The Seminar in Private Equity is designed to introduce the processes private equity professionals employ when evaluating investment opportunities and closing transactions. It will also cover the way firms monitor and manage the companies in their portfolios.
The primary focus of the course will be to expose students to the analytical processes used to evaluate venture-stage, growth equity, and leveraged buyout transactions. Accordingly, it will combine many of the fundamental skills that have been introduced in the EMBA Program (e.g., financial statement analysis, valuation, industry analysis, macroeconomics, operations, strategic management and organizational dynamics). Students will form project teams and analyze cases in these domains. Each group's results will be presented in class along with an investment memorandum that explains the team's conclusions in more detail.
The course will also emphasize the importance of monitoring and managing private equity investments. An overlooked fact of the private equity business is that substantial value is created after an investment closes and before an exit occurs. Investors can no longer assume they will be able to complete an IPO or sale to a strategic buyer shortly after their initial investment in a company. As a result, it is becoming increasingly important for industry professionals to play a role in the growth and evolution of each business in their portfolio.
Students in the seminar will also examine the behavioral patterns of the private equity market. The dot.com craze of the late 1990's is a widely recognized example of a mania, but there are many instances where private equity professionals have hitched their wagons to investment movements. As the semester progresses there will be lectures and commentary on how individuals can spot trends, take advantage of them and, perhaps most importantly, avoid being hurt by them.
Other topics to be covered during the course include how to negotiate term sheets, structure deals, build financial models for different types of transactions, evaluate different financing structures and conduct due diligence.
Scott Gallin was a Columbia Business School faculty member from 2002 to 2016.