UNIVERSITY OF GEORGIA

Terry College of Business

FINA 4420 - Private Equity Fall 2018

INSTRUCTOR:
Name: Dr. Robert W. Heller, CFA
Office: Amos Hall B362
Office Hours: By appointment, Tuesday afternoon and Wednesday morning.
Phone: 678-570-3595 (cell)
Email: rheller@uga.edu
Class Schedule: CRN#24504 Wednesday 1:25 pm to 4:25 pm Sanford Hall Room 209

UNIVERSITY HONOR CODE & ACADEMIC HONESTY POLICY

As a University of Georgia student, you have agreed to abide by the University’s academic honesty policy, “A Culture of
Honesty,” and the Student Honor Code. All academic work must meet the standards described in “A Culture of Honesty”
found at: www.uga.edu/honesty. Lack of knowledge of the academic honesty policy is not a reasonable explanation for a
violation. Questions related to course assignments and the academic honesty policy should be directed to the instructor.
All academic work submitted in this course must be your own unless you have received instructor permission to
collaborate and have properly acknowledged receiving assistance. In particular, quizzes and exams are to be the sole
work of the individual class participant. I consider sharing the daily clicker attendance responses or other clicker details
with a student who is not in the classroom to be a violation of the honor code.

PRE-REQUISITES
Prerequisites for FINA 4420 are: FINA 3000, ACCT 2101 and ACCT 2102.
Students should already have a basic ability to review and understand financial statements and general proficiency using
use Microsoft Excel, PowerPoint and Word or other equivalent software.

COURSE DESCRIPTION
This course examines the private equity industry and marketplace (inclusive of venture capital) and the application of
corporate finance concepts, legal structures and business strategies commonly used by the industry. The course
provides an overview from the differing perspectives of its primary participants including: private equity investors
(limited partners, angel investors, corporations, etc), private equity fund sponsors (general partners), intermediaries
(investment banks, securities attorneys, accountants, consultants) and the founders and management of the businesses
financed by private equity.

Although the course uses a textbook and other articles and papers to ensure a general understanding of how the
industry works, terminology used, etc, the class will be oriented towards learning from weekly assignments/case studies,
class discussions and group work. Class participation and being prepared will be a component of grading.

COURSE OBJECTIVES
Students will:
• Gain a general understanding of the private equity and venture capital industry and how it works, its
participants and activities, terminology used, financial and business strategies employed and its impact on
business and the overall economy.
• Learn to apply corporate finance concepts and analysis (including valuation methodologies and basic LBO
modeling techniques) commonly used by the PE industry to value and structure business investments.
• Practice critical skills required to be successful in the “real world” such as asking good questions/ listening,
critical/evaluative thinking, and the ability to concisely present/articulate analyses, arguments and opinions,
both orally and in writing.
COURSE TOPICS OUTLINE
Course topics to include:
• What is private equity (“PE”), who invests in it and who are the key players?
• Raising capital – How PE funds raise capital, are structured, and who gets paid what?
• How to measure/evaluate the success of a PE fund
• Sourcing/evaluating deals – How to source and evaluate business opportunities
• Pros/cons of taking VC/PE investment from a Founder/Management perspective
• Valuing businesses from a PE/VC perspective
• Application of LBO valuation analysis and modeling techniques
• Deal structuring and term sheets in PE
• How PE firms add value to their portfolio companies
• Exiting – Strategic alternatives for liquidity
• Culture, management, people and career opportunities in PE
• Impact on the economy, society and other current issues

REQUIRED COURSE MATERIAL

(1) Our required textbook for the course is the book "Private Equity Laid Bare" by Ludovic Phalippou.
It is available for about $25 in paperback form. As of this writing it is not available as an ebook.
Paperback: 206 pages Publisher: CreateSpace Independent Publishing Platform (September 7, 2017)
ISBN-10: 1973918927
ISBN-13: 978-1973918929
(2) Required Coursepack: A coursepack with the cases and materials we will be using will be available at the beginning
of the term at the Harvard Business School website. The url will be posted on elc.
(3) Poll Everywhere access – I will send in invite to those registered for the class, and post the id numbers you need to
sign up if you are not on the elc roster. You do not have to pay for the use of Poll Everywhere.
(4) Calculators: You should bring a calculator for time value of money calculations to class and to exams.
(5) Excel: You should have access to Excel and know how to use it. You will want to bring a laptop capable of running
Excel to class.

