DOCSLIB.ORG

Corporate Financial Strategy This Page Intentionally Left Blank Corporate Financial Strategy

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Corporate Financial Strategy This Page Intentionally Left Blank Corporate Financial Strategy Corporate Financial Strategy This page intentionally left blank Corporate Financial Strategy 3rd edition Ruth Bender and Keith Ward AMSTERDAM • BOSTON • HEIDELBERG • LONDON NEW YORK • OXFORD • PARIS • SAN DIEGO SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Butterworth Heinemann is an imprint of Elsevier Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 30 Corporate Drive, Burlington, MA 01803 First published 1993 Reprinted 1993, 1994, 1995, 1997, 1998, 1999, 2000, 2001 Second edition 2002 Reprinted 2003 (twice), 2005 (twice) Copyright © 2009, Ruth Bender and Keith Ward. All rights reserved The rights of Ruth Bender and Keith Ward to be identifi ed as the authors of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 No part of this publication may be reproduced in any material form (including photocopying or storing in any medium be electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: (ϩ44) 1865 843830, fax: (ϩ44) 1865 85333, e-mail: [email protected]. You may also complete your request on-line via the Elsevier homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-0-7506-8665-5 Typeset by Charon Tec Ltd., A Macmillan Company. (www.macmillansolutions.com) For information on all Elsevier Butterworth-Heinemann publications visit our website at www.bh.com Printed and bound in Hungary 09 10 11 12 10 9 8 7 6 5 4 3 2 1 Contents Preface to third edition vii PART 1: PUTTING FINANCIAL STRATEGY IN CONTEXT 1. Corporate fi nancial strategy: Setting the context 3 2. What does the share price tell us? 29 3. Executive summary: Linking corporate and fi nancial strategies 44 4. Linking corporate and fi nancial strategies 50 5. Corporate governance and fi nancial strategy 88 6. Executive compensation 104 PART 2: FINANCIAL STRATEGY AND THE CORPORATE LIFECYCLE 7. Start-up businesses and venture capital 125 8. Growth companies: Marketing focused 143 9. Mature companies: To divi or not? 164 10. Declining businesses: A case for euthanasia? 180 PART 3: FINANCIAL INSTRUMENTS 11. Financial instruments: The building blocks 193 12. Types of fi nancial instrument 208 13. Dividends and buybacks 226 vi Contents PART 4: TRANSACTIONS AND OPERATING ISSUES 14. Floating a company 243 15. Acquisitions, mergers and selling a business 258 16. Restructuring a company 276 17. Private equity 286 18. International corporate fi nance 309 19. Strategic working capital management 324 APPENDICES 1. Review of theories of fi nance 337 2. Valuing options and convertibles 353 3. Forecasting 366 Glossary of selected fi nancial terms 375 Discount table: present value of £1 380 Discount table: present value of £1 received annually for N years 382 Black–Scholes value of call option expressed as a percentage of the share price 384 Index 387 Preface to third edition This book describes how corporate fi nance works in prac- tice. It shows how an appropriate fi nancial strategy can be designed to complement the corporate strategy and add value to an organization. We consider the relevant theories of corporate fi nance, but our main thrust is to show how they can be applied in the real world. The material for the book is based upon many years’ expe- rience as practitioners and consultants in, and teachers of, corporate fi nance. It has been refi ned and tested by use on advanced MBA courses at Cranfi eld School of Management and in programmes held for senior managers and fi nanciers around the world. To bring it to life we include a number of real company Case Studies, together with a wide range of illustrative examples. We link together various parts of fi nancial theory and try to explain numerically how fi nan- cial markets really work. We have made no attempt to reproduce the many existing textbooks on fi nancial theory, although the requisite theories are summarized and explained. The objective is to go much further in placing the theory into a usable context which should enable practising managers to understand more fully the potential value added by the best fi nancial strategy available to them. The structure of the book has been designed to make it of value even if not read from cover to cover. It is divided into four parts. In Part One we give an overview of fi nancial strategy and its role within the overall corporate strategy of the business. Set in the context of shareholder value, we examine what