Instructional goals
The course has the objective to comprehensive overview of investment operations in the private equity sector. Students will gain knowledge of valuation models, deal structuring, investment management, and exit strategies. The course follows the "private equity cycle," from analyzing investment opportunities to managing and divesting assets.
Prerequisites
Corporate Finance Accounting or Accounting and performance measurement Financial Modelling / Financial Math Cost of capital
Intended learning outcomes
Gain a clear understanding of how General Partners (GPs) manage private equity funds and how Limited Partners (LPs) participate financially without engaging in operational control. Learn to evaluate investment opportunities using the Leveraged Buyout (LBO) model by analyzing capital structures, cash flows, and return metrics such as IRR and MOIC. Develop the ability to conduct effective due diligence on target companies, including the assessment of financial health, operational efficiency, legal risks, and market position. Understand how to structure private equity deals through a strategic combination of debt and equity to balance leverage, control, and return potential. Acquire the tools to enhance portfolio company value through cost optimization, revenue growth initiatives, strategic acquisitions, and leadership improvements. Explore and assess various exit strategies—such as trade sales, IPOs, and secondary buyouts—along with their respective implications for timing, valuation, and investor returns. Build awareness of the legal, regulatory, and governance frameworks governing private equity, including fund structures, compliance obligations, and board-level oversight practices.
Course Contents
REAL-WORLD ENGAGEMENT A) Case studies from successful (or failed) private equity transactions B) Guest speakers from private equity and venture capital firms, legal experts, and institutional investors C) Practical assessments: financial modeling, deal simulations, and interactive discussions INTRODUCTION TO PRIVATE EQUITY A) Overview of the private equity and venture capital industry B) Structure of private equity funds and capital commitment cycles C) Role of private equity in financial markets and economic development DEAL SOURCING AND DUE DILIGENCE A) Proprietary deal sourcing methods and investment screening B) Financial, operational, and strategic due diligence VALUATION AND DEAL STRUCTURING A) Valuation methods in private equity B) Key assumptions, sensitivities, and return analysis C) Debt and equity structuring in acquisitions D) Term sheets and investment agreement negotiation VALUE CREATION A) Operational improvements B) Add-on acquisitions and strategic repositioning C) Management incentive alignment and leadership changes EXIT STRATEGIES A) Exit routes: Trade sales, secondary buyouts, recapitalizations B) Key return metrics LEGAL, REGULATORY & GOVERNANCE ASPECTS A) Legal structures and jurisdictional considerations of PE funds B) Regulatory frameworks and compliance obligations
Reference Books
Private Equity as an Asset Class, by Guy Fraser-sampson, ed. John Wiley and sons (International Private Equity, by Eli Talmor, Florin Vasvari, Ed. John Wiley and sons – to be confirmed)
Teaching Methods
The course focuses on campus and online sessions. Each lesson is organized on three integrated learning levels: 1) Theory: Introduction and explanation of the key financial principles, industry frameworks, and private equity mechanisms. 2) Applied Theory: Exploration of how these principles are used in real-world private equity transactions, 3) Practice: Problem-solving sessions, and simulations to test and apply the financial models and techniques learned. The learning will be supported by the following teaching methodologies: Traditional Lectures Case Studies, with Presentations and Assignments Guest Speakers: Industry professionals, including fund managers, legal experts, LPs, and investors, to provide real-life insights and facilitate Q&A sessions.
Assessment Method
40% Oral exam 60% Presentation of a working group analysis on a potential acquisition target. The analysis will include: Investment thesis, Evaluation, Setup of equity and debt.
Thesis assignment criteria
n/a
Week 1
Industry Overview: Evolution of the private equity (PE) landscape from leveraged buyouts to diversified strategies. Key Segments: Distinction between venture capital (early-stage), growth equity (scaling businesses), and buyouts (control investments). Market Role: PE's influence on capital allocation, innovation, and corporate restructuring.
Week 2
Fund Structure Basics: Roles of General Partners (GPs) and Limited Partners (LPs), carried interest, and management fees. Capital Commitment Cycle: From fundraising and capital calls to investment and divestment periods. Investor Dynamics: LP expectations and performance metrics.
Week 3
Sourcing Models: Proprietary deal sourcing vs. intermediated processes (banks, brokers). Evaluation Framework: Initial screening criteria, investment memos, and sourcing funnels. Strategic Focus: Sector specialization, thematic sourcing, and building deal pipelines.
Week 4
Analysis: Financial audits, operational assessments, strategic fit. Red Flags: Identifying issues in governance, compliance, earnings quality, or scalability. Risk Management: Structuring terms and warranties to mitigate risks.
Week 5
Valuation Methods: Comparables, precedent transactions, DCF tailored to PE. LBO Mechanics: Introduction to leveraged buyout logic and structure. Return Drivers: Purchase price, debt levels, EBITDA growth, exit multiples. Workshop: Hands-on session building a simplified LBO model in Excel.
Week 6
Scenario Analysis: Modeling base, downside, and upside cases. Deal Structuring Impact: How terms like preferred equity, earnouts, and covenants affect model outputs. Return Metrics Deep Dive: Understanding and comparing IRR, MOIC, and cash-on-cash.
Week 7
Capital Stack: Senior debt, mezzanine, equity layers, and their rights. Negotiation Dynamics: Crafting and negotiating term sheets. Legal Framework: Overview of transaction documentation.
Week 8
Operational Levers: Cost optimization, working capital management, tech upgrades. M&A: Buy-and-build, roll-ups, and strategic synergies. People Factor: Incentive plans, leadership transitions, board governance
Week 9
Exit Options: IPOs, strategic sales, secondaries, dividend recaps. Return Analysis: Cash-on-cash returns, IRR breakdown, time-to-liquidity considerations. Timing the Exit: Valuation cycles, buyer landscape, macro conditions.
Week 10
Evolving Market: Rise of continuation vehicles and GP-led secondaries. LP Liquidity: Selling stakes, NAV discounting, impact on fund strategy. Market Implications: Pricing dynamics, transparency, and LP-GP alignment. Guest Speaker: Investor discusses real-world trends.
Week 11
Fund Law: Structure types, fiduciary obligations. Regulatory Context Governance: Board roles, minority protections.
Week 12
Global Practices: Differences in PE across US, Europe. Careers in PE: Skills required (modeling, strategy, ops), entry points (IB, consulting, analyst programs). Panel Session: Alumni or professionals share career paths, recruiting tips, and lessons learned.