity firms keep companies? ›

Private equity firms' average portfolio company holding periods have historically averaged from four to five years (Strömberg 2008), and a majority of private equity firms use a five-year forecasting period in evaluating investments (Gompers et al. 2016).

What asset classes are in private equity? ›

How do you define private equity as an asset class? Private equity refers to investing in a company that does not have a publicly listed security. The asset class comprises a spectrum of investment opportunities, from startups needing seed capital to mature, cash flow-producing companies.

How much does a partner at a PE firm make? ›

At the low end, such as at a brand-new fund with a few hundred million under management, a Partner might earn in the $500K to $1 million range for base salary + year-end bonus. As fund sizes approach several billion under management, Partners move closer to an average of $1-2 million in base salary + bonus.

How much does a partner at Carlyle make? ›

Partners and managing directors have an average of $22m.

How much do Apollo partners make? ›

Apollo Partners, Llc pays an average hourly rate of $1,556 and hourly wages range from a low of $1,365 to a high of $1,781.

Is private equity a hard job? ›

In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. You usually get into the office around 9am and may leave between 7pm-9pm depending on what you're working on.

How hard is private equity? ›

Private equity may be the most difficult sector to break in to in all of financial services. European PE firm Terra Firma is said to receive 250 applications for every available role.

Is private equity fast paced? ›

First, private equity is a more long-term approach to investing whereas hedge fund investing can be a more fast-paced environment. A private equity fund typically has an investment time horizon of 3 to 5 years with the life of the fund reaching the latter part of this timeframe.

How can I get into private equity with no experience? ›

Get Some Related Experience

If you can't score an internship or a first job in private equity, try a related field like venture capital, investment banking, or asset management. These firms also have little interest in hiring inexperienced business school graduates, no matter how bright.

Why is it called Blackstone? ›

Blackstone is a combination of its founders' last names: "Black" translates to "schwarz" in German, and "peter" means "stone" in Greek. Since Schwarzman and Peterson had very little experience in the private equity industry, investors were initially hesitant about giving them money to launch their first fund.

What makes a private equity firm successful? ›

Whether it's a prospective investment or an existing portfolio company, PE firms should consider the hallmarks of both sales excellence and sales obsolescence. Successful sales organizations are customer-oriented, highly productive, revenue- and profit-centric and excellent at both execution and implementation.

Can you go straight into private equity? ›

Private equity firms do hire undergraduates. However, there are usually only a handful of undergraduates from top schools that recruit directly into PE firms. Usually with previous experience in investment banking or private equity. Boutique firms with minimal recruiting structure can accept undergraduates too.

Can you get into PE without IB? ›

It will be very difficult to get into private equity without experience in IB or PE and without having gone to a typical target school. However, it is not impossible to break into the industry.

How do you transition into private equity? ›

How to get into private equity
  1. Get into private equity right out of college. ...
  2. Get a master's degree. ...
  3. Transition from an engineering career to one in private equity. ...
  4. Transition from a consulting, accounting or investment banking role.

How hard is it to get a job at KKR? ›

How to land a job at KKR, according to one of the private-equity giant's top HR execs. In 2020, KKR accepted less than 2% of 1,678 collegiate applicants to its analyst program.

How many hours do you work in private equity? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Is CFA useful for private equity? ›

The CFA shows investors that you can be trusted to manage their money. In private equity, the hardest aspect is not finding the right companies to buy, or employing the most appropriate turnaround strategy, or finding the best exit opportunity.

What are the hours like in private equity? ›

In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. You usually get into the office around 9am and may leave between 7pm-9pm depending on what you're working on.

Can you break into private equity with an MBA? ›

Getting an MBA can dramatically improve your chances of breaking into the fieldof private equity, especially at top firms that only recruit at top business schools. Many business schools provide an abundance of networking opportunities, which are critical to landing a job in private equity.

Can I get into PE after MBA? ›

Post-MBA candidates are hired as senior associates straight from b-school or two or three years after graduation. They have around six years' experience in investment banking, PE, or consulting.

How do I break into a private equity analyst? ›

To become a private equity analyst, you will need a bachelor's degree in accounting, finance or a related programme and sometimes an MBA as well. Entry-level positions are available, but usually experience working in the financial sector is a requirement.

How much does a VP in private equity make? ›

How much does a Vice President, Private Equity make? The average Vice President, Private Equity in the US makes $366,700. The average bonus for a Vice President, Private Equity is $179,200 which represents 49% of their salary, with 100% of people reporting that they receive a bonus each year.

Which private equity firm pays the most? ›

Apollo Global Management: Apollo Global Management is frequently reputed to be the highest-paying firm on the street in terms of all-in compensation, paying their Associates upwards of $400k per year. They have an enormous fund and have an incredible track record of success.

Do people go from consulting to private equity? ›

There are two primary paths for consultants into the Private equity industry: the operations team and a portfolio company (while a small portion of consultants end up working in an Investment Team, firms primarily target individuals with investment banking or Private equity backgrounds for these roles).

Is KKR good to work for? ›

83% of employees at KKR & Co. L.P. say it is a great place to work compared to 57% of employees at a typical U.S.-based company.

Is KKR a good employer? ›

Is KKR a good company to work for? KKR has an overall rating of 4.3 out of 5, based on over 284 reviews left anonymously by employees. 90% of employees would recommend working at KKR to a friend and 90% have a positive outlook for the business. This rating has decreased by -1% over the last 12 months.

Does KKR hire out of college? ›

KKR told Business Insider that it is hiring about a dozen full-time analysts straight out of college to start at the 1,200-person firm in 2020.


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