Fundamentals of Private Equity and Venture Capital - PEI Media

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Published in September 2007 by: PEI Media Second Floor Sycamore House Sycamore Street London EC1Y 0SG United Kingdom Telephone: +44 20 7566 5444 © 2007 PEI Media Ltd. ISBN 1-904696-47-3 978-1-904696-47-6 This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopy, recording or otherwise, without the prior written permission of the publisher. The views and opinions expressed in the book are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within this publication or for any expense or other loss alleged to have arisen in any way in connection with a reader's use of this publication. This module is part of a series of 10 modules entitled The fundamentals of private equity. The modules in this series are: Module 1 Module 2 Module 3 Module 4 Module 5 Module 6 Module 7 Module 8 Module 9 Module 10 Glossary What is private equity and venture capital? Private equity as an asset class Structuring and raising a fund Venture and development capital Management and leveraged buyouts Private equity real estate and infrastructure Due diligence Aftercare and exits Secondaries and their alternatives Running a private equity firm A comprehensive list of private equity terms and definitions To order any of the modules in this series, please contact Private Equity International on: +44 20 7566 5444. ii THE FUNDAMENTALS OF PRIVATE EQUITY COPYING WITHOUT PERMISSION IS UNLAWFUL
Contents About the author iv Getting the most out of this module 5 The buyout principle – three different routes to value creation 5 Creating value in buyouts 5 The consequences of leverage 7 The future for value creation 7 Evolution of the buyout markets 8 Management buyouts 9 Failures 9 Investment criteria – characteristics of a buyout company 11 Strategy and market positioning 11 The company 11 The management team 11 The buyout process 12 Auctions 12 The management role in a buyout and conflicts of interest 12 The application of leverage – types of debt and their uses 14 Senior debt 14 Working capital facility 14 Subordinated or junior debt 14 Second lien debt 14 Mezzanine debt 14 High yield bonds 15 Securitisation 15 Institutional debt 15 Documentation 15 The MBO model 21 Summary 23 COPYING WITHOUT PERMISSION IS UNLAWFUL THE FUNDAMENTALS OF PRIVATE EQUITY iii
Page 1 and 2: THE FUNDAMENTALS OF PRIVATE EQUITY
Page 3 and 4: Contents About the author iv Gettin
Page 5 and 6: GETTING THE MOST OUT OF THIS MODULE
Page 7 and 8: Module 2: Private equity as an asse
Page 9 and 10: About the author Garry Sharp - inde
Page 11 and 12: Exhibit 3: Distribution when one fu
Page 13 and 14: Module 3: Structuring and raising a
Page 19 and 20: Module 4: Venture and development c
Page 25: Module 5: Management and leveraged
Page 31 and 32: Module 6: Private equity real estat
Page 35 and 36: preceded the private equity hotel c
Page 37 and 38: Module 7: Due diligence COPYING WIT
Page 43 and 44: Module 8: Aftercare and exits COPYI
Page 49 and 50: Module 9: Secondaries and their alt
Page 55 and 56: Exhibit 7: Secondary private equity
Page 57 and 58: Published in September 2007 by: PEI
Page 59 and 60: About the author David Huckfield -
Page 61 and 62: of members including representative
Page 63 and 64: Published in September 2007 by: PEI
Page 65: The Fundamentals of Private Equity

Fundamentals of Private Equity and Venture Capital - PEI Media

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