Background: Private Equity

• The Typical Private Equity Investment Transaction
• The Sources of Value Creation in Private Equity
  • Re-Engineering the Firm
  • Obtaining Favorable Debt Financing
• Aligning Private Equity's Interests and the Portfolio Managers Companies
  • Control Mechanisms

Valuation Characteristics of Venture Capital versus Buyout Investments

• Financial Leverage and Risk Assessment
• Working Capital Required
• Investment Returns
• Ability to Grow through Subsequent Funding
• Cash Flows and Product Market
• Asset Base and Management Team

Six General Valuation Methodologies for Private Equity

• Discounted Cash Flow (DCF) Analysis
• Price Multiple Approach
• Real Option Analysis
• Replacement Cost of the Business
• Venture Capital Method
• Leveraged Buyout Method

Valuation Issues in Venture Capital Investments

• Pre- and Post-Money Valuation
• Appropriate Methods for Venture Capital Valuation

Buyout Valuation Issues

• Types of Buyouts
  • Takeovers
  • Management Buyouts (MBOs)
  • Leveraged Buyout (LBO)
• LBO Model and Exit Value

Alternative Exit Routes in Private Equity

• Initial Public Offering (IPO)
• Secondary Market Sale
• Liquidation and Exit Timing

Private Equity Fund Structures

• Private Equity Fund Terms
• Economic Terms of a Private Equity Fund
• Net Asset Value (NAV)
• Due Diligence of Private Equity Fund Investments

Risks and Costs of Investing in Private Equity

• Post-Investment Investor Expectations
• General Risk Factors
• Costs of Private Equity Investing
• Qualitative and Quantitative Measures
• Benchmarks