Private Investment in Public Equity - PIPE

Finance allah shmoop what are the top five questions you

can expect to be asked in a private equity investing

interview All right people first things first before you walk

into the interview well you've checked out the company's website

right You've looked at their history the companies they've invested

in and then googled the crap out of those companies

Right Then you've looked up on link thin in quasi

stalker like fashion each of the key partners of the

firm right and especially the people you're meeting with and

of course you've jotted down the random connections like wealth

one was also a nationally ranked squash player And be

sure you note that this is very different from your

grandfather who was a nationally ranked squash grower very different

i don't want to hit those things explode all right

So this is the very basics but more importantly you

have to know whether it is actually a real private

equity investment company the old school way or if it's

really a growth capital investment company and they're huge differences

and you've got to know the diff so before you

go in all right well in the olden days private

equity was all about finding fallen angels cos who used

to be vaunted respected loved and growing Then for whatever

reason demand suddenly changed Hi newspaper industry or its management

did stupid things like tick off its distribution retail partners

Hello coach luggage We're looking at you or the brand

itself while just got tired Hi Adidas or adi das

is they say today and the stock went from trading

at twenty times even toe like five times as wall

street fell out of love with company Well private equity

investors back then would borrow a whole heap of cash

and take the company private with a mindset of fixing

it and then taking it public using higher profits to

pay down debt and return the company to growth so

that it would carry a multiple a whole lot closer

to the twenty times it carried when people loved it

Then the five times it carried when you bought it

so that's private equity old school growth capital is something

very different Growth capital is just money already healthy companies

need thio grow maur if whatever dot com had another

one hundred million dollars in cash well then it could

Open No china Yeah china And then wow if everyone

in china just bought one thing on whatever dot com

well then wow The company would add eight billion dollars

in profits to its bottom line so i could really

use that hundred million bucks That's growth capital growth capitals

Totally different Animal there's no debt no turn around No

failed company no firing of half the workforce and redoing

the union contract It's just about investing for growth at

some price Got all that All right So here we

go Five questions managed to not change one What investments

from the industry have you liked or at least followed

Answer Well you'd better have followed a few They're not

necessarily going to ask you for specifics but it'd be

fair if they had a big fat high profile winner

in their portfolio and then they asked you about it

at least asked what you thought of it The deal

company product and the answer there You loved it genius

Such insight So this is how and where i want

to learn blob blob Blob of law in private equity

with puckering and tongue Yeah All right Next question welkos

Through the math of private equity there Okay so not

technically a question but here you might start blathering about

debt to even ratios and valuations of wildly optimistic internet

companies and you'd have scorn and guffawing and then you'll

realize that they were talking about their own compensation You

know how they charge their limited partner investors and what

carrier profit participation means to the partners their golden goose

or peace and their three homes and second set of

spouses or spice or whatever it is And families Yeah

so you've got to know how private equity it's paid

in two and twenty two percent fee twenty You gonna

carry generally Alright next number three what's gonna be your

industry We're talking like davey on that hill cartoon Alright

if you've made it this far well then you already

have some area of expertise right You're a semi young

guru of banks or retail buying called amazon or tech

or argentina How about drug distribution The legal kind Hopefully

this one since your notionally an expert in it will

be an easy answer You've followed the industry for at

least three years and got a check plus on your

final homework assignment Yeah congrats there Just remember that the

guy sitting across the table from you has probably followed

that industry for thirty years knows every ceo and their

secret lovers and also got a check plus on their

final homework assignment Yeah so take that All right moving

on for so much Do you want to work Answer

lots Whatever you need Anything you name it i take

fully caffeinated i'll be there sweep the leg whatever it

takes That's the answer got it Five why not public

equity While public equity is about nerve like it's just

a sense of where the danger lurks from where the

opportunities are where the big fat drafted you could kill

and eat for a month Private equity is all about

muscle You can't brute force your way tio picking amazon

overseers in nineteen ninety seven there's just a gut feel

that public market investors get where they have access to

scant data and very little knowledge that is direct to

actually go on regulation fd or full disclosure requires companies

to basically disclose little more than their quarterly reports and

the name of their company anytime asked private equity however

Has essentially no regulation So when you invest in it

well you get every detail you'd ever want And through

sheer force and will of doing amazingly detailed quality research

talking to every vendor and every supply heart person and

union factory workers and secretaries and on and on and

on a private equity deal may not be one hundred

eggs return but very few of them go big time

bus the way public stock to do all the time

and your temperament is simply set more for muscle in

lots of hard work than it is for nerve And

you know sensing the way the wind is blowing you

know the way the innkeeper and lame is Rob does

like that All right well there you go You're all

set for your interview and most importantly don't forget the 00:06:24.045 --> [endTime] tanaka close quarters there