CHANGES TO THE SYLLABUS

The course syllabus is a general plan for the course; deviations announced to the class by the instructor may be
necessary.

Note on Case Study Method: This course is based in part on case discussions. Being prepared, engaged and actively
participating in class discussions is critical to the success of this course. Under the “case study method”, the student
must accept the challenge and responsibility for dynamic learning rather than be a passive, dependent receiver.
Ambiguity and incomplete information can be frustrating and disconcerting. The case method is about your
learning/thinking, not about professor teaching. Analysis of the cases is not an attempt to discover the professor’s
answer but to develop your own view of the issues in the case. While there may be no clear “right answer”, students
must take a clear position, thoroughly support it and present it, and learn to change your mind based on new
information/insights. The ability to change your position when confronted with new information is an extremely
important skill.

Grading Policy
Your performance determines your course grade as follows:
Homework & Case Study Deliverables 25%
Mid-Term Exams (2 @ 25% each) 50%
Final Exams 25%
Total 100%
Class Participation Bonus (up to 10%, instructor discretion)
Final grades for the course will be based on the following scale:
A 94-100% A- 90-93% B+ 88-89% B 82-87% B- 80-81% C+ 78-79%C 72-77% C- 70-71% D+ 68-69% D 60-67% F below 60%

Class participation bonus:

Being prepared and engaged and actively participating in class discussions is critical to the success of this course. To give
everyone a chance to speak throughout the semester and ensure that everyone is engaged, in some cases I will cold call
students rather than ask for volunteers. Please remember to bring your name card to each class. I will occasionally add
points for extraordinary classroom participation (quality not quantity!) as well as subtract points for lack of
preparedness.

Please bring and display something with your name on it to every class. Assume when creating this artistic masterpiece
that I have no memory and am partially blind. If you don't have a nameplate displayed, I can't give you credit for class
participation. I will award some class participation points throughout the semester. Please note these are giving
sparingly for class participation which contributes significantly to the discussion.

Homework & Case Study Deliverables

You will have Homework and Case Study assignments during the semester, usually one every week. They will usually be
based on the readings and/or the case for that day.

Exams
We will have two exams during the semester. The exams are not optional.
The final exam will be held during the regular final exam schedule. The mid-term exams will be held during the normal
class period. Exams will be “closed book” with no resource materials; however, you will need to bring/use your
computer to take and complete the exam. Financial calculators are also highly recommended. Please note that you will
need to download the Respondus program to your computer to take the exams.

Make Up Policy
For the midterms no makeup exams allowed.
Electronics Policy:
If you've got something that can't wait for a text or conversation, please leave the classroom to take care of it. You will
need to use a cell phone, tablet or laptop to respond to questions via the Poll Everywhere program. Do not use your
devices for texting, browsing the internet, etc.
Tentative Course Schedule August, 2018

Class Date Topics To do before class In class

1a Aug Introduction to Register for polleverywhere.com. If you Brief intro to class
15 class and PE registered for the course early, you should
have received an invitation in the email.

Please answer survey questions in Begin LBO Discussion using

polleverywhere (general questions so I can HOG as example
get to know more about you and the class).

Turn in a copy of your resume to the

Assignment Dropbox in elc (please submit
by August 30)

Bring a nameplate or other way to identify

yourself and place in front of you so I can
figure out who you are.

Sign up on Harvard Business School

website for our coursepack. You will first
need it to prepare for the August 22nd
class.

Review Time Value of Money concepts if

you need a refresher. Quiz 0 is on TVM and
is not part of your grade.

