Week 7B Flashcards

1
Q

What are the 3 types of private equity?

A
  1. Venture capital (early stage), unproven BM
  2. growth equity (growth stage), more proven BM
  3. buyout equity (mature stage), PE Investor takes majority stake to restructure management/business
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2
Q

How does a PE fund most of the time look like? Who is LP and who GP?

A

Most of the time a fund takes 7-10 years where investors are Limited partners (give equity), and General Partners are responsible for execution (PE firm)

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3
Q

How does a VC decision making process look like? (4 steps)

A
  1. pre-investment screening: deal funnel
  2. selection decision ‘jockey’ (founder) or ‘horse’ (business idea)
  3. evaluation and contracting: multiple of invested capital (MOIC) and Internal Rate of Return (IRR)
  4. post-investment monitoring and advising: active ownership
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4
Q

Name 4 reasons why VCs are suitable for promoting sustainability

A
  1. investment horizon = long
  2. risk appetite
  3. engagement / monitoring
  4. reliance on qualitative factors: due diligence
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5
Q

Name 4 reasons why VCs are less (!) suitable for promoting sustainability

A
  1. size/people/ESG expertise = small
  2. risk-return trade off: need to accept lower returns
  3. competition with other VCs
  4. limited stake
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6
Q

What is an LBO?

A

majority stake is financed by debt

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7
Q

What is a distressed PE?

A

purchase stake in distressed firm with cheap debt, profit from D/E swap or debt repaid

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