Transcript: PE Funds Managers Industry Players Private Equity Secondary LBO IPO Trade Sale improving business strategy Growth/expansion capital Definition How it Works? Industry Players PE Firms' Strategies Exit Routes Funds of Funds QUESTIONS? expanding distribution The Strategies limited partmers General Partners Exit Routes Under performing or Undervalued companies investment horizon: 4-7 years. How It Works injecting managerial expertise Private Equity Venture capital Arwa AlNahdi In finance, private equity is an asset class consisting of equity securities and debt invested in operating companies that are: * Not publicly traded on a stock exchange * In public companies that eventually become de-listed from public stock exchanges "go-private deals" Content... Leveraged buyout advancing production technology Inst. Investors
Transcript: Ikke-fiendlig buyout Kjøp: $5.5 milliarder Fortjeneste: $7.2 milliarder Definisjon Privat EK - ikke børs-notert Ekspansjon, produktutvikling og restrukturering IPO Langsiktig tidshorisont Ulike strategier Private Equity Oppstarts/unge selskaper Høy risiko Venture Capital Modne selskaper Svake resultater Kjøpes ut av børsen Safeway Inc. Kilder Strategier Leveraged Buyouts http://www.investopedia.com/terms/b/buyout.asp 12.02.2017 http://www.investopedia.com/terms/p/privateequity.asp 08.02.2017 Saunders, A. & Cornett, Marcia M., (2015), Financial Markets and Institutions, 6.etd, McGraw-Hill Education Mishkin, Frederic S. & Eakins, Stanley G., (2015), Financial Markets and Institutions, 8.etd, Pearson Forelesnings-slide (FIN3522) http://www.investopedia.com/terms/v/venturecapital.asp
Transcript: Required: Bachelors or Masters degree in Finance, Economics, Accounting or Investment analysis Job Description Personal Qualities Necessary -Typically day starts at 7 am and ends between 7-9 pm - Usually don't work on weekends unless there is an urgent deal - Work in banks -Associates have their own offices -Friendly environment -Work can be stressful at times Job Outlook Advantages and Disadvantages -manage and observe portfolios investments -provide backing to structuring, due diligence, negotiation and financing -provide review reports to investors -Salary -Great working environment -Awesome lifestyle -Opportunity to work and interact with very intelligent people -Long hours -Expected to be available 24/7 -No time for yourself Work Conditions Work Schedule Advancement Opportunities Private Equity Benifits Education Requirement -provide accurate valuation -analyze new investment prospects -raise funds from corporates -create financial models and presentations -conduct detailed financial analysis MBA specialized in Finance or CFA would always be a plus - Get benefits based on personal performance -Money benefits (Bonuses) -Good communication skills and networking -Understanding of syndicated bank loans and high yield bonds - Varies depending on years of experience (Including Bonuses) Summer Intern: 70-95 K 1st year analyst: 140-160 K 3rd year analyst: 185-215 K 1st year associate: 220-290 K 3rd year associate: 250-350 K Vice president: 400-800 K Managing director: 800 K - 10 MM + Salary -Move up as you have more years of experience -Can easily start at associate position with certain degrees Training Requirement Prior experience is not necessarily required for analysts -Associate position requires 2-4 years of experience in PE firm or I-Bank -Investment Director requires at least 5 to 6 yrs. of experience in the industry - PE firms are expanding payrolls -17% by 2022 -Strong industry knowledge -Analytical skills -People skills
Transcript: Private Equity By Max Horton The goal of today's meeting is to create a new private equity firm for the Derryfield School Creating a Long Term Plan Derryfield's Future She saw what Google did when it created Google Venture (GV) Unorthodox idea to better the school Create an independent firm profits will be funneled to the improvement of the school Dr. Carter's Vision Vision Private Equity Venture Capital Private Placement 3 Main Types of Firms What is PE? Private Equity Invest in companies with techniques like leveraged buyouts Buying mature companies to give a makeover so that they become profitable Most popular form First leveraged buyout by JP Morgan in 1901 of Carnegie Steel Corporation Private Equity Pros Allows companies to grow outside of the public eye A Harvard study found that companies backed by private equity performed better than their counterparts in the stock market Private equity offered networking and funding Make about 2% annually on administration fees and 20% on profits of company Pros to Private Equity Cons Hard to liquidate