I attended a seminar recently where Deborah Hannam presented to students on private equity sector recruitment. Deborah is head of private equity at The Rose Partnership and a member of the Institute’s Advisory Board.
http://www.rosepartnership.com/people.asp?pid=25
Private equity is certainly highly competitive and a difficult sector to get into but can be rewarding, both financially and intellectually, for those fortunate enough to join a successful firm.
It is interesting firstly to put the industry into perspective. Simplistically, private equity firms buy businesses and endeavour to sell them for a profit. To do this, they need to have identify the right businesses to buy, analyse the company in detail, decide on an appropriate valuation and if they are successful in bidding for the company (often this is in a competitive situation) they need to work with management in improving the performance of the company over the holding period and sell the company, hopefully for a handsome profit.
Private equity is not about sitting behind a spreadsheet and analysing numbers. Yes, financial skills are important but private equity firms need investment professionals who can build relationships at all levels (from board executives to managers of SMEs), exercise sound judgement on deal screening and investment decisions and very importantly to be highly passionate about the industry.
In her presentation, Deborah pointed to the following professional and personal qualities which PE firms look for in recruitment:
• Outstanding academic, career and personal achievements
• Sticking power
• Intellectual curiosity
• Depth of thought / analysis
• Strong judgement
• Logical and analytical mindset
• Conviction and courage
• Humility and ability to communicate with people at all levels
Private equity firms recruit people who will stay with the firm for the long haul. They want professionals who have the qualities to one day be partners of the firm.
If you are interested in moving into a PE firm and think you have the qualities in order to be successful, how can you get into the sector?
In her speech, Deborah Hannam drew on her 21 years of experience in executive recruitment to suggest some ways to access this opaque but lucrative industry. Firstly, you should know the industry inside out, having an understanding of the theoretical framework, the players in the market and industry dynamics. Noting that most PE firms do not recruit actively at any level except pre-MBA candidates, Deborah highlighted it is critical to be pro-active when looking to enter PE. Prospective private equity professionals should research the market thoroughly to look for any niche opportunities. For example, a firm may be focusing principally on renewable energy opportunities and may be looking for people with industry experience, not necessarily from a PE background. Other proactive measures include acting pre-emptively to present an investment to a PE fund and to write a case study on a particular acquisition or fund raising.
However, as always, networking is key and budding professionals should trawl through their rolodexes thoroughly to explore all avenues into the market.
If you have your own experiences to share, we welcome your comments to this blog. Also, if you are interested in recruiting any London Business School students for a permanent role, internship or for a student project, please contact our Career Services department at tlaurinaitis@london.edu.
Hans Holmen
Executive Director
Coller Institute of Private Equity
Wednesday 23 March 2011
Thursday 3 March 2011
LBS Team Wins 11th Annual Wharton Buyout Competition
Blog by Brandon Parry, MBA 2012
Ten days ago, two teams traveled to Wharton, in Philadelphia, to represent London Business School at the 11th Annual Wharton Buyout Case Competition. The event, which hosts teams representing top US business schools including Wharton, Columbia, Harvard and Kellogg, revolved around a hypothetical private equity buyout case. Four days prior to the competition, participating teams were emailed something very simple in the middle of the night: the name of a publicly traded firm and its most recent 10-K filing. This year’s “target” for the competition was GameStop (NYSE: GME), a specialty video game retailer operating more than 6,000 stores worldwide. The basic question each team had to address was: “would you undertake a private equity buyout of the target?” The required output was a presentation – to be delivered in no more than 10 minutes before a judging panel of private equity professionals – laying out the full investment case, including industry analysis, key risks and potential returns.
Both teams sought to represent the best of LBS: a broad, but complementary, mix of backgrounds bringing rigorous analysis and keen insight to bear on the question. My team was comprised of an Italian investment banker (Matteo Masi), an American real estate private equity investor (Ryan Brewer), an Irish private equity associate (James O’Gara), an Italian management consultant (Matteo Luoni) and an American venture capital associate (me).
During the week of preparation, classes came and went, secondary to our primary focus: understanding everything there was to know about video game retailing, and GameStop in particular. Teams read critical industry reports, built financial projections, analyzed LBO returns, and contemplated the intricacies of the GameStop company charter to assess the buyout’s feasibility. After slightly less than 72 hours, we submitted a 45 page slide deck, with only seven minutes to spare until the submission deadline.
Proud of our work, but tired, we went home to rest for eight hours before heading to the airport in the morning. On the plane, we developed our presentation strategy, knowing we would need to rehearse for several hours in order to deliver the volume of content we wanted to cover in the allotted minutes. Upon arriving at the hotel, we rehearsed and rehearsed, ensuring we crisply delivered our investment thesis: that GameStop was attractively valued at the current price, but that industry headwinds and a dearth of tangible value creation alternatives made a take-private transaction unattractive.
