Zeisberger Claudia - Private equity in action : case studies from developed and emerging markets

Claudia Zeisberger

Michael Prahl

Bowen White

This edition first published 2017
2017 Claudia Zeisberger, Michael Prahl and Bowen White

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ISBN 978-1-119-32802-5 (hardback) ISBN 978-1-119-32800-1 (ebk)
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Private equity (PE) certainly has no shortage of critics, having been referred to as capitalism on steroids, its general partners (GPs) or fund managers called locusts and their preferred deal cycle as a quick-flip. Attention is generated when the media portray PE as a fast way to multiply invested capital by reducing jobs and overleveraging companies. It is time to clear the air, remove soundbite biases and set perceptions straight by showing how the industry frequently removes inefficiencies and turns underperforming companies into healthier, more dynamic ones or supports fast-growing enterprises with capital and expertise, while taking measured risks other financial players are ill-equipped to pursue.

The sheer complexity of PE deal making often obscures the mechanisms of success from casual observers and the theoretical concepts alone rarely do justice to the reality of investing in private companies. A clear understanding of the PE model is long overdue and this book provides detailed case studies to give senior executives and professionals a ringside seat to the day-to-day challenges tackled by partners in PE and venture funds, in both developed and emerging markets.

Private Equity in Action is the practical companion to Mastering Private EquityTransformation via Venture Capital, Minority Investments & Buyouts, a rigorous textbook providing the theoretical foundations that the case studies bring to life. While this case book can very well be read on a standalone basis, newcomers to the world of PE will certainly benefit from working with both books in parallel and taking advantage of their synergies.

This case book offers a selection of rich, real-life case studies that demonstrate the application of core PE concepts by providing a unique behind-the-scenes look into the investment practices of PE and VC funds. It helps students and executives comprehend the complex processes associated with investing in private companies, from start-ups to mature businesses, and understand the inner workings of the PE model. While academic concepts build the necessary foundation, practical application and execution of these concepts are the critical link that leads to a successful learning outcome.

This book provides a wealth of opportunities for the reader to put oneself into the shoes of leading PE investors and face a range of actual managerial challenges. With a focus on the all-important executional element that is at the core of successful PE investing, it helps to explain how theoretical concepts translate into investment success. After all, the competitive advantage of PE investors arises from the diligent application of global best practices in their portfolio companiesand a lot of hard work.

All case studies have been written in conjunction with leading PE and VC firms, their senior partners, or with advisors who work closely with the industry; they provide insights into real issues faced and tell real war stories about actual (yet at times anonymized) investments. Each case explains how the actions taken by the PE investors contributed to the transformation of companies in practice with examples covering investment situations not only in the established US and European markets, but also in the emerging (or already emerged) growth markets of Asia, Africa and Central Europe.

The first section of the book focuses on the classic GPLP fund model and shows how the relationship between institutional investors and PE fund managers is changing. The cases then move on to share examples from venture capital, growth equity (or minority) investments and leveraged buyouts in various settings (Sections IIIV).

Turnaround situations and distressed investments certainly test the mettle of PE investorsbe they majority or minority owners. Dealing with short-term cash constraints, allegations of fraud and disgruntled creditors or (at times public) stakeholders certainly shows whether the operational partners in a PE fund can live up to expectations (Section V).

Given their positive demographic profiles and access to new customers, emerging markets are becoming attractive target destinations for PE. However, investing in these economies comes with additional risks related to the lack of legal certainty, governance frameworks and consistently applied best practices in deal making and execution (Section VI).

All cases in this book have been subject to the rigors of classroom debate and continue to be taught in INSEADs MBA, EMBA and executive education programs, as well as in other top business schools; some have won prestigious case awards. They add color to the theoretical foundations laid in the text book, provide context, clarify theoretical concepts and give the reader a chance to step into the shoes of PE and VC professionals, as they deal with issues from fundraising to deal execution and effecting operational change to exiting their investments.