Private Equity Flashcards
Understand the role of private equity in the financial markets Discuss how private equity firms make money Identify clients that interact/transact in the private equity space Retrieve PE/VC data through FactSet
1
Q
What is Private Equity?
A
Private Equity refers to the structure of a fund.
2
Q
How are Private Equities structured?
A
PEs are structured as a partnership. The general partners setup a PE fund and use the funds from limited partners to invest.
3
Q
How do PEs make money?
A
They charge limited partners management fees (typically 2%) and carried interests (typically 20%).
4
Q
What are the two popular PE strategies?
A
- Venture Capitals: 100% successive equity investments in companies in their take-off stage (typically technology firms). They invest in new applications of existing technologies (and not in new technologies).
- Buyouts: Majority stake in mature companies that are not fulfilling their potential. Typically the buyout occurs with a significant amount of debt, and the strategy is often referred to as leveraged buyout (LBO).
5
Q
What are the main exit strategies for a PE?
A
- Sell to another fund.
- Sell to another company.
- IPO.
- Dividend recapitalisation.
- Shut-down or bankruptcy.
6
Q
Where on FactSet can you find PE data?
A
- Idea Screening.
- Company/Security tab.