The competition itself was structured in two stages, a first in which the eighteen participating teams were lumped into groups of six, out of which one would be chosen to advance to the final. To avoid any judging bias, team names were removed from the presentation and teams did not announce where they came from until the end of the day. Each team presented their thesis before 2-3 judges, all of whom were active private equity investors. Following the ten minute presentation, the teams were subjected to ten minutes of in-depth Q&A, covering anything the judges were curious about. Our presentation went smoothly (we covered all the content) and we felt we had answered questions well. With that under our belts, we headed into lunch.
Over lunch, the finalists were announced and my team was delighted to be chosen for the final. We would present before all the judges and all the other teams that had not advanced. We also faced an extended Q&A session to ensure in-depth questioning. By this time, our presentation was effectively memorized – the real wildcard rested in the Q&A portion, where judges could pick on any minor detail they wanted. In the final, before about 75 observers, we delivered our thesis and answered questions as they came in volleys from the judges. We walked away feeling we had put on a strong presentation and settled in to watch the final team present, and then await the judges verdict.
The judges returned after approximately 30 minutes of nerve-racking deliberation, during which my team distracted itself by walking around the Wharton campus. They offered high level feedback and suggested teams consider creative options for companies like GameStop, which have real assets but face industry challenges [used “headwinds” above]. Eventually, they announced the winning order – LBS first, the home-team Wharton second and Berkeley third – and our team breathed a collective sigh of relief and delight that a week of hard work had been rewarded.
The announcement was followed by a drinks reception at a nearby brew house; teams were able to thank the judges and received some insightful feedback on the strengths and weaknesses in presentation. Overall, the judges and other teams were highly complimentary of the LBS delegation’s work – many in fact asked for a copy of the presentation by email! Suffice it to say, the teams were both proud of their work and the ability to serve as good ambassadors for LBS abroad.
Ten days ago, two teams traveled to Wharton, in Philadelphia, to represent London Business School at the 11th Annual Wharton Buyout Case Competition. The event, which hosts teams representing top US business schools including Wharton, Columbia, Harvard and Kellogg, revolved around a hypothetical private equity buyout case. Four days prior to the competition, participating teams were emailed something very simple in the middle of the night: the name of a publicly traded firm and its most recent 10-K filing. This year’s “target” for the competition was GameStop (NYSE: GME), a specialty video game retailer operating more than 6,000 stores worldwide. The basic question each team had to address was: “would you undertake a private equity buyout of the target?” The required output was a presentation – to be delivered in no more than 10 minutes before a judging panel of private equity professionals – laying out the full investment case, including industry analysis, key risks and potential returns.
Both teams sought to represent the best of LBS: a broad, but complementary, mix of backgrounds bringing rigorous analysis and keen insight to bear on the question. My team was comprised of an Italian investment banker (Matteo Masi), an American real estate private equity investor (Ryan Brewer), an Irish private equity associate (James O’Gara), an Italian management consultant (Matteo Luoni) and an American venture capital associate (me).
During the week of preparation, classes came and went, secondary to our primary focus: understanding everything there was to know about video game retailing, and GameStop in particular. Teams read critical industry reports, built financial projections, analyzed LBO returns, and contemplated the intricacies of the GameStop company charter to assess the buyout’s feasibility. After slightly less than 72 hours, we submitted a 45 page slide deck, with only seven minutes to spare until the submission deadline.
Proud of our work, but tired, we went home to rest for eight hours before heading to the airport in the morning. On the plane, we developed our presentation strategy, knowing we would need to rehearse for several hours in order to deliver the volume of content we wanted to cover in the allotted minutes. Upon arriving at the hotel, we rehearsed and rehearsed, ensuring we crisply delivered our investment thesis: that GameStop was attractively valued at the current price, but that industry headwinds and a dearth of tangible value creation alternatives made a take-private transaction unattractive.
The competition itself was structured in two stages, a first in which the eighteen participating teams were lumped into groups of six, out of which one would be chosen to advance to the final. To avoid any judging bias, team names were removed from the presentation and teams did not announce where they came from until the end of the day. Each team presented their thesis before 2-3 judges, all of whom were active private equity investors. Following the ten minute presentation, the teams were subjected to ten minutes of in-depth Q&A, covering anything the judges were curious about. Our presentation went smoothly (we covered all the content) and we felt we had answered questions well. With that under our belts, we headed into lunch.
