Premium Essay

Private Equity

In: Business and Management

Submitted By zhuxiaozhu918
Words 236635
Pages 947
Venture Capital and Private Equity Contracting

This page intentionally left blank

Venture Capital and Private Equity Contracting
An International Perspective

Douglas J. Cumming
Associate Professor and Ontario Research Chair, York University – Schulich School of Business, Toronto, Ontario, Canada

Sofia A. Johan
Senior Research Fellow, Tilburg Law and Economic Centre (TILEC), Tilburg, The Netherlands


Academic Press is an imprint of Elsevier. 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA 525 B Street, Suite 1900, San Diego, California 92101-4495, USA 84 Theobald’s Road, London WC1X 8RR, UK Copyright © 2009, Elsevier Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the publisher. Permissions may be sought directly from Elsevier's Science & Technology Rights Department in Oxford, UK: phone: ( 44) 1865 843830, fax: ( 44) 1865 853333, E-mail: You may also complete your request online via the Elsevier homepage (, by selecting “Support & Contact” then “Copyright and Permission” and then “Obtaining Permissions.” Library of Congress Cataloging-in-Publication Data Application submitted British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: 978-0-12-198581-3

For information on all Academic Press publications visit our Web site at

Printed in the United States 09 10 11 9 8 7 6 5 4 3 2 1

For Sasha Adeline and Dylan Jedi

This page...

Similar Documents

Premium Essay

Private Equity

...Private Equity as an Asset Class Guy Fraser-Sampson Praise for Multi Asset Class Investment Strategy: “. . . pension fund trustees right around the globe should read the book . . . it is certain to stir up some much needed debate . . . has received rave reviews from within the UK pension industry” (Global Pensions) “. . . time and money well spent . . . the tectonic plates are shifting under the UK investment establishment” (Daily Telegraph) “. . . an indispensable roadmap for anyone looking to create a successful investment programme . . .” (The Securities Investment Review) “It’s some time since I read anything as clear and punchy . . . if you are involved in setting investment strategy for a pension fund, this book cannot help but clarify your thinking.” (Benefits & Compensation International) “This book stakes Fraser-Sampson’s claim to be recognised as one of the great thinkers on portfolio theory, ranking alongside Markowitz and Swensen.” (Rebecca Meijlink, AlphaBet Capital) “I somehow expected another version of Swensen’s “Pioneering Portfolio Management”. However, this is in my eyes a huge improvement and a surprisingly entertaining and satisfying read.” (Thomas Meyer, EIF, author: Beyond the J-Curve) Private Equity as an Asset Class For other titles in the Wiley Finance Series please see Private Equity as an Asset Class Guy Fraser-Sampson Copyright © 2007 John Wiley & Sons Ltd, The Atrium, Southern......

Words: 103951 - Pages: 416

Premium Essay

Private Equity

...Although high-net-worth investors have been buying large positions in companies since the days of Carnegie and Rockefeller, the modern aspects of the industry took shape in the 1960’s through the efforts of Kohlberg, Kravis, and Roberts, three Bear Stearns bankers who would later form the eponymous private equity firm KKR. PE activity then grew rapidly in the 1970-80’s when a large number of family businesses that were started after WWII were struggling with succession concerns and an inability to continue organic growth. PE firms saw this uncertainty as an opportunity to “flip” these companies for a profit by acquiring them, restructuring their operations, and then either finding a strategic buyer or taking the company public. Around this same time was the start of the technology boom and rise of Silicon Valley, causing an influx of capital hoping to fund the next big growth story. This large amount of eager capital spurred the creation of PE firms to facilitate investment opportunities which led to the industry standards we have today. The first task for any aspiring private equity firm is to raise the pool of assets utilized for pursuing investment opportunities. Since its inception PE has been the domain of high-net-worth investors, and as a result PE firms source their capital from high value clients such as pension funds, university endowments, sovereign wealth funds, and the fund managers’ own personal wealth. Given a finite number of potential investors, PE firms......

Words: 1421 - Pages: 6

Premium Essay

Private Equity

...Private Equity 4/12/15, 7:31 PM Private Equity By root | November 25, 2003 DEFINITION Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company. INVESTOPEDIA EXPLAINS The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO. © 2015, Investopedia, LLC.

