Question

27. What are the typical components of an LP/GP agreement?

28. Explain the key parts of the due diligence process

29. What is hurdle rate

30. Many times valuations are based on multiples of EBIT (or EBITDA), for example, 3XEBIT (3 times EBIT). What the number 3 signifies? Explain the origin of multiple comparable valuations 31. Explain fund vehicles (What is a primary fund, Feeder fund Alternative investment Vehicle parallel fund etc)

32. What is carried interest? What is waterfall distributions? How we calculate waterfall distributions?

33. What are secondaries? Why they are important in the PE market place

34. Describe key principles in the due diligence process

35. What are the post-closing price adjustments and remedies?

36. What is the difference between fund of funds Private equity and a public private equity fund

37. What is deal structuring in private equity

38. Describe typical equity instruments in the deal structuring process for Private equity

39. Describe and differentiate among debt instruments in structuring private equity transactions

40. What are representations and warranties? Where these statements are used?

41. What are covenants and why they are important in private equity transactions

42. Explain indemnification provisions in the Sales and Purchase agreement for a PE fund

43. Explain the components of value creation in a PE transaction

44. What kind of resources are needed for a PE firm to impact value creation. Discuss the role of external and internal resources

45. What is private credit? How you structure a fund to provide private credit

46. Discuss exit paths for a private equity investment

47. What is a GP Catch-up and what is “Clawback” in private equity?

48. There are two types of waterfall calculations. The “European waterfall and the “American waterfall” calculations. Please explain the differences.

49. Often the term co-investing is used in PE. Can you please explain its meaning 50. What is the role of a sponsor in a private equity transaction?

51. What is a closed-end fund? A blind pool?

Answer 1

27. Typical components of LP/GP are Institutional investors, Fund Manager, Percentage drawn, percentage undrawn.

29. hurdle rate: It is the rate of return that can be earned from the best alternative investment opportunity with the same risk profile.

40. Representations and warranties are used during loan contracts and acquisitions and sometimes in employment also. These statements are used for the full disclosure of the proceedings, mitigation of losses, etc.

41. covenants - It is a tool to reduce the risk. It is important because it is used to calculate debt like amount of money borrowed, etc.

42. It is an agreement of claiming of acquired companies as a current asset under accounting principles.

43. there are three components of value creation to PE firms. they are: Change in annual operating cash flow, Change in valuation multiple applied to operating cash flow, Net cash generated for shareholders.

44. internal resources: accounting information, internal monitoring resources. external resources: external monitoring resources, external value-added resources. The role of internal and external resources is very prominent in nature. Without these, there will be no value creation of a PE firm.

45. Private Credit: illiquid asset. It can be structured by various strategies like asset holding SPV structure, currency hedging, etc.

46. Exit Paths are: Trade sales, IPO, secondary buyout, leverage recapitalization.

47. GP Catchup: It is a preferred return to the manager when the desired hurdle rate is met.

Clawback: In this, an investor can take back his incentive fees from the manager.

48. European waterfall - Rebalances risk, Do not receive any interest.

American waterfall - Do not rebalance the risk, Receives carried interest.

49. Co investing is a minority investment done by the investor in an operating company.

50. The role of a sponsor in a private equity transaction is to provide plan investment and alternatives.

51. Close end fund is an investment model in which there are fixed shares which are not redeemable from the fund.