PrivateEquityInvesting私募股权基金介绍

PrivateEquityInvesting,MehmetI.Budak,WhatisPrivateEquity?,InvestmentstrategythatinvolvesthepurchaseofequityorequitylinkedsecuritiesinacompanyInvestmentismadethroughanegotiatedprocessBysophisticatedinvestorswithfinancialandoperatingexpertiseThegoalistoacquireundervaluedor“promising”assetsandrealizeprofitsin3-5yearsaftertheacquisitionInformationasymmetryandinefficienciesareimportantfactors,AlternativeInvestments,PrivateEquityInvestmentStrategies,LeveragedBuyoutsVentureCapital(earlyvs.latestage)SpecialSituations(i.e.distressed)MezzanineSecondaryPurchasesFundofFunds,LeveragedBuyouts,Establishedfirmswithtrackrecords,stablecashflowsandstablegrowthratesAnnualrevenuesof$25-$500millionTypicallyinbasicretail,transportationandmanufacturingindustriesTypicallyhaveassetstoborrowagainstandaccesstobankloansSeekprivateequitytoeffectachangeinownership,financeanexpansionorrestructure,VentureCapital-EarlyStage,Firmswithsubstantialriskoffailure-businessmodelsandmarketingapproachareyettobeprovedSmallandilliquidinvestmentswithsizeof$500k-$2millionThesmallesttypeistheentrepreneurwhoneedsthefinancingtoconductinitialresearchanddevelopmentThemostmaturetypearethosefirmsthatarestartingtoturnprofitsbutneedcapitalforexpansionAngelcapitalisanimportantsourceoffunding,VentureCapital-LateStage,FirmswithmorecertainbusinessmodelsProventechnologyandmarketProfitableandneedexpansioncapitalGeneralsizeof$2-$15millionIPOorSaleexpected/feasibleinneartermOriginalinvestorsmayachievesomeliquidityBecausetheriskisgenerallylowerandtheliquidityhigher,later-stageinvestmentsrequirelowerreturnsthanearly-stageinvestments,LeveragedBuyoutsvs.VentureCapital,BuyoutsfocusonmaturecompanieswithstableorsustainablegrowthprofileBuyoutsrelyheavilyondebtfinancingtofinancemostofthepurchasepriceVentureCapitalfocusonhighgrowthindustrieswithriskierinvestmentprofilethanbuyoutsVentureCapitalreliesheavilyonequityfinancingandhashigherreturntargetsthanbuyouts,SpecialSituations,InvestmentissuppliedbyspecializedTurnaroundFunds(TF)fortargetfirmsthathavedefaultedontheiroutstandingloansTFsreceivecontrollinginterests,withformerownersmakinguptheminorityinterestTFsrenegotiatestermswithexistinglenders,offeringtorestructureorpayoffloansatadiscountTFsalsodeliverexpertisetofindnewmarketsorpartnersforthefirmsproducts,cutcosts,changeorimprovethecurrentmanagement,FundofFunds,InvestingdirectlyinPEfundscanbedifficultforindividualinvestorsandsmallinstitutionsRelativelyhighinvestmentminimumsmaydisqualifysomeofthesmallinvestorsInformationonPEmanagersisdifficulttolocateGainingaccesstotopPEfundscanbedifficultduetohighinvestordemandFundofFundsco-minglestheinvestmentsofsmallinvestorsintoasinglepoolandthenassemblesaportfolioofPEfunds,HowarePEFundsStructured?,PrivatelimitedpartnershipsIndividualmanagersaretheGeneralPartner(GP)Providersofcapital(pensions,insurancecompanies,wealthypeople)areLimitedPartners(LPs)Partnershipshave10-yearlifewith+1+1extension4-6yearinvestmentperiod1-2%annualmanagementfeeProfitssplit80-20,afterreaching“hurdle”returnlevelforLPsLPsneedtofundwithin2-3weeksof“capitalcall”PenaltiesforfailuretofundbyLPsIRRsdependonwhenmoneyistransferredbyLPs,GeneralPartnersKeyActivities,SelectinginvestmentsObtainingaccesstohighqualitydealflowSortingandevaluatinglargeamountofinformationStructuringinvestmentsDesigningtransactionsMonitoringinvestmentsProvidingstrategic,operationalandfinancialassistancetoportfoliocompaniesExitinginvestmentsIPO,SaleorRecapitalization,PrivateEquityPartnershipsandFundraising,PrivateEquityMarket-Investors,Publicandcorporatepensionfunds,endowments,foundations,wealthyfamilies,insurancecompanies,foreigninvestorsandothersInvestorsexpecttoreceivehigherrisk-adjustedreturnsonprivateequitythanotherinvestmentsPotentialbenefitsofdiversificationAdvantageofeconomiesofscopebetweenprivateequityinvestingandinvestorsotheractivities,PrivateEquityMarket-Intermediaries,80%ofPEinvestmentsflowthroughspecializedintermediaries,whicharelimitedpartnershipsIntermediariesprovideexpertiseinselecting,structuring,andmanagingprivateequityinvestmentsIntermediariesnotorganizedasLPsplayalesssignificantroletodayintheprivateequitymarketSBICsownedbybanksandVCsubsidiariesofnon-financialcorporationsmostlyinvesttheircorporateparentscapital,PrivateEquityMarket-Issuers,VaryinsizeandtheirreasonsforraisingcapitalYoungfirmsthataredevelopinginnovativetechnologiesMiddlemarketcompaniesthatarestable,profitableandneedprivateequitytoexpandorrestructureGoingprivatetransactionsforpubliccompaniesPIPE(PrivateInvestmentinPublicEquity)providesfinancingwithoutregistrationcosts/disclosuresassociatedwithpublicofferings,HowarePEFundsStructured?,LimitedPartnersInvestorswithmoneyInsurancecompanies,pensionfunds,banks,andhighnetworthindividualsInvestorscommitacertainamounttothefundTheyhavenootheractiveroleinthefundandnoliabilitybeyondtheircommitmentsOneGeneralPartnerManagersofmoneyManagestheinvestmentsviaamanagementcompanyReceivesmanagementfee(typically2%)oncommitmentsReceives“carriedinterest”intheprofits,HowarePEFundsStructured?,Contractuallyfixedlifetime(10-12years)Capitalisinvestedduringthefirst4-6yearsThereafter,investmentsaremanagedandliquidatedDistributionsaremadetothelimitedpartnersintheformsofcashorsecuritiesGeneralPartnertypicallyraisesanewfundwhentheinvestmentphasefortheexistingfundhasbeencompleted(=80%)Eachfundpartnershipislegallyseparateandismanagedindependentlyofotherfundpartnerships(i.eKKRIvs.KKRII),PartnershipTerms-Example,TargetFundSize$1billionMinimumCommitment$10millionGrossTargetReturn25%ManagementFee2%CarriedInterest80%-20%CommitmentPeriod5yearsFundTerm10years+1+1,RelationshipBetweenLPsandGPs,LPsdelegatesignificantresponsibilitiestoGPsResolutionofpotentialconflictofinterestsliesinthestructureofthepartnershipagreementPartnershipshavefinitelivesToremaininbusiness,GPsregularlyraisenewfunds-easierforreputablefirmswithgoodrecordGPcompensationiscloselylinkedtothefundreturns,PartnershipCovenants,TheobjectiveistolimitexcessiverisktakingbyGPsCovenantsusuallysetlimitsonthe%ofthepartnershipscapitalthatmaybeinvestedinasinglefirmCovenantsmayprecludeinvestmentsinpubliclytradedandforeignsecurities,derivativesandotherprivateequityfunds,etcCovenantsusuallyrequirethatcashfromsaleofportfolioassetsbeimmediatelydistributedtoLPsLPsusuallylimitsuchdealfeesorrequirethatdealfeesbeoffsetagainstmanagementfeesReturnhurdleratesforLPs,EvaluatingGeneralPartners,Trackrecord,relevancyofpastexperienceGenerationofadequatedealflowSoundinvestmentdecision-makingprocessesAbilitytoachievesuccessfulexits/liquidityAdvantagesvs.similarlyfocusedfundsSufficiencyofresourcesMeaningfulcommitmentoftimeCohesivenessandsustainabilityofteamSuccessionplanning,Co-investmentByLPs,Co-investmentsaredirectinvestmentsinportfoliocompaniesbyLPsalongsideprivateequitypartnershipsUsually,LPsacquirethesecuritiesonthesametermsasthepartnershipbutpaynomanagementfeeorcarriedinterestCo-investmentopportunitiesarisewhenGPsneedadditionalequityfinancingtocloseadealSomeinstitutionalinvestorsseeco-investingasanopportunitytoacquireexpertiseinprivateequityinvestingForGPs,LPsthatstandreadytoco-investrepresentaflexiblesourceoffundsforclosingdeals,TransactionOrigination,DealFlow,Dealflow,accesstohighqualityinvestmentopportunities,isabsolutelycrucialGPsrelyonrelationshipswiththirdpartiesandindustrycontactsfordealflowgenerationThegreaterthedealflow,thehigherthelikelihoodofidentifyinganattractiveopportunity“Proprietary”dealsaremoreattractivethandealsbroughtbyagentsorintermediariesLesscompetitionmeanslowerpurchasepriceLowerpurchasepricemeanshigherIRRs,Origination,Investmentbanks,consultants,lawyersandindustrycontactsintroducepotentialopportunitiesPreliminaryopportunityanalysiswillbeperformedrelativelyquicklyInitialdecisionisquicklymadewhetheraPEfirmwouldbeinterestedintheopportunityPEfirmshavedifferentinvestmentstrategiesandviewsoftheworldIfinterested,PEfirmswouldsignConfidentialityAgreementtobeginevaluatingtheopportunity,ScreeningofDeals,DealscreeningisartandsciencePEfirmsreceivemanyinvestmentproposalsinayearProposalsarefirstscreenedtoeliminatethosethatareclearlyfailtomeetinvestmentcriteriaSpecializationonaspecificindustryorgeographyreducesthenumberofinvestmentopportunitiesconsideredInitialreviewtakesa12daysandresultsintherejectionof90%ofproposalsreceivedbyaPEfirm“Surviving”proposalsthenbecomesubjecttoasecondaryreviewafterthesigningofaConfidentialityAgreementProposalsthatsurvivethepreliminaryandsecondaryreviewsbecomethesubjectofacomprehensiveduediligenceprocess,Non-BindingIndicationsofInterest,Commonlyreferredtoas“1stroundbid”GivesellersaperspectiveonthelevelofbuyerinterestandthevaluationparametersbuyersarelikelytoassumeIndicationofinterestsubjectto:Completionofbusiness,legal,accountingandenvironmentalduediligenceNegotiationandexecutionofdocumentsReceiptofnecessaryapprovalsNegotiationofemploymentagreementswithkeymanagement,LeveragedBuyouts,WhatisanLBO?,AcquisitionofacompanywhereaPEfirmusescashequityanddebttofundthepurchasepricePEfirminjectsequityintoanewshellcompany(“NewCo”),whichborrowsdebtandsimultaneouslyacquiresthetargetPEfirmcontributescapital,operatingandfinancialexpertise,strategicinsight,contactsandmanagementtalentManagementownershipincreases,creatinghigherincentivestoimproveoperationsanddeliverresultsDebtisrepaidbytheoperatingcashflowsorbythesaleofnon-coreassetsoftheacquiredbusinessLBOissimilartobuyingandrentingoutahouse-therentcashflowstopaydownthemortgagedebt,TypicalLBOStructure,TypicalLBOStructure,VariesovertimewithmarketconditionsSourcesoffinancing4050%seniorbankdebt(5-7years)2030%subordinateddebt(8-12years)2040%commonequityBankdebtissecuredfromreceivables,inventoryandPP&E,GoodLBOCandidates,HistoryofconsistentprofitabilityPredictablecashflowstoservicedebtAvailabilityofexcesscashEasilyseparableassetsorbusinessesStrongmanagementteamStrongbrandsandmarketpositionIndustrywithbarrierstoentryLittledangerfromdisruptivechanges(technology,regulatory,etc.)Visible/feasibleexitstrategy(IPOorM&A),ValueCreation,StrategicVision,growthinitiatives,add-onacquisitions,exitOperationalSales,costs,assetsOrganizationalProcesses,structure,systems,skillsFinancialBalancesheet,taxstructure,capitalizationExpansioninvaluationmultiplesAdvantagesofbeingprivate,HowDoPEFirmsCreateValue?,MinimizepurchasepriceMaximizeleverageMinimizeliabilitiespurchasedManagetransactioncostsImprovebusinessoperationsMaximizetaxefficiencyOptimizeexit,MinimizePurchasePrice,AvoidcompetitionAprietarydealMaintainpricedisciplineAvoid“dealfever”MaximizedeductionsfromheadlinepriceEarnoutsLiabilitiespension,legal,other,MaximizeLeverage,MaintaincompetitiveprocessamongbankswillingtofundthetransactionChooserightfinancingstructureBalanceofrisk,flexibilityandinterestcostSellernotesandstaplefinancingDeeplysubordinateandatattractivetermsPartnerwithco-investors,MinimizeLiabilitiesPurchased,DetailedduediligenceLegalFinancialAccountingEnvironmentalToughnegotiationsRepsandWarranties,TransactionCostsandTaxation,MinimizetransactioncostsInternalcostsAborteddealcostsMaximizetaxefficiencyIncreaseinteresttaxshieldIncreasedepreciationIncreasetaxdeductibleamortization,ImproveBusinessOperations,ToplinegrowthNewmarkets,partnersProductsMarginimprovementCOGSSG&A,Exit,DifficulttopredictfuturebusinesscyclesandmarketconditionsPrepareanexitstrategyandgroomthebusinessforthatexitTradesaleorM&A“clean”cashexitIPOlongprocess,companyneedstobeaboveacertainsize,lock-uprestrictionsLeveragedrecapitalizationallowssponsortoremoveinvestedcapitalpriortoultimateexit,increasesIRRandhedgesagainstpoorexitSecondarybuyoutsellingtoanothersponsor,SourcesandUsesofFunds,SourcesofFunds,EquityNewequityinjectionfromLBOsponsorPotentialequitycontributionfromexistingmanagementPotentialcontinuingequityinvestmentbyexistingshareholders(“rollover”)EquityfromastrategicpartnerDebtBankdebt(“senior”debt)Highyielddebt(“subordinated”debt)MezzaninesecuritiesCanbestructuredtobemore“debt-like”ormore“equity-like”dependingonthesituation,BankDebt,Seniorsecured(mostseniordebt)Flexible,interestrateisfloatingMaturesbeforeotherdebtclasses,amortizingTypicallycallable/prepayableatparQuarterlyinterestpaymentsMaintenancecovenantsStructuredattheoperatingcompanylevelUnderwrittenviasyndicationDiligence,commitment,launch,syndicate,fund,BankDebt,RevolvingCreditFacilitiesvs.TermloansRevolversallowmultipledrawingsforworkingcapitalandgeneralcorporateneedsTermloansfundedatclosingProRatafacilitiesRevolverandTermLoanAheldbycommercialbanksBuyandholdmentality,shrinkingsegmentInstitutionaltranchesConsistofTermLoans“B”,“C”or“D”-heldbyinsurancecompanies,CLOsandCDOs,growingsegmentPurelytransactional,liquidityinthesecondarymarketMinimalfront-endamortization,HighYieldBondDebt,Usuallysubordinatedand/orunsecuredInterestrateisfixed,maturityof8-10years“Bullet”maturityafterfullbankdebtamortizationUsuallynotcallableatparinearlyyears,typically1-5yearsStructuredattheoperatingcompanylevelPubliclyquotedsecurityIncurrencecovenantsDiligence,document,roadshow,priceandfund,MezzanineDebt,SubordinatedtobankdebtandhighyieldbondsFlexible,typicallyfloatinginterestrateNon-amortizing,“bullet”maturitytypicallyafter10yearsCash&PIKcouponpaymentfurtherenhancedwithequitywarrantsPIKcomponentcan“eat”intoequityStructurallysubordinatedattheholdingcompanylevelIncurrencecovenants,DueDiligence,DueDiligence,ObjectiveValidatebusinessconceptVerifymarketAppraisemanagementValidateforecastsValuationDiligenceestablishesbasisforvaluation,priceandnegotiationDiligenceisexpensiveandtimeconsumingDiligencestrategyPreliminaryevaluationtoidentify“deal-breakers”beforespendingtimeandmoneyondetailedduediligence,KeyTopicsforDueDiligence,Businessconcept,opportunityMarketCompetitionCustomersProductsManagementFinancialsReturns,BusinessConcept,Opportunity,Whatistheconcept/opportunity?Istheopportunitysustainable?Potentialsizeoftheopportunity?Howcanthetargetcompanycapitalizeontheopportunity?Istheproposedplan/strategyrealistic?Howdoesthetargetbusinessfittoitsmarketsandregion?Whyarewesosmartorlucky?,Market,Marketcharacteristics,segments,size,growth,cyclicality,keymetrics,demographics?Projectedmarketshareandsalesvolume?Lowbarrierstoentryintothemarket?Istargetsbusinessmodelsustainable?Howwillthebusinessbeperceivedbycustomers?Regulatoryissues?,Competition,Whoarethedirectcompetitors?Relativesize,scope,costbasis,brandsandmarketshare?Whatarethekeyfactors/leversofcompetitionintheindustry?Howistargetsbusinessstrategydifferentthancompetitors?Whataretargetscompetitiveadvantages