Words: 269 - Pages: 2

Premium Essay

Private Equity

...GARCIA, Ronance Adrian F. 24th November, 2013 4ABE Prof. Dimaculangan “Private Equity Today and Tomorrow” The industry of business in its entirety has undergone a number of changes both good and bad over the last century. From the limitless amount of credit people had in the 1920’s, to the great depression that soon followed, with the popularity of manufacturing in the industrial age, over to the advent of technology development after the second millennium, time has changed how we conduct and treat our businesses. No matter what circumstance, the only thing that seemed to remain constant in all businesses is the understanding that it cannot function without capital. And although the internet obliterated certain walls of businesses such as geographic restrictions and costly marketing expenses, businesses would still have the need for capital. The need for business capital now brings us to the question of its procurement. There are a number of ways in which the budding entrepreneur or business prodigy can do this but perhaps one of the most effective ways in seeking funds for a business is through private equity. Private equity or private equity funds is the combined effort of individuals in a certain organization seeking to pool in funds in order to finance high-risk and potentially high reward projects. In its initial years, the private equity industry was a rage all over the American market. Its origins could be traced within the lines......

Words: 964 - Pages: 4

Premium Essay

Private Equity

...Benefits of Private Equity Private equity provides capital that is both committed, and long-term, to help unquoted companies succeed and experience more growth. Private equity can help if you want to (1) start up a company, (2) expand your business, (3) buy out a portion of your parent company, (4) revive or turn around a company, or (5) buy into a company. Raising private equity for your company is very different than applying for a loan from a bank or other lender. If you obtain funding from a lender, whether your business succeeds or fails, the lender has a legal right to all of the interest on the loan as well as on the interest on the repayment of the capital. When private equity is invested in your company, the shareholders have a stake in your company. This means that the amount of money the investor earns is dependent on the profit and growth of your company.  You may be wondering if your company is attractive to potential private equity investors. Most small companies are developed with the main goal of providing the owner with a good level of living as well as satisfaction at having their own business. These small businesses are not usually used as a private equity investment since they are not likely to provide a large enough financial return to make them worth the time for large investors. You can recognize large entrepreneurial businesses by their potential for growth as well as their business objectives. Many times you won't be able to recognize these......

Words: 484 - Pages: 2

Premium Essay

Basics of Private Equity

...THE BASICS OF PRIVATE EQUITY With its bright performance in 2010, Indian PE has re-emerged in good shape from the turbulent times of the global credit meltdown and subsequent economic retrenchment. Deal activity has rebounded more quickly than in other Asia-Pacific markets, the exit markets are healthier than ever and capital continues to pour into an expanding number of domestic and international PE funds. Investment in P.E. firms adds value and managerial capacity in companies that are in need of rejuvenation and intend to compete in the global environment. Value addition is the main feature of investment. What is Private Equity? In finance, private equity is an asset class consisting of equity investments in companies that are not traded on a public stock exchange. Investments typically involve a transformational, value added, active management strategy. Private equity is medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies. Private equity provides long-term, committed share capital, to help unquoted companies grow and succeed. Private equity is a broad term which commonly refers to any type of non-public Ownership Equity securities that are not listed on a public exchange. At the start of a business, owners put some funding into the business to finance assets. Businesses can be considered for accounting purposes to be sums of liabilities and assets (also known as the accounting equation).......

Words: 3153 - Pages: 13

Premium Essay

Private Equity Funding

...Grade Established under Section 3 of the UGC Act, 1956, vide notification No: F.9.12/2001-U-3of the Government of India. TITLE OF THE REPORT Investment Banking - Studying Private Equity, Financial Modeling and Private Equity trend analysis Internship Report submitted to SIU in partial completion of the requirement of MBA Banking Management at Symbiosis School of Banking Management Pune-412115. NAME OF THE STUDENT: PROJECT MENTOR(SSBM): PROJECT MENTOR Moulshree Mishra  Ardhendu Shekhar Singh AT THE BANK: PRN: 12020941033 Mr. Pradeep Das APRIL 02, 2013 TO JUNE 01, 2013 ACKNOWLEDGEMENT I take this opportunity to convey my gratitude to Mr. Pradeep Das, Executive Director at CreedCap Asia Advisors, for streamlining the summer internship program for me at the firm and for providing the necessary guidance. I would like to express my gratitude to Mr. Vishal Pereira, Director at CreedCap Asia Advisors, for permitting me to accompany and assist him for investors meetings and for providing me guidelines regarding the e-commerce research indicating the correlation between US and Indian private equity trends. I’m thankful to Mr. Geeth Vaz, Senior Associate at CreedCap Asia Advisors, for providing me knowledge on building financial models and also for......

