Transcript: Merchant bankers in London and Paris financed industrial concerns in the 1850s; most notably Crédit Mobilier, founded in 1854 by Jacob and Isaac Pereire, who together with New York based Jay Cooke financed the United States Transcontinental Railroad. J. Pierpont Morgan's 1901 acquisition of Carnegie Steel Company from Andrew Carnegie and Henry Phipps for $480 million represents the first true major buyout. In 1938, Laurance S. Rockefeller helped finance the creation of both Eastern Air Lines and Douglas Aircraft and the Rockefeller family had vast holdings in a variety of companies. Eric M. Warburg founded E.M. Warburg & Co. in 1938, which would ultimately become Warburg Pincus, with investments in both leveraged buyouts and venture capital. India gets major of its start ups funded from Singapore. Singapore acts as Hub for start up VC's in ASIA. First two venture capital firms in 1946: American Research and Development Corporation (ARDC, By Georges Doriot, the "father of venture capitalism ) and J.H. Whitney & Company. ARDC is credited with the first major venture capital success story when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 500 times on its investment and an annualized rate of return of 101%) ARDC total investment in 150 firms. First two Ventured Start ups :- a) Fairchild Semiconductor (1957) b) Venrock Associates (1969) Different Stages of a start up has different roles of funding. A hypothetical Start up goes from a IDEA to IPO. It goes from the owner getting 100% of nothing to some amount of shares in a big company and getting the returns on investments to all the fund providers along with the owner himself. 1946-81 SMALL FUNDING 1982-93- The first boom and bust cycle, was characterized by the dramatic surge in leveraged buyout activity financed by junk bonds and culminating in the massive buyout of RJR Nabisco before the near collapse of the leveraged buyout industry in the late 1980s and early 1990s 1992-2002- The second boom and bust cycle emerged from the ashes of the savings and loan crisis, the insider trading scandals, the real estate market collapse and the recession of the early 1990s. This period saw the emergence of more institutionalized private equity firms, ultimately culminating in the massive Dot-com bubble in 1999 and 2000. 2003-07- The third boom and bust cycle came in the wake of the collapse of the Dot-com bubble—leveraged buyouts reach unparalleled size and the institutionalization of private equity firms is exemplified by the Blackstone Group's 2007 initial public offering. Analyzing the potential in the plan of the start up, the ROI and the exit strategies. Getting availability of the funds with other investors( particularly in case of VC's ). Setting terms of the Equity Funding. Final Documentation. Takes active part in the functioning and working of the firm. Exits whenever they want to with good ROI ( generally by selling the investment or selling out an IPO ) How This Funding Works Venture Capitalist :- Invests in either a firm which is running and needs cash for growth. Angle Investors :- Invests in a plan that is still on paper and needs funds for execution. Leveraged buyout funds :- Typically acquire controlling stakes, either alone or in partnership with other PE firms, of mature, cash-flow-stable companies. Growth equity funds invest in more mature businesses that are looking to scale operations (organically or through M&A) and enter new markets Private Equity Segmentation The First's in Private Equity AngelList: It has been used by more than 1,000 companies to find accredited investors -- often a mix of "angels" and venture capitalists, but smaller investors can play, too. CircleUp: San Francisco startup specializes in helping inventors of consumer products such as pet food and organic snacks find investors. Crowdtilt: "Groupfunding" site backed by Y Combinator lets groups of friends launch funding campaigns for projects or purchases; money is collected via credit card, and the site takes a cut. FundAnything: The site launched by Donald Trump to offer artists, entrepreneurs and philanthropists "money for their dreams." FundersClub: It was launched in July 2012 as an "online venture capital firm" whose money comes from individual accredited investors. Kickstarter: Best known as a place to find backers for an artistic endeavor or invention, but small tech companies and other businesses can also launch funding campaigns. Liquidnet: It offers a platform to let private companies sell shares directly to institutional investors. SecondMarket: The firm also allows for the buying of private-company shares, but by individuals. Wefunder: It offers "crowdfunding for startups," lets investors put in as little as $1,000 and is making plans to welcome non-accredited investors once federal rules permit. Different platforms available
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: 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 email@example.com 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. firstname.lastname@example.org * 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: 5. If revenues are going to grow faster because of the synergy apply a faster growth rate to revenue in the combined statement. If costs are going to be cut, show the reductions in costs on the statement. Part 3: The value paid for acquisition THANK YOU! NATUREX & ROBERTET Synergy Valuation 3. Prepare cash flow statement for the combined firm Under the Florange law, those bidding to take over a company in France are also now legally obliged to meet with the workers' committee of the target company and answer questions about what they plan to do if they succeed in taking over. Bidders who refuse to divulge their plans, or are later to be found to have withheld their genuine intentions, could in some cases face prosecution for infringing the law. With the adoption of the Florange law, companies are now able to employ a range of defensive measures against takeover bids. Pre-Florange, company boards required the permission of shareholders to take defensive action, but now they can go ahead with defensive measures without shareholder permission, provided that their defensive action is within their rights and provided that it is in the interests of the company. Part 6: Execution Risk Synergies>Premium DEAL DONE! Shares dilution level Roll up strategies consolidate highly fragmented markets where the current competitors are too small to achieve scale economies. This strategy works when business as a group can realize substantial cost savings or achieve higher revenues. 