Private Equity

With contributions from experts in private equity finance and the leading investors in this growing asset class, this book provides detailed insight into this expanding area of finance. It is essential reading for those who need to understand the risks and returns involved in private equity investment as well as experienced investors who want to profit from markets other than their own. It starts by examining the main US and UK markets and then discusses the developing markets of Europe, Latin America and Asia. The book then analyses the investment risks and returns of private equity and considers the challenges of performance measurement. Market practitioners then discuss investment management techniques, examining global venture capital, leveraged buyouts, corporate governance, managing risk, growth companies, multiple approaches, leveraged build-ups and emerging markets. The following section offers an opportunity to those investing in private equity to explain their strategies. The book then looks at private equity in the context of the capital markets - raising capital for PE funds, IPOs, mezzanine finance, debt, PIPEs. A final section then discusses the prospects for this dynamic sector of finance and highlights the expected areas of growth. Several chapters of this book have been included in the Level I required reading list for Chartered Alternative Investment Analyst Association's Charter Program.

Table of Contents:
Part I: Developed markets overview Chapter 1: Hidden treasure: A look into private equity's history, future, and lure Katherine A. Cattanach, Managing principal, Sovereign Financial Services; Mary Frances Kelley, Managing principal, Sovereign Financial Services; Gail Marmorstein Sweeney,Managing principal, Sovereign Financial Services What constitutes a private equity investment? A historical perspective The mechanics of private equity partnerships Return on private equity investments Summary Chapter 2: Overview of UK venture capital James Nelson, Chairman of the British Venture Capital Association and Director of F&C Ventures Ltd Investing in dynamic high-growth businesses The scope and growth of UK venture capital Why should business people consider raising venture capital and what do investors look for in a company and its management team? Outlook Appendix 1: Funds invested by BVCA members, 1984 - 98 Appendix 2: Performance measurement survey summary results Appendix 3: Average growth rates for venture-backed and quoted companies, 1993 - 98 (% per annum) Chapter 3: European private equity: reaching adulthood Serge Raiche, Secretary General, European Private Equity and Venture Capital Association (EVCA) Semantics The economic impact of private equity Trends Performance Possible policy evolution Beyond western Europe Part II: Emerging market perspectives Chapter 4: Dragon equity: thoughts on the role and future of private equity in China Daniel Burstein, Managing Partner, Millennium Technology Ventures, L.P. Turning loss to profit through LBOs A long hill to climb Prospects Chapter 5: Private equity in Russia Shiv Vikram Khemka, SUN Group The private equity context The investment process Managing the investment Growth and restructuring Exiting the investment Conclusion Case study: SUN Brewing Chapter 6: Asian private equity - the Quantum Paradigm John-Paul Ho, Crimson Capital Management The Traditional Paradigm The Control Paradigm The Quantum Paradigm Transferring new technologies, products/services and business models to Asian markets Applying Asia's strengths to develop competitive companies in the global value chain Japan joins the Quantum Paradigm What does it take to win? Conclusion Part III: Buyouts, mezzanine and specialised forms of finance Chapter 7: Management shrugged: the case for leveraged buyouts Donald J. Gogel, Chief Executive Officer, Clayton, Dubilier & Rice, Inc. The Hawthorne effect The vision thing A dream team of management all-stars Stock ownership and cash incentives A sense of urgency Global change Chapter 8: Leveraged management buyouts at KKR: Historical perspectives on patient equity, debt discipline, and LBO governance George P. Baker, Harvard Business School George David Smith, Stern School of Business Financing leveraged acquisitions Governance and the LBO association No 'cookie-cutter' strategies Distressed deals and reputation Legacies Chapter 9: The evolution of US corporate governance: we are all Henry Kravis now Steven N. Kaplan, Leon Carroll Marshall professor of finance, Graduate School of Business, University of Chicago The takeover and restructuring wave of the 1980s Corporate governance in the 1990s How well does the US system work? Chapter 10: Chameleon of the 1990s: considering mezzanine finance and its place in the spectrum of private equity investments Ron Kahn and Susan Wilson, Duff & Phelps, LLC 'Is it debt, or is it equity?' Insurance