Need to find a person/company willing to buy all the assets Not like the stock market where oyu can just sell Price of assets is determined through agreement, not driven by market forces could be good or bad Downsides to Private Equity Invest in young, growing or emerging companies Google Ventures invested in Uber and Nest Not always just monetary investment May help with technical or managerial expertise Want to invest in companies with strong business plan and have a lot of room for growth Venture Capital Venture Capital Pros Have high rate of return on investment Investors get liquidity in company After a certain amount of time, like 4 to 6 years, the investors leave the company through a merger, acquisition or IPO Benefits of Venture Capital Pros Due to being highly profitable, they are also very risky investments Risk-return paradox Rarely obtain majority control Need to do a lot of background research before investing Investing a lot of money Downsides to Venture Capital The sell of securities to a relatively small number of select investors Investors like large banks, mutual funds, insurance companies and pension funds Not open to the general market like a stock Used to raise short term money for the company and long term money for investors Private Placement Private Placement Pros The sell of securities to a relatively small number of select investors like banks and mutual funds Used to raise short term money for the company and long term money for investors This type of investment isn’t regulated by the SEC Can get money faster with less hoops to jump through Information of the deal is not disclosed The firm can remain privately owned Benefits of Private Placement Cons Investing is not as secure because not backed by SEC Can loss a lot of money So have to know what you’re doing Downsides to Private Placement Any of these types of investments will offer Derryfield endless opportunities to grow Take advantage of a great way to raise money Bringing your school into the 21th century Endless Opportunities Conclusion
Transcript: INDIA Favorite child of host private equity Top 10 firms are WHY???? MEANING Inability of PE funds to raise capital from market declining interest of foreign investors in India experienced private equity individuals venturing out on their own low return on investment FEATURES success stories for private equity are - FLIPKART,BHARTHI AIRTEL,PANTALOONS AND SNAPDEAL private equity in growh companies in 2000-2002 earned handsome returns on their investment as it was intoduced newly it attracted investers however in recent times this structure is facing many problems In financial terms , private equity is an asset class consisting of equity security and debt in operating companies that are not publicly traded on a stock exchange. Its operations are not only confined to new firms but also existing firms which are running in losses or facing problems in operations. The private equity secondary market refers to buying and selling of pre-existing investment committments to private equity and other alternative investment funds By is nature private equity funds are illiquid ,intended to be a long term investment to buy and hold,and there is no listed public market too A private equity investment will generally be made by a private firm,a venture capital firm, or an angel investor , however, all provide working capital to the target company to nurture expansion,new product development,restructuring management etc IMPACT IN INDIA funds will not go public not listed in stock exchange highly illiquid long lock up periods lack of transparency J curve PRIVATE EQUITY FUND The Carlyle group Kohlberg Kravis Roberts(KKK) Black stone group Apollo global management TPG capital CVC capital partners General atlantic Ares management clayton Dubilier and rice Advent international INTRODUCTION It is a collective investment scheme used for making investment in various equity securities according to one of the investment strategies associated with private equity A private equity fund is raised and managed by investment professionals of a specific private equity firm LIQUIDITY MEANING PROBLEMS
