DOCSLIB.ORG

Structure and Determinants of Financial Covenants in Leveraged Buyouts

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read 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 Considerations .............................................................. 11 2.3.2 Empirical Description ...................................................................... 14 2.3.3 Equity Parties ................................................................................... 18 2.3.4 Debt Parties ...................................................................................... 23 2.4 Research Model ............................................................................................ 25 3 THEORETICAL FRAMEWORK ................................................................................ 27 3.1 Introductory Remarks ................................................................................ 27 3.2 The Conflict View - Agency Theory ........................................................... 27 3.2.1 Agency Conflict between Debt and Equity Holders ......................... 27 3.2.1.1 Asset Substitution ............................................................. 30 3.2.1.2 Underinvestment ............................................................... 34 3.2.1.3 Claim Dilution .................................................................. 36 3.2.2 Agency Costs of Debt ........................................................................ 36 3.2.3 Agency Theory of Covenants ............................................................ 37 3.3 The Control View – Financial Contracting Theory ................................. 40 3.3.1 Contractual Incompleteness ............................................................. 40 3.3.2 The Aghion-Bolton Model ................................................................ 42 3.3.3 The Rajan-Winton Model ................................................................. 55 3.3.4 Additional Functions of Financial Covenants .................................. 60 3.3.5 Excursus: Signaling Theory of Financial Covenants ....................... 60 3.4 Summary ...................................................................................................... 62 4 CLASSIFICATION AND TYPES OF COVENANTS ..................................................... 64 IV 4.1 Introductory Remarks ................................................................................ 64 4.2 The Conflict View – Action-restricting Covenants ................................... 64 4.2.1 Covenants limiting Asset Substitution .............................................. 65 4.2.2 Covenants limiting Underinvestment ............................................... 66 4.2.3 Covenants limiting Claim Dilution ................................................... 68 4.3 The Control View – Financial Covenants ................................................. 69 4.3.1 Types of Financial Covenants .......................................................... 70 4.3.2 Construction ..................................................................................... 73 4.3.3 Measure of Restrictiveness ............................................................... 78 4.3.4 Effectiveness of Financial Covenants ............................................... 81 4.4 Covenants in Leveraged Buyouts ............................................................... 82 4.5 Summary ...................................................................................................... 86 5 HYPOTHESES ......................................................................................................... 91 5.1 Introductory Remarks ................................................................................ 91 5.2 Literature Review ........................................................................................ 91 5.3 Hypotheses Development ............................................................................ 97 5.3.1 Target related ................................................................................... 98 5.3.1.1 Firm Size .......................................................................... 98 5.3.1.2 Growth ............................................................................ 100 5.3.1.3 Profitability ..................................................................... 102 5.3.1.4 Firm Risk ........................................................................ 102 5.3.1.5 Tangibility ...................................................................... 103 5.3.2 Transaction related ........................................................................ 104 5.3.2.1 Leverage ......................................................................... 104 5.3.2.2 Interest Costs .................................................................. 105 5.3.2.3 Maturity .......................................................................... 106 5.3.2.4 Share of Bank Debt ........................................................ 107 5.3.2.5 Creditor Rights Dilution ................................................. 108 5.3.3 Sponsor related ............................................................................... 108 5.3.3.1 Sponsor Reputation ........................................................ 108 5.3.3.2 Banking Relationship ..................................................... 110 5.3.4 Lead Arranger related .................................................................... 113 5.3.4.1 Organization ................................................................... 113 5.3.4.2 Final Hold ....................................................................... 113 5.3.5 Macroeconomic related .................................................................. 116 V 5.4 Summary .................................................................................................... 117 6 EMPIRICAL STUDY .............................................................................................. 119 6.1 Introductory Remarks .............................................................................. 119 6.2 Datasets ....................................................................................................... 119 6.2.1 LBO Sample .................................................................................... 119 6.2.2 Benchmark Sample ......................................................................... 131 6.3 Financial Covenants in Sponsored versus Non-sponsored Loans ......... 133 6.3.1 Types and Combinations of Financial Covenants .......................... 133 6.3.2 Financial Covenant Thresholds ..................................................... 141 6.4 Descriptive Statistics .................................................................................. 144 6.4.1 Covenant Restrictiveness ................................................................ 144 6.4.2 Financial Covenant Pecking Order ............................................... 149 6.4.3 Explanatory Variables .................................................................... 152 6.4.3.1 Target related .................................................................. 152 6.4.3.2 Transaction related ......................................................... 155 6.4.3.3 Sponsor related ............................................................... 158 6.4.3.4 Lead Arranger related ..................................................... 162 6.4.3.5 Macroeconomic related .................................................. 163 6.5 Determinants of Financial Covenant Restrictiveness ............................ 163 6.5.1 Difference in Means ....................................................................... 163 6.5.2 Multiple Regression Analysis ......................................................... 165 6.5.2.1 Target related .................................................................. 169 6.5.2.2 Transaction related ......................................................... 171 6.5.2.3 Sponsor related ............................................................... 173 6.5.2.4 Lead Arranger related ....................................................
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]
  • 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.
    [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]