Fundamentals of Private Equity and Venture Capital - PEI Media

GETTING THE MOST OUT OF THIS MODULE
Welcome to Module 8 in the Fundamentals of private equity series. This module
focuses on the aftercare and exit aspects of the private equity cycle. It is
designed to work both as a stand alone section and as part of the whole series.
The module necessarily draws upon topics reviewed in earlier modules, and
seeks to avoid repetition of their content. However, for the benefit of the stand
alone reader, a comprehensive glossary has been incorporated, which explains
the background and use of private equity terminology. All terms which may
require explanation or expansion are printed in bold, to indicate that there is a
glossary entry for them.
Introduction
The culmination of the investment process –
dealflow generation, appraisal, negotiation, due
diligence, legal documentation and, finally,
completion of the investment – marks the beginning,
and not the end, of the investment cycle.
Whilst selection and structuring are critical to
private equity success, it is once the investment
has been made that the creation and realisation
of value begins. The investor’s contribution to
value creation lies in the approach to, and implementation
of, aftercare, and he will play a key
role in the realisation of this value through driving
the exit process.
Aftercare
The aftercare function is driven by two key
objectives:
• protecting the value of the investment; and
• adding and realising value.
Exhibit 1 summarises the key aspects of the
investor’s role during the life of the investment.
Protecting value
Validating
The period immediately following completion of
an investment can represent, for the investor, the
Exhibit 1: Aftercare priorities and the investor’s role
Reporting
regime
Progress
reporting
Board
structure
Validating
Financial
reporting
Management
appraisal
Protecting
Testing
Monitoring
EXIT
VALUE
Adding
Creating
Realising
Strategy
development
Operational
enhancements
Acquisitions
Management
development
Financing
growth
Exit routes
Exit strategy
COPYING WITHOUT PERMISSION IS UNLAWFUL
THE FUNDAMENTALS OF PRIVATE EQUITY 5