Learning Outcome Statements

1. Value creation in private equity

a. explain sources of value creation in private equity;

b. explain how private equity firms align their interests with those of the managers of portfolio companies;

2. Valuation characteristics and issues in venture capital vs. buyout

c. distinguish between the characteristics of buyout and venture capital investments;

d. describe valuation issues in buyout and venture capital transactions;

e. explain alternative exit routes in private equity and their impact on value;

3. Private equity fund structures and valuation

f. explain private equity fund structures, terms, valuation, and due diligence in the context of an analysis of private equity fund returns;

g. explain risks and costs of investing in private equity;

h. interpret and compare financial performance of private equity funds from the perspective of an investor;

i. calculate management fees, carried interest, net asset value, distributed to paid in (DPI), residual value to paid in (RVPI), and total value to paid in (TVPI) of a private equity fund;

4. A note on valuation of venture capital deals

j. calculate pre-money valuation, post-money valuation, ownership fraction, and price per share applying the venture capital method 1) with single and multiple financing rounds and 2) in terms of IRR;

k. demonstrate alternative methods to account for risk in venture capital.