the viii Preface to third edition share price tells us about the market’s expectations of the business and how this can affect both corporate and fi nancial strategies. We build up a model examin- ing how these expectations and the fi nancial drivers change over the lifecycle of the company, and demonstrate what this means for a company’s fi nancial choices. We also examine how and why governance requirements of the busi- ness change as it develops through different stages of ownership. Part Two considers in much more detail the various components of the fi nan- cial strategies which are appropriate to each stage of the company’s develop- ment. We consider how the company’s strategy will adapt to its changing circumstances, look at the changing sources of business risk, and explain how dividend policies and funding sources match the organization’s needs. In Part Three we move away from the lifecycle model to examine different types of fi nancial instrument. The choice of fi nancial instruments is fundamen- tal to designing a fi nancial strategy, and we deconstruct the key features of a variety of securities, setting them out in terms of the basic risk-return relation- ship that underlies pretty much everything in fi nance. Within this section we also examine companies’ dividend and buyback choices. We have entitled Part Four ‘Transactions and Operating Issues’. Here we consider the major transactions that a company might encounter – fl otation, acquisitions, restructuring. Separately, we examine the role of the private equity industry in business today, and show how and why these investors can create value for their participants. We also look at issues fundamental to the running of a business – international considerations and working capital management. We have relegated underlying detail to the Appendices. Here you will fi nd a brief overview of all of the theories of corporate fi nance needed to under- stand our approach in this book. We also use Appendices to give further detail on share options, and to set out advice on the preparation of forecasts, an area which is fundamental to devising a fi nancial plan, and which we have found in practice to be sadly inadequate in many businesses. Very deliberately the illustrative examples and real case studies used through- out the book have been analyzed using relatively simple mathematics; the simplifying assumptions do not destroy the underlying reasoning behind the analysis. The objective is to convey the conceptual logic behind fi nancial strat- egy rather than to confuse with spuriously accurate mathematics and exces- sively complex formulae. Changes in this edition The previous edition of this book was published six years ago. Since then much has changed. Economies have gone through cycles of boom and bust; compa- nies and their fi nance have become yet more global. When returning to update the text it was a comfort to us to see that the principles and commentary remain valid today, and we have not made any signifi cant changes to the structure of this text. However, in those six years we have worked with more companies, and have learned more ourselves. Accordingly the book has been updated to refl ect this. Preface to third edition ix The major changes we have made in this edition include: Executive summary Chapter 4 contains the main models underlying the of the key models book and is necessarily long. To simplify matters for the reader in a hurry we have prepared a new Chapter 3, which briefl y summarizes its content. New chapter on Corporate governance is becoming more and more governance and important to organizations. Chapter 5, new to this fi nance edition, sets out how governance impacts upon a company’s fi nancial strategy over its ownership life- cycle. The chapter on executive compensation has been moved from Part Four of the book to sit next to this, as Chapter 6. More on private Private equity plays a more signifi cant part in the equity global economy than it did a few years ago. Chapter 17 has been revised and expanded to refl ect this. New appendix Much of fi nancial strategy depends on a company’s on forecasting forecasts of its funding requirements. Appendix 3, new to this edition, discusses forecast preparation, and includes a brief section on behavioural fi nance. We have also updated many of the Case Studies and Working Insights, and made textual alterations to most chapters. Companion website At the request of our readers, the book now has a companion website, www.elsevierdirect.com/9780750686655 and www.textbooks.elsevier.com/ 9780750686655.
