Private Equity 101: Introduction for Beginners

Identify who private equity investors are and compare the EU and Anglo-Saxon regulatory formats, including banks, closed end funds, and investment firms.

Explore European Union closed-end funds as private equity vehicles, focusing on the asset management company, funds, and investors under the AIFMD framework.

Learn how closed-end funds raise capital under the internal code of activity, draw down commitments over time, and exit investments to generate gains.

Explain how closed-end funds pay the AMC through management fees and carried interest, based on final IRR versus hurdle rate via the waterfall.

Explore how banks and investment firms participate in private equity by directly investing or via asset management structures, navigating Basel capital rules, regulatory limits, and carried interest.

Explore how the Anglo-Saxon private equity framework in the United States centers on venture capital funds and limited partnerships, with a tax-transparent model (LPs and GPs) and an LPA-based governance.

Explore SBICs as a 1958 public-private partnership that enables leverage and tax-efficient venture capital, and review corporate venture and business angels with Kusama incentives that tax-exempt capital gains when reinvested.

Explore how the UK private equity market blends venture capital funds and trusts with banks and business angels, inviting retail investors via London Stock Exchange-listed certificates and tax benefits.

Explore how carried interest and management fees are shared between managers and investors using a real closed-end fund example, comparing global IRR and yearly IRR approaches to compute profits.

Explore how private equity funds raise capital through testing the waters, creating an informal memorandum or LPA, and securing investor commitments before time zero.

Explore how private equity investors move from origination to deal making, covering screening, due diligence, valuation, negotiations, and governance within SPVs, syndication, and debt considerations.

Private equity investors manage portfolio companies to generate value and secure a profitable exit, using governance and covenants like lock up, staging, stock options, and drag along.

Explore how private equity exits secure capital gains and IRR through five options—trade sale, buyback, IPO, selling to another private equity investor, or write-off—while addressing liquidity and market realities.

Explore how private equity uses discounted cash flow to value equity at time zero and exit, combining present value of cash flows, terminal value, enterprise value, and multiples.

Master the discounted cash flow framework by projecting 3-5 year cash flows, calculating after-tax debt and CAPM-based equity costs, and determining terminal value for private equity valuation.

Apply the equity value formula using a dcf to Olad Winery, calculating cash flows, cost of debt and equity, unlevered beta, wacc, and terminal value to obtain equity value.

Learn how to use comparables and multiples (EV/sales and EV/EBITDA) to estimate enterprise value and derive equity value, compare with DCF signals, and apply negotiation skills in private equity deals.

Apply discounted cash flow and multiple-based methods to estimate equity value at time zero and exit, assess double valuation, and analyze how holding period and multiples drive private equity IRR.

Apply the venture capital method in five steps: terminal value, future value, share percentage, new shares issued, and price per share, with IRR as an input and using multiples.