Introduction to private equity презентация

Economics and chrematistics
Economics (from Greek word οἰκονομία) – "household management".
Chrematistics (from Greek: χρηματιστική) according to Thales of Miletus is the art of getting rich.
Aristotle contradistinguished economics and chrematistics

Henry Ford
"Nothing can be made except by makers, nothing can be managed except by managers. Money cannot make anything and money cannot manage anything.“
"Two classes of people lose money; those who are too weak to guard what they have; those who win money by trick. They both lose in the end.“
"When people are 'stung' in false investment schemes there are three causes; greed of something for nothing; sheer inability to know their mind; or infantile trustfulness.“
"What right have you, save service to the world, to think that other men's labor should contribute to your gains?"
Assorted quotations from Ford News, 1922

WIKI: What is private equity
Private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange.[1]
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of investor has its own set of goals, preferences and investment strategies; however, all provide working capital to a target company to nurture expansion, new-product development, or restructuring of the company’s operations, management, or ownership.

WIKI: What is private equity
Bloomberg Businessweek has called private equity a rebranding of leveraged buyout firms after the 1980s. Among the most common investment strategies in private equity are: leveraged buyouts, venture capital,growth capital, distressed investments and mezzanine capital. In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. This is distinct from a venture capital or growth capital investment, in which the investors (typically venture capital firms or angel investors) invest in young, growing or emerging companies, and rarely obtain majority control.

Private equity structure

WIKI: What is venture capital
Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT and software. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital.[1]

WIKI: What is expansion capital
Growth capital (also called expansion capital and growth equity) is a type of private equity investment, most often a minority investment, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.[1]
Companies that seek growth capital will often do so in order to finance a transformational event in their lifecycle. These companies are likely to be more mature than venture capital funded companies, able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions, acquisitions or other investments

WIKI: What is mezzanine capital
Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock.
Mezzanine capital is often a more expensive financing source for a company than secured debt or senior debt.

WIKI: What is mezzanine capital
. The higher cost of capital associated with mezzanine financings is the result of it being an unsecured, subordinated (or junior) obligation in a company's capital structure (i.e., in the event of default, the mezzanine financing is only repaid after all senior obligations have been satisfied). Additionally, mezzanine financings, which are usually private placements, are often used by smaller companies and may involve greater overall levels of leverage than issues in the high-yield market; as such, they involve additional risk. In compensation for the increased risk, mezzanine debt holders require a higher return for their investment than secured or more senior lenders

WIKI: What is buyout and acquisition
A takeover is the purchase of one company (the target) by another (the acquirer, or bidder). In UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.
Buyout is an investment transaction by which the ownership equity of a company, or a majority share of the stock of the company is acquired. The acquiror thereby "buys out" the present equity holders of the target company. A buyout will often include the purchasing of the target company's outstanding debt, which is referred to as "assumed debt" by the purchaser.

Warren Buffet: Discipline, Patience and Value
"The essence of Warren's thinking is that the business world is divided into a tiny number of wonderful businesses – well worth investing in at a price – and a large number of bad or mediocre businesses that are not attractive as long-term investments. Most of the time, most businesses are not worth what they are selling for, but on rare occasions the wonderful businesses are almost given away. When that happens, buy boldly, paying no attention to current gloomy economic and stock market forecasts."
John Train, "The Money Masters"(1980)
Buffett's criteria for "wonderful businesses" include, among others, the following:
They have a good return on capital without a lot of debt.
They are understandable.
They see their profits in cash flow.
They have strong franchises and, therefore, freedom to price.
They don't take a genius to run.
Their earnings are predictable.
The management is owner-oriented.