Private Equity: Money and More

1www.venturebean.com

Private Equity Getting more than

money into the company

Anjana Vivekwww.venturebean.com

[email protected]

Institute of Chartered Accountants of India: Bangalore Branch Study Circle Meeting: Jan 2010

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Private Equity

Covers a wide range from Angel investment

to Venture capital

to Unit/division/subsidiary of corporate

to Large private equity placements

Rs.

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Private Equity

Typically in unlisted instruments and includes

* Leveraged buyouts, venture capital, growth capital, distressed investments, mezzanine capital

* Reference: http://en.wikipedia.org/wiki/Private_equity


What do you want from the investor?

WHO? WHY? HOW? WHEN?



To help you reach out for the sky…As you attempt to achieve your dreams?

How do you proceed?

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If it was only about money…

…..All those with money would do well

And

… All those without money would fail…



Are you looking for More than money?

* Readings: 1)Do your homework well before approaching

a venture capitalist 2)VC funds, corporate VCs, or angel investors:

whom do you approach? 3) Are you ready for VC investment?


Preparation is the key to success


BUSINESS PLAN The plan must have structure and include the following:- Business / idea- People behind idea/project- Market size expected- Marketing strategy- Competition- Financials- Other information which makes this complete


Business Plans

Readings:

http://www.slideshare.net/anjanavivek/preparing-a-bplan-for-equity-investment

Forecast financials in a business plan


Identify key issues


DISCLOSURE

Prepare for due diligence by identifying pitfalls upfront and taking steps to mitigate/de-risk to the extent possible

Query? Would you disclose weak points ?


DISCLOSURE

To trigger thinking

If you do not disclose the negatives, the investor will not automatically assume that you do not have any negatives in your project/idea


What are the deal drivers?


DEAL ISSUES

Every business has issues which are

- deal drivers and- deal breakers

Try to identify key deal issues from- your perspective and - the investors perspective


DEAL ISSUES

This can help you plan on how you can leverage on your strengths

This can help in negotiating a better deal


Preparing for due diligence

- Technical- HR- Financial- Tax- Regulatory… etc


Preparing for due diligence

Readings: 1) Valuation and deals: avoid throwing away value


Valuation

Varies over time…

An art and a science


VALUATION

Valuation is based on:- intangibles and - tangibles

Valuation can be computed in multiple ways, the popular methods:- multiples of revenue; profit etc.- multiples of key drivers, eg.user base- cash flow based


VALUATION

Valuation may be driven by - the stake the entrepreneur is willing to give up at a particular stage of investment in the business and - the amount of money required by the business at that stage


VALUATION

Different persons can value the same business differently because they may- use different methods of valuation- use variations in the methods - have different inputs in the methods

Thus, valuation perceptions can vary, and we do have situations where there are divergent views on valuation


VALUATION

Deals can sometimes be structured in such a way that the differences in valuation perception are factored, e.g. linking valuation to performance


VALUATION

Valuation is also the outcome of negotiations, so it is important to identify one’s bargaining power in relation to the deal issues


Valuation

Readings:

1) Some finer points in the valuation of a business2) Valuation Basics … and.. some practical tips


Understand your bargaining power


Negotiations

Readings: 1) Negotiations: A key element in growing your

business2) Negotiating Insights: From IIMB’s MPWE

programme


To trigger thinking

How will you prepare for private equity investment in the company that you are working for?


More information:

Readings: www.slideshare.net/anjanavivekhttp://www.venturebean.com/resources.html

THANK YOU

For your time and patient hearing

www.venturebean.com30

Private Equity: Money and More

Economy & Finance

Transcript of Private Equity: Money and More