Chapter 3

Buyout Players and Processes

Buyout Players and Processes

Covered in this Module

The Private Equity Universe

The Investment Process

Approaches to investing

Debt Providers

Corporate Finance Advisers

This Module outlines the key participants in the Buyout market, their roles and the influences that drive their actions and decisions. Central to this are, of course, the Buyout funds, which are a subset – albeit the dominant subset – of the broader private equity industry. We look first at the universe in which private equity works, an understanding of which is essential to a successful Buyout team. This is followed by an outline of the investment process, which leads to a review of approaches to investing, what differentiates Buyout investors and issues that management teams should address in choosing private equity partners.

Whilst the Buyout investors drive the market, it is to a large extent fuelled by the availability of debt; in this Module we explore the ways in which changes in debt providers are affecting the market (for a review of types of debt, and their use in financial structuring, see Module 4).

The two categories of principals – equity and debt providers – are surrounded by a phalanx of advisory firms, encompassing investment banks, corporate finance advisers, accountants and lawyers, together with a variety of specialist due diligence consultants whose work is reviewed in Module 5.

The key advisers from the management team’s perspective – at least until the due diligence teams come along to submerge them – are their lawyers and their own personal corporate finance advisers (where they have them). A detailed review of legal documentation is beyond the scope of this guide, although key equity related documents are summarised in Module 4. We review the role and contribution of the team’s corporate finance advisers in the appropriately titled section in this Module.

Finally, a case study at the end of the Module demonstrates how each transaction presents its own unique challenges and how investor and management need to work in partnership to address them.