Over lunch, the finalists were announced and my team was delighted to be chosen for the final. We would present before all the judges and all the other teams that had not advanced. We also faced an extended Q&A session to ensure in-depth questioning. By this time, our presentation was effectively memorized – the real wildcard rested in the Q&A portion, where judges could pick on any minor detail they wanted. In the final, before about 75 observers, we delivered our thesis and answered questions as they came in volleys from the judges. We walked away feeling we had put on a strong presentation and settled in to watch the final team present, and then await the judges verdict.
The judges returned after approximately 30 minutes of nerve-racking deliberation, during which my team distracted itself by walking around the Wharton campus. They offered high level feedback and suggested teams consider creative options for companies like GameStop, which have real assets but face industry challenges [used “headwinds” above]. Eventually, they announced the winning order – LBS first, the home-team Wharton second and Berkeley third – and our team breathed a collective sigh of relief and delight that a week of hard work had been rewarded.
The announcement was followed by a drinks reception at a nearby brew house; teams were able to thank the judges and received some insightful feedback on the strengths and weaknesses in presentation. Overall, the judges and other teams were highly complimentary of the LBS delegation’s work – many in fact asked for a copy of the presentation by email! Suffice it to say, the teams were both proud of their work and the ability to serve as good ambassadors for LBS abroad.
LBS Team Wins 11th Annual Wharton Buyout Competition
Ten days ago, two teams traveled to Wharton, in Philadelphia, to represent London Business School at the 11th Annual Wharton Buyout Case Competition. The event, which hosts teams representing top US business schools including Wharton, Columbia, Harvard and Kellogg, revolved around a hypothetical private equity buyout case. Four days prior to the competition, participating teams were emailed something very simple in the middle of the night: the name of a publicly traded firm and its most recent 10-K filing. This year’s “target” for the competition was GameStop (NYSE: GME), a specialty video game retailer operating more than 6,000 stores worldwide. The basic question each team had to address was: “would you undertake a private equity buyout of the target?” The required output was a presentation – to be delivered in no more than 10 minutes before a judging panel of private equity professionals – laying out the full investment case, including industry analysis, key risks and potential returns.
Both teams sought to represent the best of LBS: a broad, but complementary, mix of backgrounds bringing rigorous analysis and keen insight to bear on the question. My team was comprised of an Italian investment banker (Matteo Masi), an American real estate private equity investor (Ryan Brewer), an Irish private equity associate (James O’Gara), an Italian management consultant (Matteo Luoni) and an American venture capital associate (me).
During the week of preparation, classes came and went, secondary to our primary focus: understanding everything there was to know about video game retailing, and GameStop in particular. Teams read critical industry reports, built financial projections, analyzed LBO returns, and contemplated the intricacies of the GameStop company charter to assess the buyout’s feasibility. After slightly less than 72 hours, we submitted a 45 page slide deck, with only seven minutes to spare until the submission deadline.
Proud of our work, but tired, we went home to rest for eight hours before heading to the airport in the morning. On the plane, we developed our presentation strategy, knowing we would need to rehearse for several hours in order to deliver the volume of content we wanted to cover in the allotted minutes. Upon arriving at the hotel, we rehearsed and rehearsed, ensuring we crisply delivered our investment thesis: that GameStop was attractively valued at the current price, but that industry headwinds and a dearth of tangible value creation alternatives made a take-private transaction unattractive.
The competition itself was structured in two stages, a first in which the eighteen participating teams were lumped into groups of six, out of which one would be chosen to advance to the final. To avoid any judging bias, team names were removed from the presentation and teams did not announce where they came from until the end of the day. Each team presented their thesis before 2-3 judges, all of whom were active private equity investors. Following the ten minute presentation, the teams were subjected to ten minutes of in-depth Q&A, covering anything the judges were curious about. Our presentation went smoothly (we covered all the content) and we felt we had answered questions well. With that under our belts, we headed into lunch.
Over lunch, the finalists were announced and my team was delighted to be chosen for the final. We would present before all the judges and all the other teams that had not advanced. We also faced an extended Q&A session to ensure in-depth questioning. By this time, our presentation was effectively memorized – the real wildcard rested in the Q&A portion, where judges could pick on any minor detail they wanted. In the final, before about 75 observers, we delivered our thesis and answered questions as they came in volleys from the judges. We walked away feeling we had put on a strong presentation and settled in to watch the final team present, and then await the judges verdict.
The judges returned after approximately 30 minutes of nerve-racking deliberation, during which my team distracted itself by walking around the Wharton campus. They offered high level feedback and suggested teams consider creative options for companies like GameStop, which have real assets but face industry challenges [used “headwinds” above]. Eventually, they announced the winning order – LBS first, the home-team Wharton second and Berkeley third – and our team breathed a collective sigh of relief and delight that a week of hard work had been rewarded.
