• Account for the typical structure, features, and terminology used in the PE industry, including those in the cases discussed in class.
• Account for and explain the economic reasoning behind the typical structures and features of PE investments, including those described in the cases discussed in class.
• Explain the typical structure of a term sheet used by VC funds investing in entrepreneurial start-ups, including the meaning and implications of the individual terms.
• Apply the quantitative and qualitative models from the syllabus and class materials to evaluate a situation involving a PE investment
• Explain the assumptions behind the quantitative models from the syllabus and class materials and demonstrate the application of these to correctly solve a given problem.

There is an increasing interest in private equity (PE) investments in privately-held companies, i.e., companies that are not listed and traded on an exchange. Typical examples are investments by venture capital (VC) funds in entrepreneurial start-ups and investments by buyout funds in more mature and established companies. 

Investments in such private companies differ fundamentally from investments in traditional capital markets, such as the market for publicly-traded companies, which are typically considered in standard corporate finance. For example, start-ups are young, mostly unprofitable companies, with short operating histories and little capital. Investments in such young companies involve very high degrees of risk and uncertainty, making them difficult to value using traditional methods. As another example, investments in private companies are typically negotiated on a case-by-case basis, where different investors have different ways to add value, and where investments are highly illiquid, meaning that the standard assumptions of liquid and efficient capital markets where funds are supplied elastically at the risk-adjusted rate no longer appropriate. 

The course covers the organization and structure of PE investors and their investments, ranging from the limited partners, typically large institutional investors such as pension funds, that provide the capital to the PE funds and all the way to the underlying portfolio companies, such as entrepreneurial start-ups, that receive the capital at the end.  The main focus is on understanding individual deals, i.e., an investment by a PE fund into a portfolio company, including the valuation of the deal, the structure of the investment, and the various implications of the deal for the company and the investor. 

Various case studies and lecture notes.