Private Equity Course for Beginners (PEQ101)

Understand fees in private equity: management fees of 1.5–2% of committed fund size, 20% carried interest after an 8% hurdle, and other fees, plus investor types.

Explore long-term private equity commitments of 5–7 years, exits, term sheets, and fund-manager consent, while evaluating deals via internal rate of return and net present value.

Master pre-money and post-money valuations, share price formulas, and ownership in private equity deals, and learn the step-up concept and exit implications for promoters and PE firms.

Explore how private equity uses convertible preferred stock in deal structuring, contrasts with common stock, and analyzes exit scenarios to determine when to convert.

Participating preferred stock combines preferred and common stock, yielding a fixed cash return plus a share of remaining proceeds on sale.

Explain multiple liquidation preference in private equity, covering 2x and 3x returns on investment, distributions between firm and promoter, conversion to common stock, and exit scenarios.

Explore redeemable preferred stock, convertible debt, senior debt, mezzanine debt, and subordinate debt, plus warrants, and learn how liquidation priority shapes private equity deal structuring.

Explore the four private equity strategies: venture capital, growth capital, buyouts, and special situations, aligned to a company’s life cycle from startup to decline, with emphasis on maximizing returns.

Explore primary, secondary, and co-investments in private equity, from newly created closed-end partnerships with due diligence and long commitments, to existing assets with shorter horizons, and direct co-investments alongside funds.

Banks provide leverage and debt for private equity deals, acting as lenders or loan arrangers. They use syndication and covenants, earning fees while distributing risk.

Learn to value private equity investments by comparing equity value and enterprise value. See how debt and cash influence deal structuring in leveraged buyouts.

Explain private equity structuring, detailing senior debt, mezzanine finance, vendor notes, and management equity, including their risk, collateral, and role in aligning management incentives with investors.

Learn how financial engineering builds an optimal, flexible capital structure to finance buyouts, incorporating senior and mezzanine debt, cost of capital, and NewCo as the acquisition vehicle.

Asset purchases transfer assets with stamp duty on assets; historical liabilities stay with vendor, while share purchases inherit them and stamp duty on shares; capital gains tax and allowances differ.

Explore the private placement memorandum, a non-binding LP-GP agreement that outlines investment details, fees, exit strategies, fund economics, and the path to the limited partnership agreement.

Explore the fund structure and the flow of money in a private equity deal, from limited partners to general partners and then to the companies. The lecture covers commitment periods, such as 5–7 years, a hurdle rate (8%), and a 20%–80% profit split between GP and LP, with LPs seeking assured returns.

General partners with a proven track record present fund documents detailing investment strategy and target sizes, outline LP commitments, and fund economics—2% management fee, 8% hurdle, and 20% carried interest.

Explain the private equity fund structure: general partner and limited partner, funds like fund one and fund two, profits and losses allocated to LP and GP.

Promoters approach private equity firms, undergo initial inquiries and negotiations, pass due diligence, finalize valuation and completion, then monitor and exit the deal.

Explore the full private equity investment process, from approaching the firm and initial inquiries to rough term sheet, due diligence, final negotiation, completion, monitoring, and exit.

Private equity firms conduct initial inquiries, assess track records, build relationships, and outline term sheet terms during negotiations, including valuation, financing structure, and conditions precedent.

Explore the due diligence stage in private equity, where auditors assess financials, operations, assets, and liabilities, and prepare the due diligence report. Examine market prospects and technical feasibility.

navigate the final negotiation and completion stage of private equity deals, finalizing terms through legal documents, shareholders agreement, and board rights, while planning exit and reporting.