The announcement was followed by a drinks reception at a nearby brew house; teams were able to thank the judges and received some insightful feedback on the strengths and weaknesses in presentation. Overall, the judges and other teams were highly complimentary of the LBS delegation’s work – many in fact asked for a copy of the presentation by email! Suffice it to say, the teams were both proud of their work and the ability to serve as good ambassadors for LBS abroad.
Both teams sought to represent the best of LBS: a broad, but complementary, mix of backgrounds bringing rigorous analysis and keen insight to bear on the question. My team was comprised of an Italian investment banker (Matteo Masi), an American real estate private equity investor (Ryan Brewer), an Irish private equity associate (James O’Gara), an Italian management consultant (Matteo Luoni) and an American venture capital associate (me).
During the week of preparation, classes came and went, secondary to our primary focus: understanding everything there was to know about video game retailing, and GameStop in particular. Teams read critical industry reports, built financial projections, analyzed LBO returns, and contemplated the intricacies of the GameStop company charter to assess the buyout’s feasibility. After slightly less than 72 hours, we submitted a 45 page slide deck, with only seven minutes to spare until the submission deadline.
Proud of our work, but tired, we went home to rest for eight hours before heading to the airport in the morning. On the plane, we developed our presentation strategy, knowing we would need to rehearse for several hours in order to deliver the volume of content we wanted to cover in the allotted minutes. Upon arriving at the hotel, we rehearsed and rehearsed, ensuring we crisply delivered our investment thesis: that GameStop was attractively valued at the current price, but that industry headwinds and a dearth of tangible value creation alternatives made a take-private transaction unattractive.
The competition itself was structured in two stages, a first in which the eighteen participating teams were lumped into groups of six, out of which one would be chosen to advance to the final. To avoid any judging bias, team names were removed from the presentation and teams did not announce where they came from until the end of the day. Each team presented their thesis before 2-3 judges, all of whom were active private equity investors. Following the ten minute presentation, the teams were subjected to ten minutes of in-depth Q&A, covering anything the judges were curious about. Our presentation went smoothly (we covered all the content) and we felt we had answered questions well. With that under our belts, we headed into lunch.
Over lunch, the finalists were announced and my team was delighted to be chosen for the final. We would present before all the judges and all the other teams that had not advanced. We also faced an extended Q&A session to ensure in-depth questioning. By this time, our presentation was effectively memorized – the real wildcard rested in the Q&A portion, where judges could pick on any minor detail they wanted. In the final, before about 75 observers, we delivered our thesis and answered questions as they came in volleys from the judges. We walked away feeling we had put on a strong presentation and settled in to watch the final team present, and then await the judges verdict.
The judges returned after approximately 30 minutes of nerve-racking deliberation, during which my team distracted itself by walking around the Wharton campus. They offered high level feedback and suggested teams consider creative options for companies like GameStop, which have real assets but face industry challenges [used “headwinds” above]. Eventually, they announced the winning order – LBS first, the home-team Wharton second and Berkeley third – and our team breathed a collective sigh of relief and delight that a week of hard work had been rewarded.
The announcement was followed by a drinks reception at a nearby brew house; teams were able to thank the judges and received some insightful feedback on the strengths and weaknesses in presentation. Overall, the judges and other teams were highly complimentary of the LBS delegation’s work – many in fact asked for a copy of the presentation by email! Suffice it to say, the teams were both proud of their work and the ability to serve as good ambassadors for LBS abroad.
Tuesday 1 March 2011
The 7th Annual PE Conference; a students perspective
Blog by Pascal Wittet (MBA2012)
“Turning the Corner – Delivering Value over the Next Decade”
Friday 11th February, 5.30am. I quietly crept out of bed so as not to wake my wife. This time of the morning is a shock to my student system but nevertheless I was excited for today would be the culmination of 6 months planning. We had three top class keynote speakers (Johannes Huth of KKR, Vincenzo Morelli of TPG Capital and Olivier Sarkozy of Carlyle Group) and four diverse panels covering both PE and VC. These 26 names had drawn more than 300 plus professionals, alumni, faculty and students to a sell-out event.
6.15am and on the 74 bus I have time to compose a short email to my previous employer. If I’m going to be up at this hour I might as well let somebody know!
8am with final preparations complete, the doors to the venue open and we stand armed with delegate name badges, smiles and directions to the C and three Bs; cloakroom, breakfast, bathroom, brochure.
After a rousing introduction from the Dean, Andrew Likierman, the conference kicked off in earnest. In between fulfilling front desk, ushering and microphone duties I was able catch some of the on-stage action.
