Students write an „Investment Proposal” as a private equity fund analyst. On moodle there is
a „Teaser” on NEWCO for analysis.
The „Investment Proposal” is a 2,500 words analysis according to the following:
As a private equity (PE) fund manager, a group of entrepreneurs or an M&A advisor
approaches your Fund and submits a Teaser. Assuming, that the submitted proposal fits to
your Fund’s investment policy, and you find it attractive, please accomplish the following
analysis and answer the following questions:
a. Industry analysis
– Please analyze the targeted industry. Explain why this industry is attractive for a private
equity investment.
– Describe the key industry driving forces, characteristics.
– What are the key industry trends?
– What are the critical industry risk factors?
b. Business Assessment
– Please analyze the investment proposal. Put together the investment thesis.
– Is there any further information you need at this stage for your assessment, and the Teaser
does not contain?
– Summarize the key risk factors of this proposal, you can identify at this stage.
– Put together the highlights of your due diligence list (key topics to check).
c. Investment need and uses & sources
– Analyze the attached financial statements. Calculate the Cash Flow, and calculate the
highest investment need (IF).
– Which year do you identify the highest investment need?
– Calculate the uses &sources table at the time of the highest investment need.
– Analyze the financial projections and address any issues you find critical.d. Valuation and transaction structuring highlights
– Make your valuation (use at least three valuation methods). Assume, that the business
development plan accomplished, according to plan.
– Assume, that the founder team has Euro 2 million own equity, and the planned level of LTD
and STD is available for the enterprise. Summarize your key terms and conditions.
Your ownership stake, +/- covenants, ESOP (if any) other commonly used terms and
conditions.
e. Return expectations and exit considerations
– Assuming, that the business development is accomplished according to the plan, what is
the first year you would consider exit? Why?
– Assuming, that your fund’s return expectation is IRR 30%. Would this project satisfy this
expected return?
– Would you consider dividend payment? If yes, which year and how much?
– How dividend would affect your IRR as investor?
