Private Equity Skills

What Skills Students Should Learn for Private Equity

I’ve been traveling for the last three weeks and during the flights I have been going through some white papers that I’d been meaning to read.  One particularly interesting paper is by a professor at Stetson University titled “Understanding the Skills Needed for Careers in Private Equity Investing.”  The research identifies a major disconnect between general finance education and that needed for investing in private equity.

Although many professionals receive a general business school education and work one or two years at an investment bank or other finance firm, it would be great if an MBA included a more focused study on private equity to prepare graduates for a very unique field.  There are signs of a shift toward educating students on private equity is the Tuck School of Business’s Center for Private Equity and Entrepreneurship as well as the University of North Carolina’s Kenan-Flagler Private Equity Fund which is largely run by students.  I hope that more research is done to show how students and business schools would benefit from a curriculum with a strong focus on private equity.

It’s crucial that students at least have a basic understanding of how to value companies, structure a deal, complete accurate due diligence, manage a portfolio and negotiate with investors and keep them satisfied.  The price for on-the-job training for a venture capitalist could be millions of dollars from your investors, so it’s important to have a curriculum that addresses specific skills necessary for working in private equity.  The skills that private equity professionals should have beyond the existing MBA and finance degree curriculum are:

1. Being able to realistically value businesses in an illiquid start-up context 
2. Contractually structuring the investment
3. Maintaining an effective personal network to both ensure adequate deal flow, and also assist  portfolio companies in securing critical resources
4. Possess the negotiating skills associated with both purchasing and selling an investment
5. Be able to coordinating thorough and effective due diligence

If you have not developed these skills or your business school has not addressed these needs, the author prescribes ways to improve these crucial areas:

1. Do not rely on the “general business requirements” to meet these skills.  
2. Some of these skills are process skills, meaning that they are developed by practice – not merely through understanding the process.   
3. Due diligence is on virtually no one’s curriculum.  There are great books available and free resources online to give you at least a surface knowledge of this area. 
4. A course in private equity investing can be demonstrated to accomplish the purposes of the business capstone class, and might be offered in lieu of Strategic Management, for example.

To read the full white paper, see here.

See our private equity career guide for more information on what you need to succeed in private equity

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Tags: private equity career, advice, skills, white paper, investments, skills needed, valuation, education, tuck school of business, due diligence, strategy, structuring, price, learning, education in private equity, buyouts

Private Equity India Companies

Private Equity Talks with India Companies Stall

Private equity investment in India companies has developed impressively despite the recession but talks have stalled between top consumer retain chains and private equity firms. Large retail chains including Tata’s Croma and Videocon’s Next and Planet M disagree with buyout firms over valuation.

Private equity firms are trying to get a stake of the rapidly expanding consumer durables sector which is expanding an estimated 15-20% riding an increase in demand. Yet firms such as Northbridge Capital, TVS Capital Funds, SAC Capital Partners, Citi Venture Capital International (CVCI), Avigo Capital Partners and Samara Capital are struggling to buy up stakes in Indian retail companies. Buyout firms are valuing the specialty retailers far less than what the businesses optimistically project. Part of the issue is that the private equity firms are skeptical of the emerging retail market as it is less developed as that of other countries’.

Most of the chains are still in a learning and correction stage. Valuations are dependent on such factors, especially in an uncertain market,” said the CEO of a leading PE fund, who asked not to be named.

Private equity funds usually pick up around 15-20% stake in retail chains or companies with an eye on returns within the next 3-5 years. Valuations of retail formats are determined by factors such as turnover, number of outlets, sales per sq ft and gross margins.

The new age chains are selling a large number of premium products such as LED (light emitting diodes)/LCD (light crystal display) TVs, top-end refrigerators and front-loading washing machines. Organised retail currently constitutes 9-10% of the total Rs 60,000 crore consumer durables, IT & telecom market. Retailers are not in a mood to bargain. These chains, backed by some of the largest corporate houses in the country, are not willing to accept anything less than what they feel is ‘a fair valuation’. Source

Read about the increase in India family office investors
Other articles about private equity in India: Private Equity India; Value of Private Equity Deals in India Drops; Private Equity Boom in India

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Tags: private equity india, indian private equity, buyout india, private equity and india companies, private equity retail, private equity retailers, durables, valuation, india valuation