One of the keynotes spoke with real passion about the introduction of new regulation (AIFMD) into Private Equity posturing that the reason this regulation was brought in was in part due to the poor perception in which European politicians regarded PE. Whilst the likely cost to PE is still unknown, the sentiment one was left with was that the regulatory burden could have been much worse.
The Emerging Markets welcomed Linda Yueh one of the world class economics professors from London Business School moderating a panel of speakers focusing on areas ranging from South East Asia, to Sub Saharan Africa, to Eastern Europe. While the Fund-raising panel welcomed panellists responsible for raising more than $50 billion over the last 10 years.
One of the speakers, with his dry wit and perfectly timed delivery had the audience in stitches. In taking questions from the audience, his candid responses left no-one in doubt as to where he stood with regard to the economic recovery. He explained that the US Economy had gotten into the crisis because it had over leveraged itself and now was trying to get out of it by borrowing.
The conference was rounded off by the VC Panel, skilfully moderated by Keith Willey, Associate Professor at LBS. It saw much disagreement about the future of VC in Europe with some predicting that London would become the next Silicon Valley whilst others argued that there just wasn’t enough entrepreneurial concentration for it to ever be able to compete with Silicon Valley.
Like any event, it is always difficult to quantify just how successful it was. However, never in my experience has a conference been so in demand that it has had to turn away Corporate Sponsors and panellists. Indeed, with one in every three tickets bought by industry professionals, seven years since first launch, has this become one of the PE and VC industries must attend events?
“Turning the Corner – Delivering Value over the Next Decade”
Friday 11th February, 5.30am. I quietly crept out of bed so as not to wake my wife. This time of the morning is a shock to my student system but nevertheless I was excited for today would be the culmination of 6 months planning. We had three top class keynote speakers (Johannes Huth of KKR, Vincenzo Morelli of TPG Capital and Olivier Sarkozy of Carlyle Group) and four diverse panels covering both PE and VC. These 26 names had drawn more than 300 plus professionals, alumni, faculty and students to a sell-out event.
6.15am and on the 74 bus I have time to compose a short email to my previous employer. If I’m going to be up at this hour I might as well let somebody know!
8am with final preparations complete, the doors to the venue open and we stand armed with delegate name badges, smiles and directions to the C and three Bs; cloakroom, breakfast, bathroom, brochure.
After a rousing introduction from the Dean, Andrew Likierman, the conference kicked off in earnest. In between fulfilling front desk, ushering and microphone duties I was able catch some of the on-stage action.
One of the keynotes spoke with real passion about the introduction of new regulation (AIFMD) into Private Equity posturing that the reason this regulation was brought in was in part due to the poor perception in which European politicians regarded PE. Whilst the likely cost to PE is still unknown, the sentiment one was left with was that the regulatory burden could have been much worse.
The Emerging Markets welcomed Linda Yueh one of the world class economics professors from London Business School moderating a panel of speakers focusing on areas ranging from South East Asia, to Sub Saharan Africa, to Eastern Europe. While the Fund-raising panel welcomed panellists responsible for raising more than $50 billion over the last 10 years.
One of the speakers, with his dry wit and perfectly timed delivery had the audience in stitches. In taking questions from the audience, his candid responses left no-one in doubt as to where he stood with regard to the economic recovery. He explained that the US Economy had gotten into the crisis because it had over leveraged itself and now was trying to get out of it by borrowing.
The conference was rounded off by the VC Panel, skilfully moderated by Keith Willey, Associate Professor at LBS. It saw much disagreement about the future of VC in Europe with some predicting that London would become the next Silicon Valley whilst others argued that there just wasn’t enough entrepreneurial concentration for it to ever be able to compete with Silicon Valley.
Like any event, it is always difficult to quantify just how successful it was. However, never in my experience has a conference been so in demand that it has had to turn away Corporate Sponsors and panellists. Indeed, with one in every three tickets bought by industry professionals, seven years since first launch, has this become one of the PE and VC industries must attend events?
Monday 31 January 2011
7th Annual London Business School Private Equity Conference
Over the past 5 months our team has worked tirelessly to put together the 2011 London Business School Private Equity Conference.
The 7th annual installment of our conference, titled "Turning the Corner - Delivering Value over the Next Decade" looks to the shift that several major industry players are making from creating value through leverage, to value from operational excellence and core growth at a time when limited partners are diversifying commitments across investment platforms, older vintages are finally being realized, and new investment themes are beginning to be uncovered.
