VC + E = IPO LAW GROUP™

FÊMALE VÊNTURE LAW FIRM WITH MISSION TO BE WORLD LEADING LAWYERS IN VC IPO PE M&A TÊCH LIFESCI & EMERGING GROWTH INDUSTRIES FOR FÊMALE Es VCs GPs LPs & VC FIRMS

[VC + E = IPO LAW GROUP™ @VCEIPOLawGroup]

VC + E = IPO LAW GROUP™️ IS A FÊMALE VÊNTURE-IP-PATÊNT LAW FIRM WITH GLOBAL MISSION TO BE WORLD LEADING LAWYERS IN VENTURE CAPITAL IPO PE M&A LBO IB TÊCH LIFESCI & EMERGING HIGH-GROWTH INDUSTRIES.

Michelle Obama
Founding Partner & BOD
@VCEIPOLawGroup™️

QUÊEN ATTY @MichelleObama

[Rolls-RoyceMotorCars @rollsroycemcna]

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[Rolls-Royce Motor Cars @rollsroycecars]

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#RollsRoyceGhost

[Rolls-Royce Motor Cars @rollsroycecars]

#Phantom's grille is now illuminated, while the headlights are graced with intricate laser-cut bezel starlights – adding further surprise and delight to the motor car's night-time presence.

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[VC + E = IPO™ @VCEIPO]

“VC +E= IPO™️ WILL BUILD THE WORLD'S LARGEST LEADING MOST-POWERFUL-MULTICULTURAL-DIVERSIFIED-DISRUPTIVE ‘STAGE-AGNOSTIC’ WOMÊN TÊCHNOLOGY VÊNTURE CAPITAL FIRMS HEADED-LED-RUN BY WOMÊN VCs GPs LPs INVESTING IN WOMÊN FOUNDER ÊNTREPRENEURS IN TÊCHNOLOGY.”

Stêalth
Founder
@VCEIPO™️

[Rolls-Royce Motor Cars @rollsroycecars]

#RollsRoyce #Phantom’s sumptuous interior remains almost unaltered: the steering wheel has been made slightly thicker, providing a more connected and immediate point of contact for the owner-driver.

#PhantomRendezvous #RollsRoycePhantom

[VC + E = IPO™ @VCEIPO]

“VC +E= IPO™️ WILL BUILD THE WORLD'S LARGEST LEADING MOST-POWERFUL-MULTICULTURAL-DIVERSIFIED-DISRUPTIVE ‘STAGE-AGNOSTIC’ WOMÊN TÊCHNOLOGY VÊNTURE CAPITAL FIRMS HEADED-LED-RUN BY WOMÊN VCs GPs LPs INVESTING IN WOMÊN FOUNDER ÊNTREPRENEURS IN TÊCHNOLOGY.”

Stêalth
Founder
@VCEIPO™️

[VC + E = IPO™ @VCEIPO]

VC + E = IPO™️

[Ming Zhao @FabiusMercurius]

52/ What is Private Equity?

[Ming Zhao @FabiusMercurius]

💰How PE Firms Make Money💰

Chobani, Bumble, Dell—many of ur favorite brands are PE-owned.

Every time u shop, go on a date, turn on the💡—some KKR tycoon's getting filthy rich.
How does it all work?

WHAT IS PE & HOW DOES IT MAKE $?
How is it different from a hedge fund?
👇
🧵/

[Ming Zhao @FabiusMercurius]

1/ Business Overview

PE (private equity) makes $ by buying low w/ debt & selling high.

Heres the typical KKR/TPG/BX playbook in a nutshell

Step1: Find a cheap cash-cow, "ABC Co"
Step2: Lever up & buy big stake (often >51%)
Step3: "Improve operations"
[5 yrs later]
Step4: Flip

[Ming Zhao @FabiusMercurius]

Now that u get the big pic, some notable details:

Typical target returns:
20% IRR

Typical "exit paths" (to sell ABC):
a. IPO
b. flip to another buyer

Fee structure (how PE firms charge):
"2+20", i.e.
2% mgmt fee on AUM + 20% of returns

Deal structure:
LBO (leveraged buyout)

[Ming Zhao @FabiusMercurius]

2/ What's an LBO?

Leveraged buyout refers to how PE firms acquire targets:
- Often financed by 10-20% equity, 80-90% debt (which target co. takes on, NOT PE firm!😡)
- Target's cashflows over investment horizon used to pay down debt
- Target's debt 🔜 turns into PE firm's equity

[Ming Zhao @FabiusMercurius]

3/ Major steps in LBO analysis
i.e. what a PE analyst's day job looks like 👇

Some notes:
a) it's more art than science
b) it's all about the initial target IRR, internal rate of return (e.g. 20%) & working backwards to derive all other metrics like % debt to take on

[Ming Zhao @FabiusMercurius]

4/ What makes for a good PE target?

✅Mature cheap stock, i.e. trading at low multiples to free cash flow
✅Low starting amount of debt (so new debt can be added in LBO process)
✅"Fat"/cost-cutting potential
✅Steady cash flow
✅Low future capex reqs
✅Broad set of exit options

[Ming Zhao @FabiusMercurius]

5/ How PE firms juice multiples, "improve operations" & maximize profits

1. Cut headcount
2. Saas transition (switch to subscriptions)
3. Raise prices
4. Dividend Recap
i.e. use debt proceeds to pay shareholders (themselves)
e.g. KKR bankrupts Toys-R-US: https://t.co/qH6QLQJmus

[Ming Zhao @FabiusMercurius]

6/ Management Structure

Many parties are involved in a PE setup.
- the fund: PE firms operate multiple funds (each w/ diff LPs, portfolio companies, etc)
- LPs (limited partners): investors in a specific fund
- GPs (general partners): execs of the PE firm who charge LPs "2+20"

[Ming Zhao @FabiusMercurius]

7/ PE vs. HF

Key differences summarized in the chart below.

Main takeaways:
1. Hedge funds take tiny stakes (<5% or you'd need to file a 13D to report an activist position) while PE firms often do takeovers (>50%)
2. PE holds positions for years; most hedge funds only weeks

[Ming Zhao @FabiusMercurius]

8/ How to land a job at TPG, KKR, Blackstone, etc.

TLDR: the interview process is CRAZY!
6+ months of prep
2+ years in advance
10+ interviews w/ 10+ firms in 1 day!

But more on this next time!
@segall_max & I will do a whole 2nd 🧵 next week on his
PE job-hunting war stories!

[Ming Zhao @FabiusMercurius]

End/

Hope you enjoyed this "part 1" of our "Intro to PE" series!

Next week, we'll cover:
- how to get a PE interview
- how to crush the interview
- “day in the life” of a megafund PE analyst
- & more!
🥳 💰

[Rolls-Royce Motor Cars @rollsroycecars]

Phantom Rendezvous – a rare encounter with the pinnacle of #luxury on the Côte d’Azur. There is no better place to rediscover the #luxury by which all other luxuries are judged: #RollsRoyce #Phantom.

#PhantomRendezvous #RollsRoycePhantom