Read Chapter 1 – An LBO Is Born in

Phalippou
1b Aug Leveraged Buyouts Read “Technical Note on LBO Valuation LBOs and Excel
22 and Modeling” from HBS Coursepack (you
can skip the Appendices for this week if First half of class – work on
you like) model for HOG LBO

Bring the Excel model which accompanies Forecasting Income

the Technical Note to class on your laptop. Statements

Complete Homework for this class (which is Forecasting Free Cash Flow
Quiz #1 in elc) available to pay debt

1c Aug Leveraged Buyouts Read the Appendices in “Technical Note on First half of class – work on
29 LBO Valuation and Modeling.” You may model for HOG LBO –
need to review the first part of it as well.
Forecasting Free Cash Flow
Second half of class –
Complete Homework for this class (which is tying income statement,
Quiz #2 in elc) balance sheet and cash
flow statements together.
1d Sept Leveraged Buyouts Read Phalippou Chapter 3 “For the Love of First half of class – tying
5 Debt” statements together,
Complete Homework for this class (which is testing model.
Quiz #3 in elc)
 Second half of class –
sensitivity analysis, data
tables, goal seek, finding
drivers of returns.
2a Sept Valuation Read UV6586 Business Valuation: Standard DCF Valuation problems
12 DCF Analysis Approaches and Applications (in your HBS covering exit values with
Coursepack) (comparable) multiples
and constant growth
Read Chapter 2 of Phalippou “Valuation” model.

Complete Homework Quiz #4 in elc. Case: Lady M

Sep First Exam Make sure you bring laptop and one First half of class - Take
19 calculator to exam with Respondus exam
installed and working. Second half of class -
Review exam
Install and confirm Respondus works
before today.

You can test your computer’s ability to use

Respondus by taking the one question
“Quiz” in elc.
2b Sep Valuation – Attempt Homework Quiz #5 for this class. It Discuss Homework Quiz #5
26 Venture Capital is based primarily on the Lady M case. We
Method will finish it in class. You will have two Discuss VC Method of
opportunities to try this quiz, you may Valuation, retention ratios
want to use the second try while you are in importance.
class today. Then Cap tables,
liquidation preferences,
Read Basic Venture Capital Formula in HBS Intro to VC Terms
Coursepack.

3a Oct 3 Valuation – Read "Early-Stage Term Sheets" by Work in class on

Venture Capital Chaplinsky in your HBS Coursepack. Trendsetter
Method
And Deal Complete Homework Quiz 6 in elc (based Discuss Deal Structuring
Structuring – VC on Trendsetter case).
3b Oct Deal Structuring – Discuss Trendsetter
10 VC
4a Oct The PE Business Complete Homework Quiz in elc. Discussion of PE industry
17 Model – Overview Read Chapter 7 in Phalippou “Structures” GP/LP relationships,
structures and economics.
The Limited Read Chapter 8 in Phalippou “Fees” Persistency. Need for
Partners Business return, LP portfolio
Model dynamics, selection
process

How do we evaluate PE
firms performance? What
are the economics for the
LPs in a PE fund?

Discuss PE performance
measures – IRR and MOIC
 Discuss MIRR concept.
Fees and fee disputes
J curve phenomenon

Intro to LP view
Oct Second Exam Make sure you bring laptop and a First half of class - Take
24 calculator to exam with Respondus exam
installed and working. Second half of class -
You can test your computer’s ability to use Review exam
Respondus by taking the one question
“Quiz” in elc
You will need to bring blank scratch paper,
a laptop and one calculator.
Install and confirm Respondus works
before today
4b Oct The PE Business Read Chaplinsky article The Basics of LP View, cont’d
31 Model – General Private Equity in your HBS coursepack
Partners, cont’d Intro to view from the
General Partner

4c Nov The PE Business Read Chapter 11 in Phalippou Performance

7 Model – General “Performance” Sourcing and Evaluating –
Partners – Sourcing VC Deal
and Evaluating
Deals

4d Nov The PE Business Read Chapter 4 in Phailippou “Cash Exit Strategies, Dividend
14 Model – General Generation” recapitializations
Partners – .
Maximizing Value
from Investments
(Exit Strategies)
Nov Thanksgiving Break
21
4e Nov The PE Business Read Chapter 6 in Phailippou “Dirty PE?” Exit Strategies, cont’d
28 Model – General
Partners Conclusion
Dec 7 Final Exam 12 pm
Scheduled