The conference will host some of the top practitioners in the European private equity industry including the following three fantastic keynote speakers:
• Johannes Huth; Managing Director & Head of Europe - Kohlberg Kravis Roberts & Co
• Vincenzo Morelli; Partner - TPG Capital, Chairman - European Private Equity Roundtable
• Olivier Sarkozy; Managing Director & Head of Global Financial Services - The Carlyle Group
In addition, we have brought together a fantastic group of speakers to fill out four panels focused on:
• Value Creation - Driving returns through operational excellence
• Fundraising - Attracting capital in an uncertain environment
• Emerging Markets - Finding opportunities beyond BRIC
• VC 2.0 - Funding novel opportunities and seeking out hidden gems
Planning the conference has been a great experience, but also a tremendous amount of work. That being said, it has given each of us a chance to learn quite a bit, not only about how to put together a large-scale event, but also about the current themes in the private equity industry. Further, it has given each of a chance to reunite with contacts within the industry, contemplate where we stand in our career search, and think about how private equity will continue to fit within the world of financial investments.
We are very excited in welcoming these industry leaders to our school and are looking forward to put together what we believe will be the marquee student run private equity conference in Europe.
For more information about the event, you can visit our website at www.londonpeconference.org;
for a direct link to tickets you can visit http://londonpeconference.eventbrite.com/
The conference has been made possible thanks to generous donations by the Boston Consulting Group, 3i, William Blair, the Coller Institute of Private Equity, Capital IQ, and Preqin.
The 7th annual installment of our conference, titled "Turning the Corner - Delivering Value over the Next Decade" looks to the shift that several major industry players are making from creating value through leverage, to value from operational excellence and core growth at a time when limited partners are diversifying commitments across investment platforms, older vintages are finally being realized, and new investment themes are beginning to be uncovered.
The conference will host some of the top practitioners in the European private equity industry including the following three fantastic keynote speakers:
• Johannes Huth; Managing Director & Head of Europe - Kohlberg Kravis Roberts & Co
• Vincenzo Morelli; Partner - TPG Capital, Chairman - European Private Equity Roundtable
• Olivier Sarkozy; Managing Director & Head of Global Financial Services - The Carlyle Group
In addition, we have brought together a fantastic group of speakers to fill out four panels focused on:
• Value Creation - Driving returns through operational excellence
• Fundraising - Attracting capital in an uncertain environment
• Emerging Markets - Finding opportunities beyond BRIC
• VC 2.0 - Funding novel opportunities and seeking out hidden gems
Planning the conference has been a great experience, but also a tremendous amount of work. That being said, it has given each of us a chance to learn quite a bit, not only about how to put together a large-scale event, but also about the current themes in the private equity industry. Further, it has given each of a chance to reunite with contacts within the industry, contemplate where we stand in our career search, and think about how private equity will continue to fit within the world of financial investments.
We are very excited in welcoming these industry leaders to our school and are looking forward to put together what we believe will be the marquee student run private equity conference in Europe.
For more information about the event, you can visit our website at www.londonpeconference.org;
for a direct link to tickets you can visit http://londonpeconference.eventbrite.com/
The conference has been made possible thanks to generous donations by the Boston Consulting Group, 3i, William Blair, the Coller Institute of Private Equity, Capital IQ, and Preqin.
Thursday 11 November 2010
Speaker Series: Simon Davies, Managing Director, The Blackstone Group, Hosted by: Private Equity/Venture Capital Club
Simon Davies, Managing Director at The Blackstone Group appeared before a packed house of London Business School MBAs to discuss, “Private Equity in a Changing World.” Mr. Davies, who epitomizes a true English gentleman, started the discussion with a quote from Ben Bernanke:
“At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,” March 28, 2007.
This quote highlights the syndrome existing in finance during the boom years, a syndrome known as “optimism.” As the western financial system was clearly caught off guard by a “fast ball down the middle,” financial investment firms drank the proverbial Kool Aid as debt was readily available at historically low LIBOR spreads and IPO exit strategies were easily materialized through strong public demand. This impacted both private equity funds and hedge funds but in different ways. By prescription, hedge funds suffered the most. Many institutional investors redeemed funds once their short 6-month lock-in periods expired. However, these investors could not redeem funds invested in private equity as their investments were tied to a longer asset realization timeline. Private Equity’s business model has allowed private equity funds to maintain their assets under management. Nevertheless, both hedge funds and private equity funds have recently struggled to fundraise. Blackstone’s fundraising effort yielded 40% less for its most recent private equity fund than it had three years ago. Clearly the trajectory of growth for the private equity industry has slowed, leading to a decline in new hires in recent years.