2. Value the combined firm assuming no synergy €901.23 (€93.50/ share) Business Case: Acquisition of NATUREX by ROBERTET Team Members: Amine Jiraoui, Angimel Nomel, Bachir Mahdi-Djama, Eleni Choutouriadi, Keer Deng, Marianne Lamache, Miriam Toumi, Yue Qin Price bubble (speculators knowing that Robertet wants to buy Naturex) Rergulatory issues Limited growth prospects Integration/cultural issues Resistance from shareholders €228.38 millions Part 1: SYNERGY Justification of the cash use: leverage effect => possibility to borrow Justification of the shares use: market price and evolution in the 5 past years Sell the parts of Naturex which are not profitable. Looking at listed companies doing the same activities for the price. Part 5: Decision of Robertet main investors Part 4: Financing Approach Robertet has some business units in the same sector as Naturex. Some Potential Revenue synergies include: Marketing and selling complementary products Cross selling into a new customer base Optimization of the chain value & reduce operating costs (merging some offices located in the same countries). Access to new markets(Naturex has offices in some countries that Robertet is not present). Reduced competition 6. The difference is the synergy gain. This is the MOST that one should as a takeover premium 1. Value each company, projecting out FCFs & terminal value Max bid = market price x 1.3 (30%) and have to be < potential synergies Looking actual condition and knowing that shareholders will discuss the price start with market price x 1.1 4. Evaluate where the gains from synergy are going to come from Robertet Shareholders reaction 60% public shares buy directly on the market (market price + premium) FINASUCRE: largest shareholder with more than 30% (blocking minorities), convince them with Robertet shares (highest value all time) + cash. CARAVELLE: investment firm, looking at the best possibility French law (worker committee) Part 2: TAKE OVER RESPONSIBILITIES
Transcript: And a 20% performance fee is charged for all profits gained by the company. A 2% management fee is charged annually on assets under management. - When going this route the PE fund is choosing to use debt rather than their own capital to obtain the target company. Ex: If Recap Holdings is managing assets for Solar Extract; a solar energy company, who has 3 billion dollars worth of assets under management then Recap Holdings will generate $60,000,000 in management fees alone. What is Private Equity? Private Equity is simply the buying and selling of Private Companies in order to generate a profit. 3) What is Private Equity composed of. 1) How does Private Equity generate a profit for the firm and managers. When investing within the company the firm must first analyze three key structures in determining it's survivability. - How bad is the distress. - Can the company assets be restructured. - And will the creditors of the company become target holders. "Distressed Buyout" They generally have a performance fee along with a management fee. Carl Ichan Warren Buffet Private Equity firms are composed of high net-worth investors that create a fund for a specific purpose of investing. How does Private Equity generate a profit for the firm and managers? Bill Gates EX: If Solar Extract generated $340,000,000 in net profit, then Recap would benefit $68,000,000 Are investments within companies that are in the stage of development. Typically witnessing negative cash flow and requires a lot of potential before seeing positive cash flow. Is when a Private Equity fund purchases/invests into a company that has taken on a high amount of debt and can no longer function on it's own. Elon Musk "PRIVATE EQUITY INDUSTRY" - They are generally a high risk for investors because these are companies that have not yet found a market to reside in because of idea being fairly new. Is when a fund acquires an existing company using a considerable amount of borrowed funds. "Leveraged Buyout" "Venture Capital" Christian Rampergas Bus 104 10/24/16 2) Types of Private Equity investments. - Distressed Buyout - Leveraged Buyout - Venture Capital
Transcript: TPG Capital In 1992, a private equity firm became one of the first companies in the US to expand operations in Europe and Asia. They now have 10 locations and 17 offices. How It Works Videos Which Investor Would Use This? Real Life Example Private equity firms invest in businesses for major profit. Basically you put your money into a pool and it goes into a company with potential. Private equities want to make the companies more valuable to sell and make a larger profit. Advantages vs. Disadvantages Financial engineers Venture Capital Firms Institutional Investors "Wealthy people" Bain Capital In 1984, two Harvard graduates started a company and brought in a management crew that helped the company thrive. Bain now operates in 8 countries, has 10 global private equity funds, and over 4 billion dollars. Private Equity Real Life Example Advantages: alternative source of capital significant amount of time spent on potential of companies patient investors high returns large amounts of funding Sources: smallbusiness.chron.com business.tutsplus.com investopedia.com financewalk.com Disadvantages: use significant amounts of debt high risk with small company start ups "liquid in nature" so investors can't sell or buy the investment whenever they want
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