Load more

Recommended publications
  • PRIVATE EQUITY DEMYSTIFIED an Explanatory Guide
    Financing Change PRIVATE EQUITY DEMYSTIFIED An explanatory guide John Gilligan and Mike Wright Financing Change An initiative from the ICAEW Corporate Finance Faculty This is the first report to be published under Financing Change, the thought leadership programme of the ICAEW Corporate Finance Faculty. The faculty is the world’s largest network of professionals involved in corporate finance and counts accountants, lawyers, bankers, other practitioners and people in business among its members. Financing Change aims to advance the economic and social contribution of corporate finance activity by promoting better understanding and practice. Once a niche market for finance, private equity today competes with the public markets as a provider of equity capital, and is the owner of many large companies which are household names and major employers. Private equity has been the subject of public debate in many jurisdictions and a number of common public policy challenges have arisen. If future private equity deals are to achieve their full economic potential and avoid being constrained unnecessarily by legislators and regulators, it is important that dealmakers continue to have regard to the context in which private equity transactions take place, and that greater effort is made to provide all stakeholders with clear, transparent and objective information. Private equity demystified – An explanatory guide was commissioned to shed light on the motivations of the main participants in private equity transactions and on their risks and rewards. It deals with issues of international relevance, using UK-specific examples to illustrate operating models, remuneration practices, employment regulations and taxation policy. The report also includes a review of academic studies on private equity transactions from around the world.
    [Show full text]
  • Private Equity: How Does It Work?
    Faculty of Economics and Business Administration PRIVATE EQUITY: HOW DOES IT WORK?, FINAL BACHELOR'S PROJECT Author: Gonzalo Hernández Gajate Director: Ramón Bermejo Climent MADRID | April 2020 1 INDEX ABSTRACT .....................................................................................................................4 1. INTRODUCTION .................................................................................................................... 6 1.1. PE in the investment spectrum........................................................................................... 7 2. PRIVATE EQUITY BUSINESS MODEL ........................................................................... 8 2.1. Structure ............................................................................................................................ 8 2.2. Types of funds .................................................................................................................... 9 2.3. Phases of a PE investment ............................................................................................... 12 2.3.1. Sourcing ..................................................................................................................................................... 12 2.3.2. Execution ................................................................................................................................................... 16 2.3.3. Monitoring ................................................................................................................................................
    [Show full text]
  • Private Equity En Fiscaliteit