One key takeaway for MBAs was what Mr. Davies described as reliance on financial models. For those looking to break into PE, the consequences of using too many variables simply leads to bad investments (ie. garbage in garbage out). Investment teams often rely on financial modeling to find investment solutions however, a model shows when investment strategies break down, not when they work, which is a key distinction from Warren Buffet’s investment methodology:
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Which follows nicely with another Warren Buffet quote I found:
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
Mr. Davies shared his thoughts and predictions about how private equity investors will adjust to the market turmoil going forward. One can expect lower exit multiples, longer exits, a difficult fundraising environment and lower investment returns. On the other hand, investment managers will scrutinize due diligence on new acquisitions more so than before the financial crisis, will focus on running leaner portfolio companies and will use more equity as a percentage of enterprise value then they have in previous recessionary periods.
The evening concluded with a Q&A where Mr. Davies described his function as a Managing Director in Blackstone’s Restructuring and Reorganisation Division and his view on investment opportunities in the near term. Mr. Davies’ role functions as an advisor to investment teams. This requires both pragmatism and “soft hands” as he often handles debt workouts for portfolio companies with capital structure issues. Looking forward, investment opportunities will occur at all levels of high yield debt and in emerging markets such as China. The session ended with an MBA asking Mr. Davies what he would do if he were the central banker of the U.S. I will not reveal his answer here as it is our hope you will come to the next event!
On behalf of the Private Equity and Venture Capital Club, I would like to thank Mr. Davies for an insightful presentation. We look forward to having him back in the near future.
Ryan Brewer, MBA 2012
“At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,” March 28, 2007.
This quote highlights the syndrome existing in finance during the boom years, a syndrome known as “optimism.” As the western financial system was clearly caught off guard by a “fast ball down the middle,” financial investment firms drank the proverbial Kool Aid as debt was readily available at historically low LIBOR spreads and IPO exit strategies were easily materialized through strong public demand. This impacted both private equity funds and hedge funds but in different ways. By prescription, hedge funds suffered the most. Many institutional investors redeemed funds once their short 6-month lock-in periods expired. However, these investors could not redeem funds invested in private equity as their investments were tied to a longer asset realization timeline. Private Equity’s business model has allowed private equity funds to maintain their assets under management. Nevertheless, both hedge funds and private equity funds have recently struggled to fundraise. Blackstone’s fundraising effort yielded 40% less for its most recent private equity fund than it had three years ago. Clearly the trajectory of growth for the private equity industry has slowed, leading to a decline in new hires in recent years.
One key takeaway for MBAs was what Mr. Davies described as reliance on financial models. For those looking to break into PE, the consequences of using too many variables simply leads to bad investments (ie. garbage in garbage out). Investment teams often rely on financial modeling to find investment solutions however, a model shows when investment strategies break down, not when they work, which is a key distinction from Warren Buffet’s investment methodology:
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Which follows nicely with another Warren Buffet quote I found:
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
Mr. Davies shared his thoughts and predictions about how private equity investors will adjust to the market turmoil going forward. One can expect lower exit multiples, longer exits, a difficult fundraising environment and lower investment returns. On the other hand, investment managers will scrutinize due diligence on new acquisitions more so than before the financial crisis, will focus on running leaner portfolio companies and will use more equity as a percentage of enterprise value then they have in previous recessionary periods.
The evening concluded with a Q&A where Mr. Davies described his function as a Managing Director in Blackstone’s Restructuring and Reorganisation Division and his view on investment opportunities in the near term. Mr. Davies’ role functions as an advisor to investment teams. This requires both pragmatism and “soft hands” as he often handles debt workouts for portfolio companies with capital structure issues. Looking forward, investment opportunities will occur at all levels of high yield debt and in emerging markets such as China. The session ended with an MBA asking Mr. Davies what he would do if he were the central banker of the U.S. I will not reveal his answer here as it is our hope you will come to the next event!
On behalf of the Private Equity and Venture Capital Club, I would like to thank Mr. Davies for an insightful presentation. We look forward to having him back in the near future.
Ryan Brewer, MBA 2012
Monday 8 November 2010
Success at the Rotterdam School of Management European Private Equity Case Competition
I was a member of London Business School’s winning team at the European Private Equity Case Competition hosted by the Rotterdam School of Management on October 22. The event was fantastic – it brought out the best in the eight competing teams and provided a great learning opportunity to everyone involved. We thoroughly enjoyed the experience and were extremely proud to take the trophy back to London.
