Gompers Paul Alan - PRIVATE EQUITY : a casebook

Advance Praise for Private Equity

It has been difficult for students and practitioners to find good material on investing in private equity. Until now! In this book, Gompers, Ivashina, and Ruback have compiled exciting and clearly written cases and notes on sourcing, valuing, structuring, and managing private equity investments.

Steven Neil Kaplan, Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance, University of Chicago Booth School of Business

Professors Gompers, Ivashina, and Ruback have compiled an insightful, thorough, and useful compendium of private equity techniques from valuation to structuring to firm management. The thoughtful practitioner will enjoy having this book not only as a reference but also as an opportunity to review case studies where theory is put into practice.

Michael S. Berk, Managing Director, TA Associates

Professors Gompers, Ivashina, and Ruback bring forth the depth and complexity of the growth equity and private equity deal-making process from the real-life perspectives of important industry participants. The professors structured view of the often unstructured and intuitive world of these risk capital providers makes this casebook an essential tool for educators, researchers, and others with a professional interest in the industry.

Bruce R. Evans, Senior Advisor, Former Managing Director, Summit Partners

The incisive detail of each case brings alive the complex considerations, both financial and human, that are critical to investment value creation. As we all must embrace continuing education, this is an excellent book for investors, practitioners and students alike. After all, the day we believe we have nothing further to learn is the day we become fools.

Dominique Senequier, President, Ardian

I have been an enthusiastic user of the authors cases for several years now. This compilation, supplemented with several new cases and very useful teaching notes on PE techniques and concepts, is a great resource for anyone wanting to teach a comprehensive and up-to-date course on private equity. PE has come a long way since the Barbarians at the gate of the 1980s, and this volume provides a rich and balanced view of the exciting new world of private equity investing.

Per Strmberg, SSE Centennial Professor of Finance and Private Equity, Swedish House of Finance

Private Equity is an invaluable tool for understanding how private equity investors conduct their craft with many real-life lessons to draw upon for new and emerging practitioners. The authors provide a road map for learning from many of the premier private equity firms and their landmark deals as well as insights on how the firms themselves execute the continuity of their business.

Darren Black, Managing Director, Summit Partners

A fabulous resource for the aspiring private equity investment professional. Gompers, Ivashina, and Ruback strike a marvelous balance of being comprehensive, pragmatic, and nuanced without being overly technical or academic. I wish this book had been around when I was starting outit would have definitely turbocharged my understanding of how to approach potential opportunities and what makes successful private equity deals work.

Andrew S. Janower, Managing Director, Charlesbank

Private equity investing is both an art and a science, and certain investors appear to just have a knack for picking winners. But this belies the discipline, diligence, and consistently strong processes that almost always inform such successful investors wise decisions. Gompers, Ivashina, and Ruback use compelling real-world examples to demonstrate the importance of such discipline throughout the life cycle of successful private market transactions and provide the reader with many tools to develop their investment edge.

Neil Wallack, Founder and Managing Director, 1901 Partners

Private equity is becoming a fundamental topic in finance. Understanding the way in which private equity deals can create value is becoming a necessity for every good MBA student. This casebook provides the basis for a course that illustrates the private equity model from fundraising to exiting.

Michael Weisbach, Ralph W. Kurtz Professor of Finance, Ohio State University

Private Equity

Private Equity

A Casebook

Paul A. Gompers,
Victoria Ivashina
and Richard S. Ruback

Anthem Press

An imprint of Wimbledon Publishing Company

www.anthempress.com

This edition first published in UK and USA 2019

by ANTHEM PRESS

7576 Blackfriars Road, London SE1 8HA, UK

or PO Box 9779, London SW19 7ZG, UK

and

244 Madison Ave #116, New York, NY 10016, USA

Copyright Paul A. Gompers, Victoria Ivashina and Richard S. Ruback 2019

The authors assert the moral right to be identified as the authors of this work.

All rights reserved. Without limiting the rights under copyright reserved above,

no part of this publication may be reproduced, stored or introduced into

a retrieval system, or transmitted, in any form or by any means

(electronic, mechanical, photocopying, recording or otherwise),

without the prior written permission of both the copyright

owner and the above publisher of this book.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

ISBN-13: 978-1-78308-916-1 (Hbk)

ISBN-10: 1-78308-916-4 (Hbk)

This title is also available as an e-book.

Contents

This book is a collection of cases that have been used in Private Equity Finance, an advanced corporate finance course offered in the second year of the Harvard Business Schools MBA curriculum, over several years. The goal of the book (and the course) is to provide a detailed insight into the sources of value creation and the process of the dealmaking in the growth equity and buyout spaces of the private equity industry. Most of the cases are written from the perspective of the investor, or general partner. Each case in this book is based on actual investment decisions tackled by experienced industry professionals.

As explained in the first chapter, the structure of the book follows the timeline of a private equity investment. It begins with deal sourcing, assessment, and valuation and moves on to deal structuring and active management of the operations and the capital structure. Finite horizon of an investmentabout five years on average, a standard time line in a typical valuation exerciseis one of the defining characteristics of the private equity asset class. Thus, the discussion of the dealmaking process will conclude with a set of cases and notes on private equity realizations. The final chapter of this book will take a step back and reflect on the economics of a private equity firm.

Most of the cases will be concerning growth equity and buyout investments. However, the cases will cover a range of size targets and investments in different geographical markets. These markets include several developed economies, but also emerging markets like China, Russia, Turkey, Egypt, and Argentina.

This is an advanced book. An opening note, Introduction to Private Equity Finance, will outline some basic concepts about private equity that will be helpful to navigate through the rest of the book. In addition, the book includes several sections that dive into specific topics in depth. This includes sections focused on valuation techniques, a section on the leveraged loan market, a section on capital structure used in private equity transactions, and several sections related to exit from private equity transactions. While being self-contained, the book will advance at a fast pace.