PE - FINA 537 Equity Valuation Professor Laura Xiaolei Liu...

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1 FINA 537 Equity Valuation Professor Laura Xiaolei Liu Valuation in Private Equity
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2 What is private equity • A private equity firm is a financial intermediary that is involved in raising pools of capital to invest in companies that need financing PE firms take ownership stakes in either private companies or shares of public companies Ownership is restricted so that stakes cannot be sold for some specified period of time Generally, a PE investor is an active investor who acquires some measure of control over the invested firms The life of a fund is commonly 7 to 10 years
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3 Types of financing • PE firms tend to specialize in companies which operate in similar life cycle stages ¾ Seed Capital – typically supplied by wealthy individuals (angel investor) for brand new companies ¾ Venture Capital – early stage financing for established start-up companies ¾ Growth and Expansion Capital – provided by PE firms for developing companies ¾ Restructuring or Reorganization Capital –LBO firms provide financing to break apart or reconfigure mature companies
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Example: Sequoia Capital • Sequoia Capital is a venture capital firm founded in 1972. It has its main office in US, but have branches in HK, India, and Israel. • Around 10% of the value of NASDAQ
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PE - FINA 537 Equity Valuation Professor Laura Xiaolei Liu...

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