Financial leverage - This refers to how a company uses debt financing to increase its potential

returns. It can magnify profits if investments made with borrowed money outperform the
interest costs of the debt.
value driver because it can significantly boost a company's profitability.

Formula –

Future performance - Projections are forward-looking estimations of the future benefits that a
business will provide and will act as a guidebook for a company's potential future. They are most
typically based on historical performance, market trends, business strategy, and realistic
assumptions.
Value driven - It can affect a company's future profitability and risk profile, which are
important considerations for valuation.

Value driven - It's a value driver because it reflects the company's potential for generating
profits.
Cash flow is the movement of money in and out of a company.

Operating Cash Flow (OCF): This is the money generated from your day-to-day business
activities. Imagine it's the money you get from selling your products or services (cash in)
minus the money you spend to run the business, like paying rent or salaries (cash out).
Investing Cash Flow (ICF): This involves buying or selling things your business uses in the
long run, like equipment or buildings. So, if you buy a new delivery truck (cash out), that's a
negative ICF. But if you sell an old machine (cash in), that's positive ICF.
Financing Cash Flow (FCF): This is how your business raises money from outside sources
and how it pays back that money. Issuing new stock or taking out a loan.
Value driven - This is because cash flow is used to pay debt, fund operations, and distribute
dividends to shareholders.

ASSET TYPE -
Value driven - The ease with which assets can be liquidated (converted to cash) is also a
factor.

This refers to the plan for how investors will eventually get their money out of the company.
Common exit strategies include selling the company to another company (acquisition),
taking the company public through an initial public offering (IPO), or repurchasing shares
from investors.
Value driven - A clear and achievable exit strategy with a high potential return is a value
driver because it assures investors of liquidity (getting their money back) and potentially a
significant gain on their investment.
Characteristics of PE –

 Private Equity deals involve investing in private companies that are not publicly traded - They
invest in "unlisted" companies: These companies aren't on the stock market, so you can't
just buy shares like you would with Apple or Amazon.

 Investors may participate in PE through private investment funds managed by professionals -

 PE funds may take an active role in the management of portfolio companies. - They get
involved: Private equity firms often try to improve the companies they buy by giving advice
and making changes.

 Investments in PE may have a longer time horizon, as exits can take several years - They hold
on for the long haul: These investments typically last for several years, unlike stocks you
might buy and sell quickly.

 PE investments may involve a higher level of risk due to the nature of private equity markets
- There's more risk involved: Since these companies aren't publicly traded, there's a higher
chance the investment might not work out.
 PE Investors may benefit from potential higher returns, but the illiquidity of investments can
be a consideration - Potential Higher Returns: Private equity (PE) investors have the chance
to earn more money compared to other investments like stocks or bonds. This is because
they invest in companies that have the potential to grow a lot but When you invest in private
equity, it's harder to quickly sell your investment and get your money back compared to
something like stocks, which you can sell easily on the stock market.
 PE investment partners may provide capital funds for expansion, acquisitions, or
restructuring of portfolio companies - Capital Funds for Expansion, Acquisitions, or
Restructuring: PE investment partners provide money to companies so they can grow, buy
other companies, or make changes to become more successful.
 Valuation of PE investments may be challenging, and returns can be influenced by market
conditions - Challenging Valuation: Figuring out how much a private equity investment is
worth can be tricky because these investments aren't traded on a public market like stocks.
The value can also be affected by how well the overall economy is doing.
 Limited partners in PE funds may have less control over investment decisions - Limited
Control for Investors: People who put their money into PE funds (called limited partners)
don't get much say in how that money is invested. They trust the PE firm to make the right
decisions.
 Regulatory considerations and potential changes in tax policies may impact PE investments -
Regulatory and Tax Impacts: Changes in government rules and tax laws can affect how
profitable private equity investments are. Investors need to keep an eye on these changes
because they can impact their returns.

Deal/ Fund Structuring –

Stocks (Common Stock): Owning a piece of the company. When a company does well, the stock
price (and potentially your investment) goes up. You also get a chance to earn dividends, which are
like a share of the company's profit.
Redeemable Preferred Stock: A mix of stock and debt. Like regular stock, you can get dividends, but
they are usually fixed. The twist? The company can eventually buy back these shares from you at a
predetermined price. It's good for a steady income stream, but you might miss out on big stock price
gains.
• Types and Benefits of PE Funds
• Contents of Business Plan

• Note on Rolland Bergers Product Suite

•
• Note on Monte Carlo and Adjusted Present value
 • Factors affecting PE Firms

• Option valuation

Q/S