This course will introduce the methodologies used in Venture Capital (VC) & Private Equity (PE) finance and employ the case method to study VC&PE deals. PE (including VC) is a great lab to study important topics in finance such as capital structure, corporate governance, valuation, asset allocation and organizational restructuring. Throughout the course, PE market is going to be discussed from the perspective of different agents including entrepreneurs, PE fund managers, and the investors in PE funds. The course is going to start with early stage investments in the Venture Capital market. The objective in this section is to analyze a VC opportunity from a qualitative and quantitative perspective. Later, we will discuss private equity and leveraged buyout investments in large companies. We will discuss how to evaluate a buyout opportunity from a quantitative as well as a qualitative perspective, and how buyout funds choose, value, structure, and manage their investments. In the last part of the course, we will study investments in VC&PE funds and issues related to structuring those funds. PE funds are structured in a specific way to align the incentives of PE partnerships and their investors; therefore, one needs to comprehend the structure of PE funds to be able to understand the dynamics of the PE industry.
The objective of the course is to familiarize you with the general concepts related to the theory and practice of corporate financial decision-making. This course examines the tools and concepts that form the core of modern finance theory with an emphasis on practical applications. By building on the framework developed in the Introduction to Financial Management course, we will take an in-depth look at the trade-off between risk and return, re-visit the estimation of the appropriate cost of capital and investigate the capital structure decision. Furthermore, we will work on detailed practical applications of the Discounted Cash Flow technique by valuing projects and firms.
The process of measuring and managing value of companies is a central aspect of financial management. The primary objective of the management is to create shareholder value. Managers add value to their organizations either by helping to cut the costs or by helping their firms to grow. The value that can be added through cutting costs is limited because costs of every business have a lower bound. As a result, in the long run most of the shareholder value is created through firm growth. Managers add value to their firms by enhancing the firm’s productive capacity through internal (or organic) growth. They also add value to their firms by making prudent acquisitions that match the corporation’s key strengths and create synergies. Therefore, not surprisingly, almost every important business decision is made by asking the question, “What is it worth?” The principal objective of this course is to provide you with the conceptual basis, intuitive reasoning, and analytical framework for making sound valuation decisions.