Words: 8284 - Pages: 34

Premium Essay

Private Equity Investment

...Summary Envelope Products is a leading manufacturer and distributor of quality paper products especially envelopes with its position further strengthened with its recent acquisition of Envelope Makers. This company has good stable growth with no gearing and potential cost synergies between Envelope Products and Envelope Makers operations. It is recommended to purchase the entire shares of this company as a going concern rather than net assets at a value of $48m with 35% equity stake and geared at 60%. Management will receive 5% equity stake with 10% ratchet on exit. The investment horizon is expected to be 5 years with IRR target of 35%. The exit strategy is to increase the earnings capacity of the company through cost savings from the synergies and increase in market share by actively marketing of its new value-added products and growth opportunities in the development of new technologies, with the intention to sell the business either through trade sale to its natural owners or secondary private equity investments. Investment Thesis The investment proposition is to improve the quality of earnings by consolidating and creating synergies between Envelope Australia and Envelope Makers and pursue other growth opportunities in value-added products such as the open and reusable products. Growth in earnings through: • Increase in earnings through further integration and consolidation of Envelope Makers which includes merging of offices in most states where there are 2......

Words: 1441 - Pages: 6

Premium Essay

Private Equity Fund Final Take Home Exam

...Private Equity Investments - Final Exam (July/ 4/ 2011) Question 1-a a. What are financial theory and concepts that support and rationalize activities of parties involved in the events leading to the financial crisis? Why and how did the meltdown happen? Is the model used in the process wrong? Answer 1-a Moral hazard nurtured by Real estate and MBS bubble; House prices of the United States had risen steadily since 1975. This trend accelerated in 1996, and reached about 12 percent per annum in late 2005 and early 2006. One reason for the rise in house prices is the Federal Reserve’s policy of maintaining low interest rates after the 2001 recession. Under these market situation, mortgage loan and mortgage backed securities market became more popular and bigger. The financial markets’ appetite for mortgage product also resulted in more creative and complex financial products and strategies such as MBS (Mortgage-backed securities), CDO (Collateralized debt obligation), ABCP (Asset-backed commercial paper), Conduits, SIV (Structured investment vehicles). For example, according to the case, the S&L crisis also boosted the securitization of mortgages by two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Starting with bundles of mortgages purchased from mortgage originators, the GSEs created and sold mortgage-backed securities (MBSs), which delivered to holders the payments made on these mortgages. In exchange for a fee, the GSEs......

Words: 2191 - Pages: 9

Premium Essay

Does the Land of Venture Capital Have a National Competitive Advantage for Private Equity?

...------------------------------------------------- Assignment 1 Does the land of Venture Capital have a national competitive advantage for Private Equity? Checcarelli Betti Francesco Hawlasewicz Maja Janssen Wim Kees Irina Müller Doing Business in Emerging Markets Fall Term 2014 04. November 2014 Abstract This assignment conducts an analysis of Israel using Porter’s Diamond model with a focus on the Private Equity industry. The aim is to understand if Israel has a national competitive advantage for the PE industry. Factor conditions National level. The country’s natural endowment is rather weak, forcing the nation to focus on knowledge-based industries (i.e. software, biotech, etc…) rather than being heavily dependent on natural resources. The ongoing hostilities with its neighbouring countries shaped the economic landscape, having a positive effect on Israel’s defence industry, which in turn provided a foundation for wide parts of the country’s high-tech industries. In addition, the near east led to even closer collaboration between Israel and the US, which is the top foreign investot in Israel, accounting $19.7 billion of the $74.4 billion in FDI in 2012, or 26.5% of the total (Kumar et al., 2009, p. 11). PE activity. These preconditions, supported by a strong education system within science and engineering-related subjects, helped Israel to build up one of the country’s most important strategic assets: specialized know-how and......

Words: 1352 - Pages: 6

Premium Essay


...The Wall Street Journal Private-Equity Firms Notch Up Gains but Face Investing Challenges; Strong Debt and Stock Markets Have a Flip Side By Ryan Dezember Feb. 20, 2014 In a year of record-setting profits, the big publicly traded U.S. private-equity firms were rewarded by investors with billions of dollars of new money for their next round of buyouts. Yet the same frothy debt and stock markets that have made it an ideal time for these firms to sell companies have made it increasingly difficult to buy new ones. "It was a challenging year to invest, particularly in the United States," Carlyle Group LP's co-founder and co-chief executive, William Conway, told investors Wednesday after the firm reported its fourthquarter and full-year earnings. "This was the flip side of robust public markets and low interest rates." The fourth quarter was Carlyle's most profitable as a public company, with earnings up sharply from a year earlier. Carlyle's economic net income, a measure of profits favored by buyout firms, was $576 million, or $1.64 a share, up from $182 million, or 47 cents a share, a year earlier. Analysts polled by FactSet forecast 96 cents a share. The Washington firm sold $6.3 billion in assets in the fourth quarter to fuel the gains. Those sales came predominantly from its corporate buyout funds, which shed big stakes in companies such as ratings firm Nielsen Holdings NV and Allison Transmission Holdings Inc. as well as entire companies. For the year, Carlyle reaped......

