B2815 - Private Equity and Venture Capital

Learning outcomes

The purpose of this course is to analyze the steps of the evaluation process and value creation employed by private equity and venture capital investors in the investment proposals they receive, and subsequently in companies where they decide to invest. A special focus is reserved to the role that institutional investors such as venture capital funds have in assisting these companies during this process. At the end of this course students should be able to: 1. Understand why venture capital and private equity investors are important and how are they structured 2. Comprehend the different phases of the venture capital and private equity cycle, namely: fundraising, selection and evaluation, business and financial planning, negotiation, deal structure, monitoring and exit 3. Analyze the different methods that these investors employ to evaluate investment opportunities 4. Understand the difficult process of deal negotiation between the target company and the institutional investor 5. Explore the different type of key securities and relative terms employed in venture capital and private equity transactions 6. Construct and apply a comprehensive buyout model and perform a leveraged buy-out analysis for a specific company

Course contents

The entire course is designed especially for the second year of the second cycle degree program in Business and Administration and Sustanability. To follow this course you need to have acquired advanced knowledge of accounting, financial analysis and cost management, corporate finance and corporate valuation.

The Private Equity and Venture Capital course will focus on the entire venture capital cycle followed by these financial intermediaries. The venture capital cycle includes the following steps:

• Fundraising;
• Deal sourcing
• Due diligence (selection and target evaluation; critical evaluation of the business plan from the VC perspective)
• Valuation of target firms with various methods (Venture Capital Method; Comparables, DCF Method)
• Deal structuring and various term provisions;
  
• Monitoring;
• Exit.

A special focus will be devoted to sustainability issues and how they impact the appraisal of new investment opportunities by private equity investors.

Readings/Bibliography

A special course package will be provided to attending students.

The recommended book is the following: Lerner, J., Leamon, A., Hardymon, F. "Venture Capital, Private Equity, and the Financing of Entrepreneurship", 2012, Wiley, chp. 1-7

Selected material from: Caselli S. and Negri G., Private Equity and Venture Capital in Europe, third edition, Elsevier Academic Press, 2021.

Selected material from Smith, J.K., and Smith, R.L., Entrepreneurial Finance: Venture Capital, Deal Structure & Valuation, Second Edition, 2019, Stanford University Press.

Teaching methods

The course is interactive and gives the opportunity to the students to apply theoretical concepts in real world cases where the point of view of institutional investors (VCs) and entrepreneurs regarding specific deals is compared.

Assessment methods

Weekly group assignments on different topics covered in class (30% of the final grade). Final written exam at the end of the course (70% of the final grade).

Attendant students will develop the necessary competences to handle assignments and the final exam during the course.

Non attending students need to follow carefully the themes and the framework explained in the textbook suggested for this course.

The passing grades for students are in the range 18-30 cum laude (30L). These grades are based on the following evaluation criteria:

18-23: The student has sufficient preparation and analytical skills, spread however, over just few topics taught in the course, the overall jargon is correct.
24-27: The student shows an adequate preparation at a technical level with some doubts over the topics. Good, yet not too articulated analytical skills with the use of a correct jargon.
28-30: Great knowledge about most of the topics taught in the course, good critical and analytical skills, good usage of the specific jargon.
30 cum laude (30L): Excellent and in depth knowledge of all the topics in the course, excellent critical and analytical skills, excellent usage of specific jargon.

Teaching tools

Excel

Databases available to UniBo students and faculty

Office hours

See the website of Andi Duqi