Private equity fundamentals
Training objectives
- Understand the different types of private equity players and the role of investment managers
- Understand the concepts of leverage and cost of capital
- Make the legal distinction between a management company and a fund
- Understand the different investment phases
- Understand the different types of due-diligence
- Understand the different methods of valuing an unlisted company
- Understand the main shareholder clauses and their role
- Understand how a venture capital fund works, and the relationship between LPs (limited partners) and GPs (general partners).
- Understand and know how to interpret the different ratios used to determine the performance of a venture capital fund.
Audience and prerequisites for this training
Fund Manager
Junior Private Equity Investment Manager
Portfolio Manager
Wealth Manager
Management Assistant
Financial Analyst
Bank Treasurer
Corporate Treasurer
Financial Engineer
Duration
2 days
Training fees
- 1950 euros HT for 1 single participant
- 1550 euros excluding VAT per participant for a group of 2 or 3 participants *
- 1250 euros excluding VAT per participant for a group of more than 3 participants *
*Intra only
Program
I- Definition, Characteristics, and the Private Equity Ecosystem
- Definition and key features of private equity
- Private equity vs. stock market
- The role and expense of raising capital: equity cost vs. debt cost
- Leverage
- Minority vs. majority ownership
- Active vs. passive involvement (hands-on vs. hands-off)
II- The Private Equity Ecosystem
- Start-ups, growth companies, established companies
- Classification of participants
- Management firm vs. fund
- FCP (Joint Investment Fund) vs. SCR (Venture Capital Company)
- LP (Limited Partners) and GP (General Partners)
- Venture capital funds
- Growth capital funds
- LBO (Leveraged Buyout) funds
- A day in the life of an investment manager
Application(s):
CASE STUDY: "Analysis of a French venture capital fund prospectus."
III- The Private Equity Investment Process
1. The Pre-Investment Phase:
- Business plan analysis
- Meeting the management
- Operational review
- Financial audit
- Financial package proposal
- Valuation
2. Investment Phase:
- Valuation methods
- The multiples approach
- Conventional financial restatements
- Discounted cash flow approach: IRR and the selection of a discount rate
- The financial package: equity, convertible bonds, obsa (bonds with equity warrants), absa (bonds redeemable in shares)
- Shareholder agreements and key clauses
3. The Post-Investment Phase:
- Monitoring the investment
- Shareholder meetings
- Board meetings
- Exits strategies
- Handling "breaks" or probabilistic thinking
- Different exit routes: trade sale, IPO
Application(s):
CASE STUDY: "Examination of real-world cases: hits and misses."
IV- Performance Measurement Indicators for Venture Capital Funds
1. The Life Cycle of a Venture Capital Fund:
- J-curve
- Capital calls
- Managing cash drag
2. LP and GP Relationships:
- "Clawback" clause
- Distribution patterns
- "No fault divorce" clause
3. Compensation Structures in a Venture Capital Fund:
- Carried interests
- Management fees
- Transaction charges
- Oversight fees
- Compensation adjustment mechanisms:
- Ratchets
- Hurdle rates
Application(s):
CASE STUDY: "Calculation of carried interest."
4. Key Performance Indicators for Private Equity Funds:
- Net asset value
- Invested capital
- Committed capital
- PIC (Paid-In Capital) and its multiple: PIC/committed capital
- Return on invested capital metrics
- DPI (Distributed to Paid-In)
Unrealized gains performance metric:
- RVPI (Residual Value to Paid-In)
Application(s):
CASE STUDY: "Analyzing the performance indicators of a private equity fund."