Session 13: Alternative Asset Valuation Reading 49: Private Equity Valuation
LOS a: Explain the sources of value creation in private equity.
The Jefferson Group is a large private equity firm managing a multi-billion dollar portfolio. Which of the following is the least likely source of value-added the Jefferson Group would provide to its portfolio companies than a public firm would?
A) |
Reengineering the portfolio companies. | |
B) |
Aligning the interests between private equity owners and limited partners. | |
C) |
Obtaining cheap credit. | |
The three sources of value-added a private equity firm provides over public firms are: reengineering the portfolio firms, obtaining debt on favourable terms (cheap credit), and aligning the interests between private equity owners (the limited partners) and portfolio managers.
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