Objectives

Private Equity is concerned with the financing of private corporations. Contemporary giants such as Google, Apple and Intel once started out as private firms with little assets and very limited personnel. Their staggering success has generated a growing interest over the years in the financing of private enterprises, where innovating ideas, aspiring to shape the future, are born. As the tech-valuation wave of the late 90-s showed, such a success is neither easy nor guaranteed. By its very nature, investment in private firms is illiquid, it is undertaken based on scarce information, its maturity is unknown, and the asymmetric information problems associated with it are acute.

At the same time, the buyout industry is concerned with the operational and financial restructuring of firms away from the pressing demands of the stock market. Multiple challenges emerge in this industry, may that be the appropriate mix of core and peripheral activities, the design of incentives, the due diligence process or the balance between bankruptcy risk and tax saving.

To travel through such a rough landscape, a private equity fund employee needs a balanced set of skills: Institutional knowledge, financial valuation skills, and real world experience. The content of the course is built around these premises.

Contents

1. Introduction
2. Funding Private Equity
3. Alternative Startup Financing I
4. Alternative Startup Financing II
5. PE Valuation I
6. PE Valuation II
7. Partial Valuation I
8. Partial Valuation II
9. Startup ideas
10. Buyouts I
11. Buyouts II
12. Buyouts III
13. Initial Public Offerings
14. Private Equity Firms

References

No book covers the entirety of the class. The recommended textbook for the course is:

• Metrick, Andrew and Ayako Yasuda (2021), Third Edition, Venture Capital and the Finance of Innovation, Wiley, ISBN-13: 978-1119490111.

Evaluation

First attempt

Exam:

Without exam (cf. terms)  

Evaluation:

• The final grade for the course is:

Grade=0.7*Graded Case Studies+0.3*Presentation average

The case studies and the presentations will each be graded on a 1-6 scale. A grade 0 will be assigned for late submissions/omissions/copying or other breach of academic integrity. The final case study grade is the average across all case study grades.

Retake

Exam:

Without exam (cf. terms)  

Evaluation: