Career Focus

This is an advanced corporate finance course focused on private equity (PE) investing. The course offers a deep dive into growth equity and buyouts, also touching on closely related investing strategies such as distress and private debt. Students will examine a wide variety of investment settings: from lower middle market companies to mega-cap, from the United States to emerging markets, from buy-and- build situations to turnarounds to mature businesses, from “home-run” deals to troubled investments. (The course does not cover venture capital or real estate segments of PE.)

Through these case studies, the goal of the class is to understand when and how private equity firms consistently add value: what are the persistent and repeatable sources of risk-adjusted excess returns in the private equity space, what skills and institutional features enable that success, and what opportunities and challenges are presented by recent developments in the PE industry.

The students will gain exposure to a set of practical skills including deal assessment and due diligence, valuation, deal execution, capital structure, governance, change management, and setting incentives. In addition, a substantial part of the course will be spent on strategic elements of deal making.

The course is intended for students who are interested in working for a private equity firm, leading a private-equity owned operating company, investing in private equity as limited partners, or providing advisory services to private equity firms. This course is also appropriate for all students who are interested in a detailed and rigorous exploration of corporate finance, as many of the decisions taken by PE firms have a direct parallel to the strategic and financial decisions taken by companies more broadly and by other types of investors. The majority of cases will integrate these topics from a PE investor’s perspective. Guests will attend many of the classes.

Educational Objectives

This course has two objectives. First, it builds a rigorous approach and toolkit for sourcing, analyzing, negotiating, structuring and managing PE investments. The second goal of the course is to provide students with a deep understanding of the private equity industry in a broad sense: its common tools, strategies, impact, and factors that have been affecting its evolution.

Course Content and Organization

The course has 28 sessions, followed by a final exam. The course is organized into five modules.

• Module 1: Deal Sourcing and Valuation
  

  This module will explore various strategies employed by private equity firms to identify and evaluate investment opportunities. Students will be expected to articulate clear, compelling and differentiated investment theses. Important tools for evaluating investments – including LBO investment return models, returns bridges, financial statement analysis, and broader due diligence questions – will be examined.

• Module 2: Deal Execution
  

  This module highlights the critical levers utilized by private equity investors in structuring transactions, examining how funding choices enable or impede success, while increasing or mitigating risk. Capital structure, security choice, alignment of incentives, and broader capital markets issues will be central to the cases in this module. A detailed exploration of the structure and functioning of credit markets and their central role in private equity transactions will be highlighted.

• Module 3: Deal Management
  

  This module explores the important choices that private equity firms make after closure of the transactions. In particular, the critical operational levers that drive value creation will be examined, as well as governance, board effectiveness and impact, and debt management. The interaction between investor and portfolio-company operating executives will be examined from multiple perspectives.

• Module 4: Realizations
  

  This module examines timing of the exit and highlights the critical mechanisms for realizing value. A variety of realizations will be presented, including leveraged recapitalizations, strategic and financial sales of portfolio companies, initial public offerings, and secondary transactions.

• Module 5: Private Equity Firm Strategic and Management Issues
  

  This final module takes a step back from deal-level analyses and looks at the organizational and strategic issues of private equity organizations. The goal is to understand why and which practices are likely to deliver sustained profitability in the future, and also to reflect on LPs pressures and needs.

Students are expected to be active participants in class discussion, offering a variety of quantitative and qualitative insights that contribute to the assessment of each day’s decision. Class participation and the final exam each count for 40% of the course grade. Some cases include assigned exercises/submissions, which count for 20% of the grade.

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