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Diversity of Private Equity Funds

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Title: Diversity of Private Equity Funds


1
Diversity of Private Equity Funds
PE/VC Bootcamp October 2008 Bader Alam Chris
Carter
2
Agenda
Goal Give you an overview of the PE industry to
guide your additional research
  • Private Equity Overview
  • Buyouts
  • Venture Capital

3
What is Private Equity?
  • Any type of equity investment (i.e., stock of a
    company) in which the stock is not freely
    tradable on a public stock market
  • Institutional investors (e.g., pension funds,
    university endowments) may invest in private
    equity funds, which are in turn used by private
    equity firms for investment in target companies
  • Categories of private equity investment include
  • Leveraged buyouts
  • Venture capital
  • Growth capital
  • Angel investing
  • Mezzanine capital
  • Private equity funds typically control management
    of the companies in which they invest, and often
    bring in new management teams that focus on
    making the company more valuable
  • Private equity investments are typically sold
    through an initial public offering (IPO), sale to
    strategic buyer, or a sale to another private
    equity firm

4
Private Equity deals span a wide spectrum…
VC-backed company outcomes
Many of these have quietly failed
5
Key traits that distinguish PE funds
6
Private Equity financing types
7
Private Equity geographical distribution
8
Agenda
  • Private Equity Overview
  • Buyouts
  • Venture Capital

9
Buyouts fund deal sizes
10
Buyouts strategies
Geographical Focus
Industry Focus
Deal Size Focus
Operating Focus
  • Based on distinct advantages within a region of
    the country or area of the world
  • Many emerging markets targeted as high growth
    areas
  • Example KKR European Fund
  • Based on partners expertise within a particular
    industry
  • Allows for deep relationships within the sector
    that results in proprietary deal sourcing
  • Example Gordon Brothers Merchant Partners
    (consumer-focused)
  • Based on understanding of deal dynamics within
    each tier
  • See slide before
  • Some funds just act as financial sponsors while
    other funds like to get highly involved with the
    company
  • Often determined by makeup of professionals at PE
    firm
  • Example Audax Group

Firms pursue some combination of these strategies
to maximize their return to investors
11
Buyouts fundraising
US LEVERAGED BUYOUT FUNDRAISING VOLUME
in billions
Source The Private Equity Analyst
Leveraged Buyout fundraising reached an all-time
high in 2007
12
Buyouts returns
OUTPERFORMANCE BY FUND TYPE
As of December 31, 2006
Source Thomson Venture Economics/National
Venture Capital Association
Buyouts have outperformed the SP 500 over the
past 20 years
13
Agenda
  • Private Equity Overview
  • Buyouts
  • Venture Capital

14
VC fund deal sizes
15
VC strategies
16
VC industry and stage distribution
17
VC geographic distribution
18
Venture Capital Most Active Firms Q2 2008
19
VC recent performance
20
VC liquidity trends
21
VC fundraising and investment activity
22
VC current affairs
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