Transcript: MergerMarket/DealReporter M+A Deals PE Houses Companies in PE portfolios Analysis of strategic intent Bloomberg News: NI PE NI MNA Analysis PE MA (advanced search) FSRC Private Equity and Journals Databases Finding a specific journal article Private Equity Performance and Liquidity Risk. FRANZONI, FRANCESCO NOWAK, ERIC PHALIPPOU, LUDOVIC Journal of Finance, Dec 01, 2012; Vol. 67, No. 6, p. 2341-2373 http://banker.thomsonib.com firstname.lastname@example.org cassbanker10 Journals - academic literature Refworks web based - www.refworks.com Helps you compile a bibliography. Create your own personal database by importing references from databases. Thomson One Private Equity Fund performance Deals Analysis www.city.ac.uk/library Private equity data... which database? Thomson One Banker Zephyr Bloomberg MergerMarket /DealReporter SDC Platinum Referencing “How to” guide on Library webpages Pears, Richard (2010) Cite them right: the essential referencing guide. email@example.com * Business Source Complete * Proquest Business Collection * Science Direct * SSRN * Emerald Management * JSTOR * Web of Knowledge (citation reports) Zephyr M+A deals Search by Deal Type Deal structure/finance News/Commentary Analysis
Transcript: HOW DO PE FUNDS WORK? EARLY SUCCESSES Finance: dominated by a few large firms making it difficult for new entrants to compete High legal and capital requirements Construction: Saturated sector Government is the major customer GROWTH PROSPECTS OF PE IN INDIA Private equity refers to a type of investment aimed at gaining significant, or even complete, control of a company in the hopes of earning a high return. Private equity funds invest in assets that either are not owned publicly or that are publicly owned but the private equity buyer plans to take private. The fund would be monitored and evaluated against projected and expected performance. Once the investment objective is met, the exit strategy would be executed. WHO WILL MANAGE THE FUND? Began in the mid 1980's First venture capital funds launched by ICICI and IFCI Commercial Banks started venture capital funds Regional venture capital funds in Andhra Pradesh and Gujarat HOW CAN A PEF WORK IN TRINIDAD AND TOBAGO OTHER STRATEGIES AGRICULTURE WHAT IS PE? HOW CAN A PEF WORK IN TRINIDAD AND TOBAGO Downstream Energy Industry attractive for PE IPO Exit Strategy Challenge of acquiring land, plant and equipment; payback period of the investment would be lengthy Institutional Investors High Net Worth Individuals GROWTH PROSPECTS OF PE IN INDIA 1. Investments are pooled from high net worth individuals and institutional investors, 2. The Fund is either incorporated as a company or a Trust, 3. The Fund may have open-ended or close-ended investments, 4. Managed by an Asset Management Company or Investment/Fund Manager, 5. The Fund typically holds diversified investments to manage risk. 6. Profits are distributed to investors in a pre-determined manner 7. Excess returns are shared between the investors and the Fund Manager. Bharti Airtel - Warbug Pincus deal: - Bharti Airtel received US $292 million from Warbug - Fund enabled Bharti to expand its business from 2 to 23 mobile telecom circles - Warbug Pincus exited by selling off its stake to Vodafone for US $848 million - Warbug secured total gains of around US$ 1.3 billion in the sell-off Attractive for PE as it is underdeveloped and can diversify the economy away from oil and gas dependence. Exit Strategy: sell-off or re-capitalisation HISTORICAL BACKGROUND FACTORS THAT DETERMINE INVESTOR WILLINGNESS TO ENTER PE MARKET EARLY DAYS OF PE IN INDIA STARTING A PRIVATE EQUITY AND VENTURE CAPITAL FUND IN TRINIDAD AND TOBAGO SECTORS FOR PE IN TRINIDAD AND TOBAGO TOURISM Owner cash out Investor buy out Merchant banking Fund of funds CAN PE BE SUCCESSFUL IN TRINIDAD AND TOBAGO Attractive for PE as the Government attempts to incentivise entry into this sector Exit Strategy: Sell-off or re-capitalisation Challenges: family owned farms, seasonal adverse weather conditions and seasonal crops Laws for venture capital funds started taking shape in the mid - 1990's In 1996 the Securities and Exchange Board of India issued the SEBI (Venture Capital Funds) Regulations 2008 Financial Crisis resulted in a slowdown in India's PE industry However, there is currently modest growth and the slowdown is merely a "bump in the road" India remains the 2nd largest Asian recipient of foreign PE after Japan WHO WILL BE THE INVESTORS? Leveraged Buyout (LBO) Growth Capital Mezzanine Capital Venture Capital Shallow Capital Market Small Economy Poor Corporate Governance Family Owned Businesses and Lack of Transparency Lack of Management Expertise GENERAL CHALLENGES IN TRINIDAD AND TOBAGO HAS IS WORKED IN DEVELOPING COUNTRIES AND WILL IT WORK IN TRINIDAD AND TOBAGO? Economic reform by the government in late 80's/early 90's 1995-2000 foreign firms such as Baring PE partners, CDC Capital, Draper International, HSBC Private Equity and Warbug Pincus entered Chris Capital and West Bridge Capital set up with a focus on IT UNFAVOURABLE SECTORS INDIA PE Industry slowed down in 2001-2003 Investment activity revived in 2004 with 6 companies