companies as mezzanine providers Others enter the market The mezzanine credit crunch Development of mezzanine limited partnerships Interest rates and mezzanine availability The bifurcated mezzanine market Capital flows to mezzanine The mezzanine market today Where the trends may lead Chapter 11: Private financing of public companies Gianluca Cicogna and Claudio Guazzoni, Zanett Lombardier Fund The issuer's side of the private placement market The investor side of the private placement market A brief overview of private placements theory How private placements work in practice Credit risk analysis Risk management Conclusion Part IV: New ventures Chapter 12: An introduction to understanding venture capital funds Joel Press, Senior Partner and Bonnie Kennedy, Principal, Ernst & Young LLP Business considerations and accounting US tax considerations Conclusion Chapter 13: Structuring venture capital investments Jonathan E. Cole, Esq. and Albert L. Sokol, Esq. Edwards & Angell, LLP Pre-investment considerations Typical documentation for a venture capital investment Standard investment documentation Achieving goals via investment structure Conclusion Chapter 14: Negotiating the best valuation and terms for early-stage investment Joseph W. Bartlett, Partner at Morrison & Foerster LLP in New York and adjunct professor at the New York University School of Law The process of valuing and financing an early-stage company Empirical results Protection against 'cram-down' or burnout financing Pay or play provisions Form of the transaction Benchmarks and milestones Registration rights Control Severance payments and parachutes No-shop/no-solicit provisions Alternative investors Risks and rewards Conclusion Chapter 15: The pricing of successful venture capital-backed high-tech and life-sciences companies Houlihan Valuation Advisors/VentureOne Study San Francisco, California Introduction Methods Transactional analysis Statistical analysis Applicability of the study Chapter 16: The evolution of the UK venture capital industry: the dynamics of capital, entrepreneurship, public policy and investors Vicky Mudford, Director, Murray Johnstone Private Equity Limited, in charge of Investor Relations (Executive Director of the British Venture Capital Association, 1984 - 1997) The evolution of UK public policy Differences between the UK and US markets Early-stage/technology versus management buyouts/management buyins (MBOs/MBIs) The development of European IPO markets The economic impact of venture capital Venture capital today ...And what of the future? Part V: Performance measurement Chapter 17: The performance of US buyout funds Jesse Reyes, Product Manager, Venture Economics; Toby Walters, Publications Manager, Venture Economics Sample composition Total capitalisation Summary of major findings Composite group performance Chapter 18: The performance of US venture capital funds Jesse Reyes, Product Manager, Venture Economics Toby Walters, Publications Manager, Venture Economics Sample composition Total capitalisation Average capitalisation and sample bias Cash flow investment cycle Summary of major findings Chapter 19: Historical performance of European private equity Alan Doran, Bannock Consulting Introduction Progress in performance measurement Results Prospects Chapter 20: The challenge of performance assessment Paul A. Gompers, Associate Professor at the Harvard Business School and faculty research fellow of the National Bureau of Economic Research; Josh Lerner Professor of Business Administration at the Harvard Business School and research associate of the National Bureau of Economic Research The problem A proposed solution The impact of marking to market Conclusions Chapter 21: LBO returns in the United States: what will it take to succeed in the new era of LBOs? Karen Gordon Mills, Managing Director and Founder, Solera Capital, LLC The three eras of LBOs Sources of LBO returns What are the options for future success? Implications for LBO firms in the coming era Conclusion Part VI: Investor perspectives Chapter 22: The rationale for private investments from an institutional perspective Betty M. Sheets, Senior Investment Manager, Private Investments, I.B.M. Retirement Fund Introduction Of risks and returns How the process works Why the process works Will the process work? Parting thoughts Chapter 23: Down and dirty due diligence Steve Brockman, Great Lakes Consulting Group, Inc. My gig in a nutshell The case of the not-ready-for-prime-time players Auto-by-tell-me-a-lie The case of the in-sourcer Are they liars, stupid, careless, or just can't read? Why dumb can be smart A humble state of mind Ten down and dirty tactics for your on-site visit Bonus down and dirty tactic Afterword

Review :
"...well written with a wealth of information, the book provides a solid foundation of investment practice" The Finance and Treasury Professional.