PRIVATE EQUITY & VENTURE CAPITAL
6QQMB312
PERIOD 3 – AUGUST 2024
REASSESSMENT OVERVIEW & ****MARKING CRITERIA
Your re-assessment for the Private Equity & Venture Capital module will be based on t代 写6QQMB312 VENTURE CAPITALhe submission of coursework with two components ****and with a total word count of 3,500 words.
PART ****1 ****(60% weighting)
You are required to submit a highly abridged “Investment Paper” (2000 words) recommending a buyout of a company AS IF ****YOU ****WERE ****AN ****EXECUTIVE ****IN ****A ****PRIVATE ****EQUITY ****FIRM.
YOU ****MUST ****SELECT ****A ****DIFFERENT ****COMPANY TO THAT ****PREVIOUSLY ****SUB MITTED. ****YOU ****CAN ****SELECT ****A ****NEW COMPANY ****FROM THE ****LIST ****PROVIDED.
For the avoidance of doubt this means that you are writing the paper for people who know all about Private Equity and therefore want to read your conclusions – NOT ****A PAPER EXPLAINING WHAT ****PRIVATE ****EQUITY ****IS.
Your paper will not coverall the items required for an actual Investment Paper (or reach the levels of detail needed), but it will provide you with an opportunity to demonstrate key learnings from the module, namely:
How buyouts work;
How a commercial view of the investment impacts on valuation, risk and transaction structures;
How management is incentivised and how returns flow to fund investors.
We will use the tutorials to ensure that you are clear on the technical aspects of a transaction (e.g.
financial, structural, valuation/returns) and blend these with the core commercial reason for making the investment. You will only need to focus on specific elements of the investment paper as shown below:
Introduction/Executive Summary
The Commercial Opportunity
Market Context
Risks
Valuation and Investment Returns (using a very basic financial model which we will discuss in detail)
Exit Options.
The paper needs original thought. A high level of perception as to the fundamental investment opportunity will drive a higher grade. Excess words that ****do ****not ****add to the ****reader’sunderstanding ****of your ****recommendation ****will ****have ****a ****negative ****impac t ****- but, of course, your narrative will still need to have a natural logical flow.
Early in the module, you will be offered some choices as to the illustrative investment candidates using real publicly quoted businesses. YOU ****MUST ****ASSUME ****THAT ****THE ****BUSINESS ****YOUR ****WRITE ****ABOUT ****IS ****NOT ****A ****PUBLIC ****COMPANY ****FOR ****THE ****PURPOSES ****OF ****THE ****ASSESSMENT ****BUT ****IN STEAD ****A ****PRIVATE ****ONE ****WHERE THE ****EXISTING ****FAMILY SHAREHOLDER WISHES TO ****SELL TO ****THE ****INCUMBENT ****MANAGEMENT TEAM.
References to the share price performance of the company, market value, dividend yield are therefore completely irrelevant. Remember also that in a buyout the company is bought debt free - and then the new owner decides what the capital structure will be going forward.
In ****creating ****the ****financial ****mo del ****for ****your ****chosen ****company, ****you ****will ****need ****to ****propose ****an ****entry ****(and ****exit) ****valuation ****as ****well ****as ****suggest ****a ****leverage ****mul tiple ****and ****then ****allocate ****enough ****equity to ****management to ****result in a good ****result for them and ****also ****a ****good ****result ****for ****the ****PE ****firm.
Please ****ensure that you ****copy ****and ****paste ****the ****simple ****buyout ****r eturns ****model ****we ****provide you with ****into ****your assessment so ****I can see what ****you ****have ****assumed.
NOTE ****THAT ****WE ****DO ****NOT ****FOCUS ****ON ****FINANCIAL ****MODELLING ****IN ****THE ****MODULE ****SO ****DO ****NOT ****CREATE ****ANY OTHER ****MODEL ****FOR THE ASSESS MENT.
PART 2 ****(40% weighting)
Based on your tutorials with Simon Welte, who will guide you through a real-life case study of a buyout which raises several interesting features that have generated academic debate, you will be asked to critically evaluate your chosen investment candidate in Part 1 through an academic lens.
It is integral that for this academic essay (1500 words) you change your ****perspective to ****an ****academic ****finance ****scholar. Understanding what may lead to challenges or even the failure of YOUR proposed private equity buyout- despite the attractive investment model- will provide you with an opportunity to develop a differentiated view. You should consider the different concepts covered in the tutorials and the role they may play for your specific investment proposal, answering the following question:
What are the critical considerations for your ****proposed ****buyout to ****become a ****successful ****investment? ****Of the four discussed, please focus on two elements ****(and their potential interrelation):
Capital structure and leverage
Creation, capture and destruction of value
Corporate governance: Management incentives and boards
Realization of value: Information asymmetry, market timing and PE exit.
Similar to the investment paper, this second part should NOT BE A PAPER EXPLAINING WHAT PRIVATE ****EQUITY IS, NOR WHAT THE MAIN FINANCE THEOR IES ARE. ****Rather, it should demonstrate your critical thinking and application of the knowledge and analytical skills learned on the module to a real-life case.
Illustrative questions you might want to ask yourselves are:
**“Does **the **level **of leverage **chosen **appear **optimal **with **respect **to **capital structur e **theory **and **at the **sametime **leave **enough **room **to **adapt **to **fluctuations **in **the **external **market **environment ?”
**“How **will **value **be **created **or **captured **based **on **your **paper, **and **which **groups **of s takeholders might be affected? Do you believe that management is well incent ivized to minimize agency costs?”
**“ Which **important **external **or **internal **factors **have **to **be **considered **for **private **equity **exit **strategy and timing that might adversely affect **investment perfor mance?”.
REQUIREMENTS AND SUBMISSION
Your **submission should be limited to 3,500 words in total: 2,000 wo rds ******for ******Part 1 and 1,500 words ******for Part 2 .
This word count excludes diagrams, tables, headings and references – the use of **which are encouraged **to help make your case as **compelling **as possible.
NOTE THAT ACADEMIC ****REFERENCES ARE ****NOT ****RELEVANT TO ****PART ****1.
IN ****PART 2, ****PLEASE APPLY THE ****NAME-YEAR ****FORMAT AND ****PROVIDE A ****BIBLIOGRAPHY AT THE ****END ****IF ****REFERENCING ANY ACADEMIC OR ****NON-ACADEMIC SOURCES.
Reading your paper before submission and checking for errors is a basic need for every paper and failure to do so has a very negative impact on the reader.
The ****submission ****deadline is 10:00 on Friday 16 August 2024. Submissions after this will not be accepted by the exam board.
MARKING CRITERIA
The examiners will adopt the perspective of the Investment Committee at the Private Equity firm (in Part 1) and of an Academic Private Equity Research Group (in Part 2) . Marks will be awarded based upon the following four criteria:
| Marking Criteria | Approximate ****Weighting |
|---|---|
| Demonstrating your understanding of Private Equity | 25% |
| Articulating a logical, holistic, investment case with relevant data points (in Part 1)andan incisive academic analysis of your chosen business (in Part 2) | 30% |
| Demonstrating original thought | 30% |
| Presentation |
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