    Belastingdienst Private equity en fiscaliteit Belastingdienst, Platform Versterking Vaktechniek Onder redactie van mw. mr. C.M. Groot Inhoud 1 Inleiding 9 1.1 Rapport Private equity en fiscaliteit 9 1.2 Opzet van het rapport 9 1.3 Samenstelling projectgroep 9 1.4 Inhoud van het rapport 10 I Zicht op private equity 11 2 Wat is private equity? 12 2.1 Inleiding 12 2.1.1 Ontstaansgeschiedenis private equity 13 2.1.2 Rol van private equity in de Nederlandse economie 14 2.1.3 Recente ontwikkelingen 18 2.2 Een definitie van private equity 19 2.2.1 Private equity als vermogens beheerarrangement 20 2.2.2 Kapitaal bijeengebracht door investeerders 22 2.2.3 Fonds dat beheerd wordt door een participatie maatschappij 23 2.2.4 Participeren in niet-beursgenoteerde onder nemingen 25 2.2.5 Zeggenschap in de portfolio-onder neming 27 2.2.6 Realisatie op termijn 28 2.2.7 Leverage – het hefboom effect 29 2.2.8 Carried interest 30 2.2.9 Rol van de fonds managers 31 2.3 Afbakening: private equity ten opzichte van andere financieringsvormen 31 2.3.1 Informal investors 31 2.3.2 Hedgefondsen 32 2.3.3 Crowdfunding 33 2.4 Private equity als vorm van onder nemingsfinanciering 34 2.4.1 Venture capital 36 2.4.2 Financiering door middel van private equity bij volwassen ondernemingen 38 2.5 Private equity als vorm van belegging 42 2.5.1 Investeerders in private equity 43 2.5.2 Co-investeringen 46 2.6 Participatiemaatschappijen 48 2.6.1 Verschillende soorten participatie maatschappijen 48 2.6.2 Private-equityhuizen 49 2.6.3 Participatiemaatschappijen van banken of verzekeraars
    [Show full text]
  • Inversión Responsable Para Un Futuro Sostenible ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ANUARIO ASCRI CAPITAL PRIVADO 2020
    ANUARIOANUARIO ASCRI ASCRI CAPITALCAPITAL PRIVADO PRIVADO 2020 2020 ASCRI DIRECTORYASCRI DIRECTORY PRIVATE EQUITYPRIVATE & EQUITYVENTURE & VENTURECAPITAL CAPITAL El CapitalEl Capital Privado: Privado: inversióninversión responsable responsable para unpara futuro un futuro sostenible sostenible ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ANUARIO ASCRI CAPITAL PRIVADO 2020 ANUARIO ASCRI CAPITAL PRIVADO 2020 ANUARIOANUARIO ASCRI ASCRI CAPITALCAPITAL PRIVADO PRIVADO 2020 2020 ASCRI DIRECTORYASCRI DIRECTORY PRIVATE EQUITYPRIVATE & EQUITYVENTURE & VENTURECAPITAL CAPITAL ANUARIO 2020 DIRECTORY Patrocinado por / Sponsored by: ANUARIO ASCRI 2020 Todos los derechos reservados ASCRI: Príncipe de Vergara, 55, 4ºD. 28006 Madrid DISEÑO EXTERIOR: Atela Comunicación Corporativa DISEÑO INTERIOR: Zingular IMPRENTA: Zingular 2 SUMARIO / INDEX CARTA DEL PRESIDENTE Y DEL DIRECTOR GENERAL DE ASCRI 4 ASCRI Chairman and Managing Director´s Letter QUÉ ES ASCRI 7 What is ASCRI PRIMEROS RESULTADOS DEL AÑO 2019 18 First results for the 2019 exercise LISTA DE ENTIDADES DE VENTURE CAPITAL, CORPORATE VENTURE E IMPACTO SOCIAL 30 Venture Capital, Corporate Venture and Social Impact entities LISTA DE ENTIDADES DE PRIVATE EQUITY 42 Private Equity entities DISTRIBUCIÓN GEOGRÁFICA DE LAS ENTIDADES DE VENTURE CAPITAL & PRIVATE EQUITY SOCIAS DE ASCRI 48 Geographical location of Venture Capital & Private Equity entities (ASCRI members) LISTA DE COMPAÑÍAS PARTICIPADAS 2019 51 Portfolio directory 2019 ÍNDICE DE TÉRMINOS QUE
    [Show full text]
  • EL CAPITAL PRIVADO, Impulso De La Economía Anuario 2019 Directory
    EL CAPITAL PRIVADO, impulso de la economía Anuario 2019 Directory Patrocinado por / Sponsored by: ANUARIO ASCRI 2019 Todos los derechos reservados ASCRI: Príncipe de Vergara, 55, 4ºD. 28006 Madrid DISEÑO EXTERIOR: Atela Comunicación Corporativa DISEÑO INTERIOR: Zingular IMPRENTA: Zingular 2 sumario / index CARTA DEL PRESIDENTE Y DEL DIRECTOR GENERAL DE ASCRI 4 ASCRI Chairman and Managing Director´s Letter QUÉ ES ASCRI 7 What is ASCRI PRIMEROS RESULTADOS DEL AÑO 2018 16 First results for the 2018 exercise LISTA DE ENTIDADES DE VENTURE CAPITAL, CORPORATE VENTURE E IMPACTO SOCIAL 28 Venture Capital, Corporate Venture and Social Impact entities LISTA DE ENTIDADES DE PRIVATE EQUITY 44 Private Equity