As you’d expect from LBS, our team was a diverse mix of professional and national backgrounds – an Italian investment banker (Matteo Masi), an American hedge fund analyst (Chris Steinbaugh), an Italian consultant (Matteo Luoni) and an Irish/American PE associate (me). Our road to Rotterdam started a month earlier, when we won an internal competition organized by the LBS Private Equity and Venture Capital Club (the judging panel included Dunedin Capital Partners’ Jim Strang, Coller Institute Chairman Eli Talmor and Executive Director Hans Holmen).
The case for the competition arrived a week before we were due in Rotterdam. Intriguingly, the organizers structured the case as an overview of the German ice cream manufacturing industry, laying out five different potential targets to analyze. This broad case meant that there were multiple investment strategies on the table.
The preparation week flew by as we balanced our regular class workload with the hours of intense industry research, company analysis and financial modeling necessary to form our investment thesis. We settled on an industry roll-up as the best strategy and focused hard on communicating our rationale and evaluating the key investment risks – we were still making tweaks to our presentation as we flew to Rotterdam on Thursday evening.
The competition itself was set up in two rounds. In the first round, we faced off against the teams from INSEAD, ESADE and IESE for a single spot in the final. The eight judges boasted a range of experience in private equity and related advisory services. Our 20-minute presentation went smoothly, and we felt we handled the 10-minute Q&A session well. We knew that the other schools would be equally well prepared, so we weren’t surprised when the judges announced that the competition in our group had been extremely close. We were able to breathe a sigh of relief when they revealed that we’d made it through to the final, where we’d face Hong Kong-UST.
The final round was just as nerve-racking. We were given a slightly-expanded 25-minute timeslot for our presentation, but in this round the judges were allotted up to 30 minutes for Q&A. After our presentation, they relentlessly grilled us on the industry and financial assumptions underpinning our strategy. By the time it was over we were mentally exhausted, but relieved that we’d been able to defend our rationale and analysis relatively well. The judges took their time deliberating, and again commented on how close the decision between the two finalist teams had been. When they announced us as the winner, we were elated.
The announcement was followed by a drinks reception and dinner hosted by RSM in Rotterdam. We were able to thank the judges and received some insightful feedback on the strengths and weaknesses in our presentation – a great opportunity to learn from industry practitioners. We also got to know the other teams a bit better and traded war stories from our preparation and presentations. It was an excellent cap to the day and further enhanced the great overall experience.
James O'Gara, MBA 2012
As you’d expect from LBS, our team was a diverse mix of professional and national backgrounds – an Italian investment banker (Matteo Masi), an American hedge fund analyst (Chris Steinbaugh), an Italian consultant (Matteo Luoni) and an Irish/American PE associate (me). Our road to Rotterdam started a month earlier, when we won an internal competition organized by the LBS Private Equity and Venture Capital Club (the judging panel included Dunedin Capital Partners’ Jim Strang, Coller Institute Chairman Eli Talmor and Executive Director Hans Holmen).
The case for the competition arrived a week before we were due in Rotterdam. Intriguingly, the organizers structured the case as an overview of the German ice cream manufacturing industry, laying out five different potential targets to analyze. This broad case meant that there were multiple investment strategies on the table.
The preparation week flew by as we balanced our regular class workload with the hours of intense industry research, company analysis and financial modeling necessary to form our investment thesis. We settled on an industry roll-up as the best strategy and focused hard on communicating our rationale and evaluating the key investment risks – we were still making tweaks to our presentation as we flew to Rotterdam on Thursday evening.
The competition itself was set up in two rounds. In the first round, we faced off against the teams from INSEAD, ESADE and IESE for a single spot in the final. The eight judges boasted a range of experience in private equity and related advisory services. Our 20-minute presentation went smoothly, and we felt we handled the 10-minute Q&A session well. We knew that the other schools would be equally well prepared, so we weren’t surprised when the judges announced that the competition in our group had been extremely close. We were able to breathe a sigh of relief when they revealed that we’d made it through to the final, where we’d face Hong Kong-UST.
The final round was just as nerve-racking. We were given a slightly-expanded 25-minute timeslot for our presentation, but in this round the judges were allotted up to 30 minutes for Q&A. After our presentation, they relentlessly grilled us on the industry and financial assumptions underpinning our strategy. By the time it was over we were mentally exhausted, but relieved that we’d been able to defend our rationale and analysis relatively well. The judges took their time deliberating, and again commented on how close the decision between the two finalist teams had been. When they announced us as the winner, we were elated.
The announcement was followed by a drinks reception and dinner hosted by RSM in Rotterdam. We were able to thank the judges and received some insightful feedback on the strengths and weaknesses in our presentation – a great opportunity to learn from industry practitioners. We also got to know the other teams a bit better and traded war stories from our preparation and presentations. It was an excellent cap to the day and further enhanced the great overall experience.
James O'Gara, MBA 2012
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