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Flashcards in Session 7 Deck (29):
1

What is the characteristic of a private equity (broad sense)?

equity financing for non-quoted companies
- limited in time
- no dividends, but capital gains
- value added

2

What is the definition of a venture capital?

financing of newly formed companies --> early stage

3

What is the definition of a private equity (narrow sense)?

financing of established companies --> later stage

4

What are the phases of entrepreneurial financing?

- early stage (seed, start-up)
- expansion stage
- later stage (bridge, MBO/MBI)

5

What is the characteristic of the seed phase?

- product conception
- market analysis
- basic research

6

What is the characteristic of the start-up phase?

- company formation
- product development
- marketing concept

7

What is the characteristic of the expansion phase?

- product manufactoring
- market entry or growth financing

8

What is the characteristic of the bridge phase?

- preparation for
a) an IPO
b) a sale to an industrial investor

9

What is the characteristic of the MBO/MBI phase?

takeover by
a) current management (MBO)
b) external management (MBI)

10

How does the Asset Management Cycle expire?

1.) Asset Allocation
2.) Fund Selection
3.) Monitoring

11

How does a Private Equity Cycle expire?

1.) Fundraising
2.) Investor Relations
3.) Investment
4.) Distribution of returns

12

How does the "Investment" of the Private Equity Cycle expire?

1.) investment origination
2.) investment due dilligence
3.) investment structuring
4.) investment development
5.) investment exit

13

Which organizational forms of VC/PE Funds exist?

- closed-end funds
- open-end funds

14

What is the characteristic of closed-end funds?

- upper limit to the fundraising volume with a specified subscription period
- pre-defined lifetime
- returns from its investments are distributed to the investors at the latest at the end of the fund

15

What is the characteristic of open-end funds?

- investors can continually make subsrciptions to the fund (no upper limit)
- no pre-defined liquidation date
- returns from its investments are usually reinvested in the fund

16

What is an equity sindicate?

involves two or more VC & PE firms taking an equity stake in an investment, either in the same investment round or more broadly defined, at different points in time, for a joint payoff

17

What are the motives for syndicating deals?

- beneficial effect on the portfolio level
- beneficial effect on the investment level

18

How does the beneficial effect on the portfolio level compound?

- spreading risk (portfolio diversification)
- improving reputation (transfer of reputation, window dressing (only for co-investor))

19

How does the beneficial effect on the investment level compound?

- pre-contractual (financing the investment, access to deal flow, due diligence assistance (particularly for co-investor)
- post-contractual (advanced exit opportunities)

20

What is the task of a investor in a principal agent relationship between investor and portfolio company?

provide money

21

What is the task of a portfolio company in a principal agent relationship between investor and portfolio company?

- dividend/interest payments
- ownership share/repayment of loan

22

What are the problems in a principal agent relationship between investor and portfolio company?

- asymmetric information
- differing goals

23

What are the solutions in a principal agent relationship between investor and portfolio company?

- monitoring
- bonding
- screening

24

What is the definition of a buyout?

purchase of a controlling interest in a company from its owners

25

What is the main definition of a buyout?

acquisition of a business by a management team or group of employees with private equity/bank support

26

What is a leveraged buyout (LBO)?

kind of a superordinated concept and refers to a transaction in which the capital structure of the acquired company incorporates a particularly high level of debt following the purchase

27

What makes an attractive buyout opportunity more attractive?

- stable industry sector
- secure market position
- reputable in its markets
- mature products
- good spread of customers and suppliers
- committed management
- realistic price
- identifiable/saleable assets

28

What makes an attractive buyout opportunity less attractive?

- highly cyclical
- rapid technological change
- poor labour relations
- significant R&D and/or capital investment
- high/volatile working capital
- high business risk

29

Was sagen Engel/Braun/Achleitner in: "Leverage and the performance of buyouts: (How) does the use of debt impact equity returns?"

- Auswirkungen der Schuldenverwendung der (risikoadjustierten) Aktienrenditen in Private-Equity-Buyout-Transaktionen
- empirische Bewertung von theoretischen Vorhersagen
- Ergebnisse liefern auch Hinweise darauf, dass es zu einer Über-Übernahme eines Unternehmens kommen kann (sehr hoher Verschuldungsgrad = Schulden zu Gesamtkapital von rund 90%)
- bei sehr hohem Verschuldungsgrad (Schulden zu Gesamtkapital von rund 90%) eines vergrößerten Ausfallrisikos von Unternehmen überwiegen die positiven Auswirkungen auf Leverage in Zusammenhang zu Übernahmeergebnisse in abnehmenden Aktienrenditen
- kein signifikanter Zusammenhang zwischen Übernahme und risikoadjustierten Eigenkapitalrenditen
- dies impliziert, dass der Rücklauf steigt, der durch höhere Schuldenquoten mit der zunehmenden Gefahr einhergeht
- Private-Equity-Sponsoren kann zu Debt-Equity-Arbitrage in Zeiten von Schuldenmarktkonditionen führen
- Investoren legen erfolgreich Schuldenmärkte fest