INSEAD Library

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I Introduction Acknowledgements contents ---.--J xiii xxiii Private Equity as an Asset Class Private Equity as an Asset Class 1 What is Private Equity? Fund investing versus direct investing Terminology Primary versus secondary fund investing A broad delineation: buyout and venture Capital: allocated, committed, drawn down and invested How do private equity funds work? Structure Cashflow Investment Fundraising Summary 2 Private Equity Returns - The Basics Understanding the J-curve and compound returns Upper quartile figures Median returns Average returns Pooled returns Distributed over Paid In (DPI) Paid In to Committed Capital (PICC) Residual Value to Paid In (RVPI) Total Value to Paid In (TVPI) Valuation Fees Time-weighted returns Summary 3 Buyout Types of buyout transactions MBO MBI BIMBO LBO Take private Roll-UP Other "buyout" activity Established businesses Debt Earnings Size Control Barriers to entry Summary 4 How to Analyse Buyouts Earnings EBIT EBITDA Earnings growth Multiple Multiple increase in an imperfect market Multiple increase in a perfect market Leverage Recapitalisation Timing Modelling and analysing buyout funds Summary 5 Buyout Returns US versus European buyout Buyout skill bases Imperfect markets Earnings multiples Earnings growth Leverage Fund size What can we expect from buyout returns in future? Recent fundraising levels Some conclusions and predictions Summary 6 Venture Capital What is venture capital? Backing new applications, not new technology Classification by sector IT Telecoms Life Science Classification by stage Seed The US model Seed stage focus Home run mentality "Value add" The US model comes to Europe Why European venture capital firms have avoided the seed stage Classification by stage, continued Early stage investing Mid- and late stage investing Summary 7 How to Analyse Venture The fundamentals Money multiples Valuation Cost and value IRRs and multiples Going In Equity (GI%) Percentage of the holding within the fund The impact of home runs Summary 8 Venture Returns US out-performance versus Europe Money multiples drive IRRs Home runs and the golden circle Market conditions European venture - is it as bad as it seems? Returns and fund size Venture returns by stage What of the future? Summary 9 Due Diligence Buyout funds Venture funds Co-investors Cross-fund investing Buyout companies Venture companies Fund of Funds Monitoring private equity funds Summary 10 Planning your Investment Programme Cashflow planning Allocated, committed and invested capital Diversification by time Proper commitment levels Diversification by sector and geography Total Return How to deal with uninvested capital Secondaries Mezzanine Private equity proxies Towards a new world of private equity programmes Summary Glossary 219 220 222 225 Index 253