going public PE industry grew from US $2 Billion to US $20 Billion by 2006 PE was the largest investor class driving equity deals in India HOW TO ALLOCATE INVESTMENTS ENERGY WHAT STRATEGIES DO PE INVESTORS USE? IPO Sell-off Re-capitalisation A diverse group of finance specialists, accountants and lawyers with multi-sector experience MONITORING AND EVALUATION OF THE FUND REAL ESTATE DEVELOPMENT Economic Activity Open Market Economy State of Capital Markets Investor Protection and Corporate Governance Regulation Taxation Entrepreneurial Culture and Deal Opportunities Management Expertise Culture Attractive for PE as the Government attempts to incentivise entry into this sector Exit Strategy: IPO, Sell-off to larger manufacturing companies or re-capitalise Challenges: most manufacturing companies in Trinidad are family owned, they may not be willing to part with control or favour transparency. MANUFACTURING GROWTH AND DEVELOPMENT OF PE IN INDIA MOST ATTRACTIVE SECTORS IN INDIA FOR PE Sector diversification Companies should be in
Transcript: Due Diligence: Trust but Verify Advantages: 1. Greater diversification 2. Increase cost effectiveness 3. Reduce their minimum investment requirement 4. Lower risk Disadvantage: * additional layer of fees to the General Partner. Biggest Private Equity Firms Exit/Sale of Company Management team Value proposition and differentiation Business model economics Relationships with customers and suppliers Organizational model Company Agreements: Company and Industry Speak with industry experts, customers and suppliers Validate company value proposition and industry dynamics Quantify possible risks Sale to strategic buyer (e.g., industry competitor) Initial Public Offering (“IPO”) Sale to another Private Equity Fund (“Financial buyer”) Liquidity in Private Equity Legal Identify any outstanding litigation and potential liabilities Intellectual property and patents Founded on June 11, 2003 508 investment projects reviewed Industry Sale of Limited Partnership Interests Sale of Direct Interests Board of Directors representation Identify new Directors with relevant experience who can assist the Company Augmenting the Management Team If necessary, recruit new CEO/ CFO Identify functional areas to add additional talent Incentive key players Execution of the growth strategy Buy and Build: Add-on acquisitions Accelerating Growth: Investments in new products or markets Transformation: Professionalize operations Due Diligence Financial Private Equity Financial model (historical and projected) Working capital Capital expenditures Capital structure and leverage Investment security Target returns Valuation Investments in Private Equity Management Background and reference checks In-depth interviews Employment agreements IFK Thank you! Fund of Fund Private equity is money invested into a company, which can be private or publicly held Most private-equity firms typically look for high net worth individuals Minimum requirements Major investors: pension fund, insurers, and other institutions Sourcing Deals: Buy Right EBITDA/Earnings growth Multiple Expansion FCF Generation Competitive dynamics Industry size and growth Cyclicality Fragmentation vs. consolidation Identification of key risks Comparable company analysis Akyltayeva Uldana Assylbekov Daulet Baidaliyeva Aida Iqbolzoda Amina Invests in joint-stock companies Participates in projects as a direct investor Max. 49% of ownership in invested company Min. investments – $6 mln Period of investments no more than 7 years IRR min. 20% Letter of Intent Venture Capital Growth Capital Leverage Buyout Mezzanine financing In Distressed Situation Transaction Closing Merger or Asset Purchase Agreement Proprietary Sourcing Contact companies directly (no intermediary) Networking with business brokers, accountants, attorneys and other industry participants Auction Process Investment banks work with companies to create an Information Memorandum which is distributed to strategic and financial buyers Investment bank’s process focused on achieving highest value for the Seller Sourcing Transactions: The Deal Pipeline Private Equity Process Initial Evaluation: The First Look Munaimash Value Creation: Ideas into Action Exits: Realizing the Investment PE Definition IFK Investment Principles Sourcing Deals Initial Evaluation of Deal Accounting Independent accounting review Portfolio Company Monitoring/ Value Creation Methods to Increase the Exit Value Fund of funds PE Secondary Market Financing long lock-up periods lack of transparency unlimited leverage concentrated holdings of illiquid securities Strategies in PE
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