Private Equity Investment – A theoretical Analysis of Process, Parties and Requirements

Trabajo de Seminario , 2011 , 35 Páginas

Economía de las empresas - Inversiones y finanzas

The majority of companies are in need of investment capital to pursue their growth strategies. Also, a large number of companies only display a low equity ratio and as a result possess bad credit worthiness. In this regard, Private Equity represents a good alternative solution providing investment capital. It allows companies to make investments to solidify or improve their position among the competitors on the market. In times where banks and credit institutions exercise restraints, the interest of companies in Private Equity even increases. Nevertheless, particularly in Germany the growing importance of Private Equity is accompanied by great controversy. One group argues that often the Private Equity investors in their function as majority shareholders neglect the sustainable development of their portfolio companies in favor of their temporary value increase. On the other hand numerous studies indicate that companies benefit from Private Equity investments. According to these studies, companies, which have entered cooperation with Private Equity investors, comparatively, display stronger revenue growth and productivity and also generate more jobs.1 In this respect, the quality of the partnership between the portfolio company and the Private Equity investment association is a decisive success factor and must not be underestimated. Private Equity deals only generate win-win-situations if both parties are professionally engaged. Lack of preparation can either lead to a one-sided relationship – leaving one party at a disadvantage –, or even to a bad overall business, in which both sides incur losses.
This paper takes the perspective of each party and points out which specific aspects they have to consider in order having good chances of benefiting from a Private Equity deal. This leads to the analysis of several critical stages within the investment process: investment stages in general, transaction process, due diligence, business valuation and exit. Prior the meaning, history and significance of Private Equity are described.

Table of Contents

I. EXECUTIVE SUMMARY

II. LIST OF FIGURES

III. LIST OF ABBREVIATIONS

1. INTRODUCTION

2. PRIVATE EQUITY IN GERMANY - BASICS
2.1 DEFINITION OF PRIVATE EQUITY
2.2 HISTORY OF PRIVATE EQUITY
2.3 BENEFIT OF INVESTMENTS FOR PRIVATE EQUITY COMPANIES
2.4 ECONOMIC IMPACT OF PRIVATE EQUITY

3. PRIVATE EQUITY INVESTMENT
3.1 PRIVATE EQUITY INVESTMENT FROM A COMPANY´S VIEW
3.2 PRIVATE EQUITY INVESTMENT FROM AN INVESTOR´S PERSPECTIVE
3.3 STAGES OF PRIVATE EQUITY INVESTMENTS
3.4 PRIVATE EQUITY TRANSACTION PROCESS
3.5 DUE DILIGENCE
3.6 BUSINESS VALUATION
3.7 DIVESTMENT PHASE AND EXIT

4. CONCLUSION

V. BIBLIOGRAPHY

VI. ITM CHECKLIST (360-DEGREE ANALYSIS)

• Universidad: University of Applied Sciences Essen
• Curso: Investment & Controlling
• Autor: Sean Miller (Autor)
• Año de publicación: 2011
• Páginas: 35
• No. de catálogo: V179535
• ISBN (Ebook): 9783656020127
• ISBN (Libro): 9783656020738
• Idioma: Alemán
• Etiqueta: Private Equity, Investment, Due Diligence, Business Valuation, Transaction