entities DISTRIBUCIÓN GEOGRÁFICA DE LAS ENTIDADES DE VENTURE CAPITAL & PRIVATE EQUITY SOCIAS DE ASCRI 50 Geographical location of Venture Capital & Private Equity entities (ASCRI members) LISTA DE COMPAÑÍAS PARTICIPADAS 2018 53 Portfolio directory 2018 ÍNDICE DE TÉRMINOS QUE CONTIENEN LAS FICHAS 85 Index of terms included in this directory SOCIOS GESTORES 86 General Partners Members SOCIOS INVERSORES 204 Limited Partners Members SOCIOS ASESORES 216 Advisory Members LISTA DE PROFESIONALES DE LOS SOCIOS GESTORES POR ENTIDAD 288 General Partners Professionals listed by entity LISTA DE PROFESIONALES DE LOS SOCIOS GESTORES POR APELLIDO 300 General Partners Professionals listed by surname LISTA DE PROFESIONALES DE LOS SOCIOS INVERSORES POR ENTIDAD 312 Limited Partners Professionals listed by entity LISTA DE PROFESIONALES DE LOS SOCIOS INVERSORES POR APELLIDO
    [Show full text]
  • A Guide to Private Equity
    xxxxx A Guide to Private Equity A Guide to Private Equity 1 xxxxx 2 A Guide to Private Equity BVCA mission statement THE BVCA is the industry body and public policy advocate for private equity and venture capital in the UK, an industry that accounts for almost 60% of the European market. With a membership of over 450 members, the BVCA represents an overwhelming majority of UK-based private equity and venture capital firms and their advisers – from venture capital, through mid-market, to private equity/large buy-out houses. For over 26 years, the BVCA’s voice has been one of authority when speaking for, or negotiating on behalf of, the UK industry to a wide range of key stakeholders: government, the European Commission and Parliament, media and statutory bodies at home, across Europe and globally. We also promote our members’ services to entrepreneurs and investors, as well as providing valuable research, training and networking opportunities to our members. All members of the BVCA are listed in our annual ‘Directory of Members’. Other publications include reports and analysis produced by our Research team, such as the annual Performance Measurement Survey and the Report on Investment Activity. All publications are available on the BVCA website: www.bvca.co.uk A Guide to Private Equity 1 Private Equity – investing in Britain’s future • Each year UK private equity firms provide billions of pounds to form, develop and reshape over 1,600 ambitious UK companies with high growth prospects. • Private equity makes managers into owners, giving them the freedom, focus and finance to enable them to revitalise their companies and take them onto their next phase of growth.
    [Show full text]
  • JARGON® Global Mergers & Acquisitions
    The BOOK of JARGON® Global Mergers & Acquisitions The Latham & Watkins Glossary of Global M&A Slang and Terminology First Edition Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. The Law Office of Salman M. Al-Sudairi is Latham & Watkins associated office in the Kingdom of Saudi Arabia. In Qatar, Latham & Watkins LLP is licensed by the Qatar Financial Centre Authority. Under New York’s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York’s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Phone: +1.212.906.1200. © Copyright 2013 Latham & Watkins. All Rights Reserved. Welcome to the Book of Jargon® – Global Mergers & Acquisitions. For readers who are lawyers, bankers, or studying to be one, this book can serve as an introduction to the legal and business terms — including corporate and private equity sponsor terminology — often encountered in the structuring, negotiation and execution of mergers, acquisitions and dispositions in many countries around the globe. From statutory terms and nomenclature to sometimes colorful slang, this book includes the words that comprise both home country law and the lingua franca of the M&A world — which has become truly global.
