ASSESSMENT OVERVIEW & MARKING CRITERIA
October 2022
Your assessment for the Private Equity & Venture Capital module will be based on the submission of
coursework with two components and with a total word count of 3,000 words.
PART 1
You are required to submit a highly abridged “Investment Paper” recommending a buyout of a
company as if you were an executive in a private equity firm. For the avoidance of doubt this means
that you are writing the paper for people who know all about Private Equity and therefore want to
read your conclusions – NOT A PAPER EXPLAINING WHAT PRIVATE EQUITY IS.
Your paper will not cover all the items required for an actual Investment Paper (or reach the levels of
detail often needed), but it will provide you with an opportunity to demonstrate key learnings from
the module, namely:
How buyouts work;
How a commercial view of the investment impacts on valuation, risk and transaction structures;
How management is incentivised and how returns flow to fund investors.
We will use the tutorials to ensure that you are clear on the technical aspects of a transaction (e.g.
financial, structural, valuation/returns) and blend these with the core commercial reason for making
the investment. You will only need to focus on specific elements of the investment paper as shown
below:
The Commercial Opportunity
Market Context
Risks
Valuation and Investment Returns (using a very basic financial model which we will discuss in detail)
? Exit Options.
The paper needs original thought. A high level of perception as to the fundamental investment
opportunity will drive a higher grade. Excess words that do not add to the reader’s understanding of
your recommendation will have a negative impact – but, of course, your narrative will still need to
have a natural logical flow.
Early in the module, you will be offered some choices as to the illustrative investment candidates using
real publicly quoted businesses. YOU MUST ASSUME THAT THE BUSINESS YOUR WRITE ABOUT IS
NOT A PUBLIC COMPANY FOR THE PURPOSES OF THE ASSESSMENT BUT INSTEAD A PRIVATE ONE
WHERE THE EXISTING FAMILY SHAREHOLDER WISHES TO SELL TO THE INCUMBENT MANAGEMENT
TEAM. References to the share price performance of the company, market value, dividend yield are
therefore completely irrelevant.
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In creating the financial model for your chosen company, you will need to propose an entry (and
exit) valuation as well as suggest a leverage multiple and then allocate enough equity to
management to result in a good result for them and also a good result for the PE firm. Please ensure
that you copy and paste your model into your assessment so I can see what you have assumed.
PART 2
Based on your tutorials with Simon Welte, who will guide you through a real-life case study of a buyout
which raises several interesting features that have generated academic debate, you will be asked to
critically evaluate your chosen investment candidate in Part 1 through an academic lens. It is integral
that for this academic essay you change your perspective to an academic finance scholar.
Understanding what may lead to challenges or even the failure of YOUR proposed private equity
buyout – despite the attractive investment model – will provide you with an opportunity to develop a
differentiated view. You should consider the different concepts covered in the tutorials and the role
they may play for your specific investment proposal, answering the following question: What are the
critical considerations for your proposed buyout to become a successful investment?
Of the four discussed, please focus on two elements (and their potential interrelation):
Capital structure and leverage
Creation, capture and destruction of value
Corporate governance: Management incentives and boards
Realization of value: Information asymmetry, market timing and PE exit.
Similar to the investment paper, this second part should NOT BE A PAPER EXPLAINING WHAT PRIVATE
EQUITY IS, NOR WHAT THE MAIN FINANCE THEORIES ARE. Rather, it should demonstrate your critical
thinking and application of the knowledge and analytical skills learned on the module to a real-life
case. Illustrative questions you might want to ask yourselves are:
“Does the level of leverage chosen appear optimal with respect to capital structure theory and at
the same time leave enough room to adapt to fluctuations in the external market environment?”
“How will value be created or captured based on your paper, and which groups of stakeholders
might be affected? Do you believe that management is well incentivized to minimize agency costs?”
“Which important external or internal factors have to be considered for private equity exit strategy
and timing that might adversely affect investment performance?”.
REQUIREMENTS AND SUBMISSION
Your submission should be limited to 3,000 words in total spread evenly between the two parts of the
assessment and which both contribute 50% of your module grade. This word count excludes diagrams,
tables, headings and references – the use of which are encouraged to help make your case as
compelling as possible – but NOTE THAT ACADEMIC REFERENCES ARE NOT RELEVANT TO PART 1. IN
PART 2, PLEASE APPLY THE NAME-YEAR FORMAT AND PROVIDE A BIBLIOGRAPHY AT THE END IF
REFERENCING ANY ACADEMIC OR NON-ACADEMIC SOURCES.
Reading your paper before submission and checking for errors is a basic need for every paper and
failure to do so has a very negative impact on the reader. The submission deadline is 20th December
2022. Submissions after this will not be accepted by the exam board.
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MARKING CRITERIA
The examiners will adopt the perspective of the Investment Committee at the Private Equity firm (in
Part 1) and of an Academic Private Equity Research Group (in Part 2). Marks will be awarded based
upon the following four criteria weighted as follows:
Marking Criteria Weighting %
Demonstrating your understanding of Private Equity 25
Articulating a logical, holistic, investment case with relevant data points (in Part 1)
and
an incisive academic analysis of your chosen business (in Part 2)
30
Demonstrating original thought 30
Presentation 15
The examiners will use a rubric to mark your assessment against these key criteria.