Section 16: Understanding private equity Flashcards
1
Q
What one decision does the PEG make?
A
Hire or fire CEO
2
Q
Do LPs dictate what the PEG invest in?
A
No
3
Q
What valuation method do PEGs prefer
A
Income Valuation
EBITDA multiple
Driven by total enterprise value - IRR from 18% to 28% depending on risk
4
Q
PEG - Three legs to a stool
A
Company
Deal
Management
5
Q
Items looked at when Evaluation Risk - Company
A
Customers Industry and End Markets Suppliers Competition Management and Financials
6
Q
Items looked at when evaluating Managment
A
Cultural fit what does the bench look like Where are the gaps What is the vision Key non-owner managers?
7
Q
Deal
A
What’s the deal?
Seller’s goals and objectives
Valuation expectations
8
Q
Most Liquidity
A
Outright sale 100%
Majority recap sell >50% of company
Minority recap sell < 50% of company
Debt recap - subordinated debt
9
Q
Outright sale - Transaction examples
A
Corporate divestitures
Owner retirements
Management buy-ins