?Whatarethetargetscompetitivedisadvantages?Threatfrompotentialnewentrants?,Customers,Whoarethecustomers?Currentandfuturecustomerbase?Whatspecificmarketandcustomerneedsdoesthetargetbusinessserve?Howdocustomersmaketheirpurchasedecisions?Keycriteria?Customersatisfactionandretention?Doestheprojectednumberofcustomersorsalesmakesense?Realistic?Howwillthetargetacquirenewcustomers?,Products,Productlifecycle,penetrationtrends?Productpricing?Productprofitability?Productivityversuscompetition?Maintainor“jettison”certainproducts?Plantconsolidation?Inventoryoptimization?CAPEXrequirements?Developmentplans?,Management,Competent?Experienced?Cohesive?Strategic?Flexible?Incentivized?Proactive?Realistic?,Financials,Whatistheoptimalcapitalstructure?Arerevenueandcostprojectionscomprehensive,realistic,reasonable?Whataretheunderlyingbusinessassumptionsoftheprojections?Impactofvariousbusinesscasescenarios?Howdoescashflowinthisbusiness?Howmuchcapitalinvestmentneeded?When?Correctaccountingtreatment?Whatarethekeysensitivities?,ConfirmingValue,FinancialandaccountingdiligenceisprimarilyfocusedondrillingintothebasiccomponentsofvaluationRecurringEBITDA(adjustforextraordinaryitems)CAPEXWorkingCapitalCashFlowMultiple,RecurringEBITDA,Generalissuesexclusions,accountingchanges,proformaadjustmentsRevenuecomponents,methodofrecognition,customers,customerarrangements,pricing/volumeMarginscomponentsofcostofsales,grossmargintrendsReservesunder/overstatementofprofitsCompensationbenefits,headcountneeds,transitionissues,bonusSG&Acomponents,trends,discretionarycosts,fixedvs.variable,costsavingsOtherrestructurings,acquisitions,contingencies,CAPEX,DeterminenormalizedannualCAPEXMaintenanceormandatoryCAPEXDetermineexpansionCAPEXDiscretionaryCAPEXCAPEXbetweensigningandclosingoftransactionreducenetcashpositionImportanttohavecorrectCAPEXassumptionsincalculatingexitvalue,WorkingCapital,AnalyzeworkingcapitalcycleComponentsofB/SaccountsNeedsandtrendsSavingsopportunitiesPotentialclosingbalancesheetissuesImportanttohavecorrectworkingcapitalassumptionsincalculatingexitvalue,LegalDueDiligence,Conductedintandemwithbusiness,financialandaccountingduediligenceStructurethetransactioninthemosttaxefficientmannerUnderstandthelegalaspectsoftargetsbusinessandassetsbeingacquiredIdentifyandevaluateliabilitiesMaterialsaretypicallymadeavailableforreviewinadataroom,WhatIsaBadDeal?,NorealcompetitiveadvantageofPEfirmLonglistofthingsthathavetogorighttomakethedealwork“Builditandtheywillcome”isnotagoodbusinessstrategyAggressiveestimatesoffuturegrowthEmployingthewrongmanagementteamTruedownsidecaseisnotadequatelyevaluated,TransactionStructuringandDocumentation,TermSheets,PreliminarydocumentsdesignedtoprovideaframeworkfornegotiationsbetweeninvestorsandthetargetcompanyProvidescollectiveunderstandingoftheproposedtransaction,basictermsandconditionsGenerallyfocusesonthetargetsvaluationandtheconditionsunderwhichinvestorsagreetoprovidefinancingTermsheeteventuallytransformsintoaformalagreementknownasthePurchaseAgreement,whichisalegaldocumentthatdetailswhoisbuyingwhatfromwhomatwhatpricewhen,KeySectionsofTermSheets,AcquirerTargetValuationStructureofacquisitionManagementcompensationDebtfinancingBoardofdirectorsRightsTransactionfeesManagementfees,PurchaseAgreement,TransactiontermsandstructureDescriptionofassetsoldCalculationofpurchasepriceClosingdateRepsandWarrantiesbuyerandsellerConditionstoclosingsellerConditionstoclosingbuyerConditionsfortermination,PurchaseAgreement,ClarityregardingkeyfinancialanddealtermsBusiness/assetsbeingacquiredandtheliabilitiesbeingassumedArrangementsforassetsharinggoingforwardProtectingtheacq