    [Show full text]
  • Private Equity in België: Vennootschapsrecht, Governance, Financiering
    Faculteit Rechtsgeleerdheid Universiteit Gent Academiejaar 2009-10 PRIVATE EQUITY IN BELGIË: VENNOOTSCHAPSRECHT, GOVERNANCE, FINANCIERING. Masterproef van de opleiding „Master in de rechten‟ Ingediend door Astrid Delanghe (studentennr. 20053199) (major: Sociaal- en economisch recht) Promotor: Prof. Dr. Hans De Wulf Commissaris: drs. Diederik Bruloot 2 Voorwoord Ik zou graag mijn promotor, Prof. Dr. Hans De Wulf, bedanken om mij dit onderwerp toe te wijzen. Zijn deur stond ook altijd open om mijn soms impulsieve vragen te beantwoorden. Ook zou ik graag drs. Eveline Hellebuyck, assistente bij het Financial Law Insitute, willen bedanken om een voorlopige versie van mijn masterproef na te lezen en er uitgebreide feedback over te geven Mijn promotor en zijn medewerkers hebben mijn reeds vooraf bestaande interesse in zowel economie als het recht sterk aangewakkerd en mijn keuze voor de major sociaal- en economisch recht beïnvloed. Omwille van mijn dubbele interesse ligt het onderwerp “Private equity in België: vennootschapsrecht, governance en financiering” in het brandpunt van mijn belangstelling. Het aangeboden masterproef onderwerp gaf me immers de kans om deze twee interesses te combineren en mij in deze materie te verdiepen tijdens het werken aan mijn masterproef. Ook mijn ouders verdienen een bijzonder dankwoord voor het nalezen van mijn masterproef en het kritisch op zoek gaan naar eventuele typ- en grammaticale fouten. Astrid Delanghe Aalst, 12 mei 2010 3 Inhoudstafel Voorwoord ............................................................................................................................................
    [Show full text]
  • El Capital Privado: Inversión Responsable Para Un Futuro Sostenible ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ANUARIO ASCRI CAPITAL PRIVADO 2020
    ANUARIOANUARIO ASCRI ASCRI CAPITALCAPITAL PRIVADO PRIVADO 2020 2020 ASCRI DIRECTORYASCRI DIRECTORY PRIVATE EQUITYPRIVATE & EQUITYVENTURE & VENTURECAPITAL CAPITAL El CapitalEl Capital Privado: Privado: inversióninversión responsable responsable para unpara futuro un futuro sostenible sostenible ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ASCRI DIRECTORY PRIVATE EQUITY & VENTURE CAPITAL ANUARIO ASCRI CAPITAL PRIVADO 2020 ANUARIO ASCRI CAPITAL PRIVADO 2020 ANUARIOANUARIO ASCRI ASCRI CAPITALCAPITAL PRIVADO PRIVADO 2020 2020 ASCRI DIRECTORYASCRI DIRECTORY PRIVATE EQUITYPRIVATE & EQUITYVENTURE & VENTURECAPITAL CAPITAL ANUARIO 2020 DIRECTORY Patrocinado por / Sponsored by: ANUARIO ASCRI 2020 Todos los derechos reservados ASCRI: Príncipe de Vergara, 55, 4ºD. 28006 Madrid DISEÑO EXTERIOR: Atela Comunicación Corporativa DISEÑO INTERIOR: Zingular IMPRENTA: Zingular 2 SUMARIO / INDEX CARTA DEL PRESIDENTE Y DEL DIRECTOR GENERAL DE ASCRI 4 ASCRI Chairman and Managing Director´s Letter QUÉ ES ASCRI 7 What is ASCRI PRIMEROS RESULTADOS DEL AÑO 2019 18 First results for the 2019 exercise LISTA DE ENTIDADES DE VENTURE CAPITAL, CORPORATE VENTURE E IMPACTO SOCIAL 30 Venture Capital, Corporate Venture and Social Impact entities LISTA DE ENTIDADES DE PRIVATE EQUITY 42 Private Equity entities DISTRIBUCIÓN GEOGRÁFICA DE LAS ENTIDADES DE VENTURE CAPITAL & PRIVATE EQUITY SOCIAS DE ASCRI 48 Geographical location of Venture Capital & Private Equity entities (ASCRI members) LISTA DE COMPAÑÍAS PARTICIPADAS 2019 51 Portfolio directory 2019 ÍNDICE DE TÉRMINOS QUE
    [Show full text]
  • “How to Invest As a Private Equity”
    MASTER OF SCIENCE IN BUSINESS ADMINISTRATION THE LISBON MBA INTERNATIONAL 2011 / ESPÍRITO SANTO CAPITAL WORK PROJECT “HOW TO INVEST AS A PRIVATE EQUITY” Francisco Simões Rodrigues December 2011 Master Work Project - How to Invest as a Private Equity “This (growing inequality) is not the type of thing which a democratic society can really accept without addressing”1 -- Former Federal Reserve Chair Alan Greenspan 1 Source: GRIER, Peter; Congressional Joint Economic Committee hearing, as quoted in the Christian Science Monitor, “Rich-poor gap gaining attention,” June 14, 2005. ***Source Cover Image: Financial Times, June 19, 2007, Espírito Santo Bank Francisco Simões Rodrigues Page 2/48 30-12-2011 Master Work Project - How to Invest as a Private Equity ABSTRACT This work project presents a road map for making deals under the umbrella support of a private equity investor. Fundraising, investment analysis, asset monitoring, and divestment are stages in the process that are covered in-depth and clarified in terms of action plan and procedures. Moreover, private equity brings tangible and intangible efficiency to the economy and companies, not only by providing finance to grow and expand but also by forcing superior organizational organics that foster sustainable business positions. In a world domain, Europe as been a second liner as compared to US in terms of size within the private equity sector, but it is quickly maturing and converging to US numbers. In this sense, Portugal has been improving in both numbers and regulations in order to leverage on its strategic location and position itself as a key player to address future business challenges coming from emerging markets such as Africa and Latin America.