Words: 3628 - Pages: 15

Premium Essay

2012 Training

...knowledge, skills and expertise, and those of your team • Learn new techniques direct from the industry experts • Keep abreast of current best practice • Improve day-to-day performance The BVCA is the leading industry body for private equity and venture capital worldwide. We have been delivering industry-leading training to prestigious corporate clients for over 28 years and have garnered a reputation as the pre-eminent provider of training solutions for the private equity and venture capital industry. Our renowned training programmes focus on providing solutions aligned with your needs and corporate objectives. Our position as the leading global association for the private equity and venture capital industry and our unrivalled knowledge ensure our clients receive leading industry intelligence and training delivered by industry experts. If your objective is to enrich your own skill set, or support the development of your team through investment in training, so that their enhanced knowledge increases operational efficiency and contributes to your company’s long-term success, we are committed to providing outstanding development solutions. Full details of our comprehensive training programmes, which have been specifically created for the private equity & venture capital industry, follow. For further information or to book your place, please telephone the BVCA training team on +44 (0) 20 7420 1800 to discuss your needs. CPD points available on all BVCA programmes. Visit......

Words: 5609 - Pages: 23

Premium Essay

Bain & Co

...GLOBAL PRIVATE EQUITY REPORT 2013 About Bain & Company’s Private Equity business Bain & Company is the leading consulting partner to the private equity (PE) industry and its stakeholders. Private equity consulting at Bain has grown 13-fold over the past 15 years and now represents about one-quarter of the firm’s global business. We maintain a global network of more than 400 experienced professionals serving PE clients. Our practice is more than three times larger than that of the next-largest consulting firm serving private equity funds. Bain’s work with PE spans fund types, including buyout, infrastructure, real estate, debt and hedge funds. We also work with many of the most prominent limited partners (LPs) to PE firms, including sovereign wealth funds, pension funds, financial institutions, endowments and family investment offices. We support our clients across a broad range of objectives: Deal generation: We help PE funds develop the right investment thesis and enhance deal flow, profiling industries, screening companies and devising a plan to approach targets. Due diligence: We help funds make better deal decisions by performing diligence, assessing performance improvement opportunities and providing a post-acquisition agenda. Immediate post-acquisition: We support the pursuit of rapid returns by developing a strategic blueprint for the acquired company, leading workshops that align management with strategic priorities and directing focused initiatives. Ongoing value......

Words: 27471 - Pages: 110

Premium Essay


...1) What do you think of Zoots strategy till date? Did their business model make sense? Zoots was an innovative dry-cleaning chain that had been founded by Krasnow and Tom Stemberg (the founder of office supply giant Staples) in 1998. Krasnow and Stemberg each provided $200,000 in seed funding by themselves. And the first Zoots store opened that October and was served by a centralized processing facility located in Wilmington, Massachusetts. They expanded their business very aggressively. At first, the growth strategy was to both build out the scale of its first network by opening new stores to feed this hub and to open new regional networks with their own centralized processing facility. And they also grow by acquisition; they acquire a delivery business in 1999. They are growing very rapidly and revenue is well above industry average. However, he was caught off guard by the complexity of managing the centralized processing facilities and encounters some serious problems. By early 2000, Krasnow and the management team had decided to put the growth strategy on hold and focusing on operations. Later, they changed their focus on Improving facility efficiency and quality and Building up volume in existing networks. After a while, their operating begins to stabilized and back to track. By mid-2003, they hire a new CEO, which is very professional and suitable for the business. They the made more changes on their strategy. The most important is they transitioning......

Words: 832 - Pages: 4

Premium Essay

Quick Lbo

...ECFS895 Private Equity Investment AFC Term 1 CBD 2015 Dept of Applied Finance and Actuarial Studies Contents General Information Learning Outcomes General Assessment Information Assessment Tasks Delivery and Resources Unit Schedule Learning and Teaching Activities Policies and Procedures Graduate Capabilities Changes from Previous Offering Important Notice Standards Required to Complete the Unit Satisfactorily 2 2 3 3 7 8 10 10 12 15 15 15 Disclaimer Macquarie University has taken all reasonable measures to ensure the information in this publication is accurate and up-to-date. However, the information may change or become out-dated as a result of change in University policies, procedures or rules. The University reserves the right to make changes to any information in this publication without notice. Users of this publication are advised to check the website version of this publication [or the relevant faculty or department] before acting on any information in this publication. 1 Unit guide ECFS895 Private Equity Investment General Information Unit convenor and teaching staff Lecturer (Sydney/Melbourne) Stephane Chatonsky Contact via Email Unit Convenor / Lecturer Roger Casey Contact via Email Credit points 2 Prerequisites (Admission to MAppFin or PGCertAppFin or GradDipAppFin) and ECFS866 Corequisites Co-badged status Unit description This...

Words: 4777 - Pages: 20