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RMIM-9-overview-of-private-equity.html
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<!doctype html>
<html lang="en">
<head>
<meta charset="utf-8">
<title>Risk Management and Investment Management | Chapter 9 | Overview of Private Equity</title>
<meta name="description" content="Financial Risk Manager Part 2 Study Materials">
<meta name="author" content="MacLane Wilkison">
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<section>
<h1>Chapter 9</h1>
<h3>Overview of Private Equity</h3>
<p>
<small>Created for <a href="http://alchemistsacademy.com">Alchemists Academy</a> by <a href="http://alchemistsacademy.com/about">MacLane Wilkison</a></small>
</p>
</section>
<section>
<section>
<h1>Types of Investments</h1>
</section>
<section>
<h2>Leveraged Buyout (LBO)</h2>
<p>Refers to the purchase of all or most of a company or business unit using equity from a small group of investors in combination with a significant amount of debt. The targets are typically mature companies that generate strong operating cash flow</p>
</section>
<section>
<h2>Growth Capital</h2>
<p>Typically refers to minority equity investments in mature companies that need capital to expand or restructure operations, finance an acquisition, or enter a new market, without a change of control</p>
</section>
<section>
<h2>Mezzanine Capital</h2>
<p>Refers to an investment in subordinated debt or preferred stock of a company, without taking voting control. The securities often have warrants or conversion rights attached</p>
</section>
<section>
<h2>Venture Capital</h2>
<p>Refers to equity investments in less mature non-public companies to fund the launch, early development, or expansion of a business</p>
</section>
</section>
<section>
<h2>Characteristics of an LBO Transaction</h2>
<ul>
<li>Company or business unit acquired financed with secured debt and equity</li>
<li>Relatively high leverage</li>
<li>Results in company going private with a view towards an eventual exit strategy</li>
<li>IRR determined by amount of leverage, dividends, and eventual exit</li>
<li>General partners commit capital alongside limited partners</li>
</ul>
</section>
<section>
<h2>Target Company Characteristics</h2>
<ul>
<li>Motivated and competent management</li>
<li>Robust and stable cash flow</li>
<li>Leveragable balance sheet</li>
<li>Low capital expenditures</li>
<li>Quality assets</li>
<li>Opportunities for asset sales and cost-cutting</li>
</ul>
</section>
<section>
<h1>THE END</h1>
<h3><a href="http://alchemistsacademy.com">AlchemistsAcademy.com</a></h3>
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