Insights on Private Equity – By Carlton Pereira, MD – Tano Capital

He started with giving us the broad areas in private equity –

·         Activity of Raising Money

·         Deal Making or Investing Itself

·         Managing Investments

He gave us a basic model to understand Private Equity:-

Some of the key characteristics of Private Equity are:-

·         Illiquid in nature

·         Investment is made on commitment basis

Fund managers are paid by management fee (generally 2 percent of the fund) and carried interest (20 percent of profit in most agreements).

Some myths about private equity are:-

·         Private Equity is portfolio investment

·         Private Equity investors are “sharks”

·         Private Equity returns are generated by Financial Engineering

·         Private Equity is disruptive in terms of asset stripping or management change

The investment process involves the following steps:-

1.       Preliminary Evaluation

2.       Initial Negotiation / Deal Contouring

3.       Business Due Diligence

4.       Final Term Sheet

5.       Accounting / Legal Due Diligence

6.       Agreement / Investment

7.       Investment

8.       Monitoring

9.       Exit

A “Winning Deal” is never struck !!! Exits define winners and losers !!!