    [Show full text]
  • Private Equity Demystified an Explanatory Guide
    Private equity demystified An explanatory guide THIRD EDITION John Gilligan and Mike Wright BUSINESS WITH CONFIDENCE icaew.com/financingchange Private Equity Demystified – An Explanatory Guide An initiative from the ICAEW Corporate Finance Faculty Private Equity Demystified provides an objective explanation of private equity, recognising that for public scrutiny of this sector to be effective it must be conducted on an informed basis. This is recognised by the work featuring on reading lists of leading business schools. Since the publication in 2008 of the first edition of Private Equity Demystified the major economies have moved from growth to recession to evidence of emergence from recession. We have seen the enactment and subsequent implementation of the European Commission’s Alternative Investment Fund Managers Directive which covers private equity funds. In addition, the academic world has applied new techniques to old questions as new data sets have become available. Earlier editions reflected the turmoil of the recession and examined the way in which the banking market changed its approach to private equity investments as well as the dynamics of the restructuring industry. This third edition picks up as many western economies show signs of a resurgence of growth. It examines further developments in private equity, such as its methodologies, management of funds and relationships with limited partners. The value of the work will continue to be measured in better-informed debate, in private equity’s effective engagement with wider stakeholders, in well thought out public policies and in awareness among business owners of private equity as a potential source of sustainable finance for growth.
    [Show full text]
  • Structure and Determinants of Financial Covenants in Leveraged Buyouts
    Technische Universität München KfW Stiftungslehrstuhl für Entrepreneurial Finance Univ.-Prof. Dr. Dr. Ann-Kristin Achleitner Structure and determinants of financial covenants in leveraged buyouts Florian T. Tappeiner Vollständiger Abdruck der von der Fakultät für Wirtschaftswissenschaften der Technischen Universität München zur Erlangung des akademischen Grades eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) genehmigten Dissertation. Vorsitzender: Univ.-Prof. Dr. M. Moog Prüfer der Dissertation: 1. Univ.-Prof. Dr. Dr. A.-K. Achleitner 2. Univ.-Prof. Dr. G. Friedl Die Dissertation wurde am 30.09.2010 bei der Technischen Universität München ein- gereicht und durch die Fakultät für Wirtschaftswissenschaften am 15.12.2010 ange- nommen. II III TABLE OF CONTENTS 1 INTRODUCTION ........................................................................................................ 1 1.1 Relevance and Objectives ............................................................................. 1 1.2 Structure of Analysis ..................................................................................... 5 2 CHARACTERISTICS OF LEVERAGED BUYOUTS ...................................................... 8 2.1 Introductory Remarks .................................................................................. 8 2.2 Private Equity and Leveraged Buyouts ....................................................... 8 2.3 Capital Structure ........................................................................................... 9 2.3.1 Theoretical
    [Show full text]