The 4 life stages of a private equity fund

The lifespan of a typical private equity fund is ten years, but that ten years generally doesn’t start until the team raises substantial capital and it doesn’t end until all assets are sold. So, the lifespan of a private equity fund may stretch to as long as 15 years. Below, I discuss each of the stages that attribute to the real lifespan of a private equity fund.
It’s also important to note that these stages overlap and that funds even overlap. As you raise a new fund, you may be managing and exiting investments from a previous fund. And, while you may hire new private equiteers to manage the new fund, invariably there’s a labour overlap and old funds create a hindrance.

1. Raising capital and building the team (1 to 2+ years) - it can be very difficult to source capital, which is why most funds don’t even get off the ground in the first place. Private equiteers may spend upwards of two years creating hype and luring investors until they reach their funding target. If and when the final funding round closes, the managing company must then build the team to invest in and manage the portfolio businesses. This is a defining moment because the lifespan of a private equity fund is longer than many marriages and hence, the fund’s success firmly relies on the people chosen at this point (and specifically their resourcefulness, aptitude and ability to get along with others).
2. Sourcing deals (2 to 5+ years) - most mid-market firms source deals themselves, though they may entertain bankers and advisers on the odd occasion. This stage requires a dedicated team willing to sell themselves to C-level executives while broaching the concept of private equity. It can be tough, it can be dispiriting, but we’re private equiteers, so it’s part and parcel. A motivated team can invest an entire fund in a couple of years, while slower funds may take 5+ years.
3. Managing and improving the portfolio (3 to 7 years per investee) – once a team makes an investment, it needs to work quickly to create a record of exceptional performance. A team can’t just wait until before an exit to make a difference because potential buyers look at medium-term historic performance when conducting their valuations. This can be a stressful time in difficult economic conditions or a blissful times during strong economic growth.
4. Exiting the investments (varied time frames) - an exit can occur 6 months after your investment if the right strategic buyers and economic conditions present. However, an exit may drag out for 7+ years if the investment underperforms, the economy teeters, and buyers don’t present. The longer an investment remains in a portfolio, the higher the required exit price to meet target IRRs. If investments remain at the end of the official ten year term of the fund, there are a range of options: a) the investment may be sold to a secondary fund, b) the fund may be extended for anything from 1 to 3+ years, or c) the fund can hold a fire sale.  The best exits are with many potential buyers and when you’re not forced to sell, so private equiteers certainly don’t want to hold fire sales. And, since the team likely raised another fund, extending this fund will only hinder the new fund.

Keeping in mind that the average fund has a real life of 12+ years, most private equiteers will likely have left the firm before seeing a whole fund through. Food for though, especially when calculating your likely carry.

M&A

http://www.scribd.com/doc/19530639/mergers-acquisitions-ma-presentation

Credit Suisse. Recommended Reading

After the Trade is Made – David M. Weiss

An Introduction to Capital Markets (Products & Applications) – Andrew Chisholm

An Introduction to Equity Markets – Reuters

An Introduction to Global Financial Markets – Stephen Valdez

Barbarians at the Gate: The Fall of RJR Nabisco – Bryan Burrough & John Heylar

Beginner’s Guide to Investment – Bernard Gray

Don’t Send a Resume – Jeffrey J. Fox

How the Bond Market Works – Robert Zipf

How the City of London Works – William M. Clarke

Liars Poker: Rising Through the Wreckage on Wall Street – Michael Lewis

Monkey Business: Swinging Through the Wall Street Jungle – John Rolfe

Principles of Corporate Finance – Brealey & Myers

Saving & Investing – Michael Fisher

Securities Operations: A Guide to Trade & Position Management – Michael Simmons

The Money Machine – Philip Coggan

Understanding Derivatives in a Day – Stefan Bernstein

GUNGA JOHN

You can talk about cachet
And your Harvard MBA
When you're nine-to-fivin' for some white-shoe banker
But when you're market-makin'
And you spend your day risk-takin'
Then it's guts and ice-cold blood for which you hanker

Now at Solly in her prime
Where I used to spend my time
With Billy, Timmy, Tommy, Craig and Ron
Of all that trading crew
The bravest man I knew
Was our legendary leader, Gunga John.

It was "John! John! John!
We bought the IBM deal Gunga John!
Should we hedge? The market's sloppy.
Henry thinks it's pretty toppy.
You'd better make the call here, Gunga John!"

His morning protocol
Was to light a Temple Hall
Then take a little stroll around the store
And while Goldman's Johnnys might
Head for lunch at some chic site
Our Johnny ate with us--right on the Floor!

Yes it's John! John! John!
Not perfect, nor were Koufax, Ford, or Spahn
Tell the guys who worked for Buffett
That in my book they can stuff it!
You're a better man than they are, Gunga John!

the order of importance in terms of getting the interview

1) Ability for analyst at BB bank to vouch for you to get an interview. This entails networking.

2) School / work experience brand name. Work experience brand is probably more important for internship than for full-time recruiting, since for full-time you're either trading up (i.e. going from UBS to Goldman) or you didn't get an intern offer. Either way, the resume selectors aren't going to be that impressed with your work experience.

3) What you say on the bullets -- only when the BB can't come up with enough applicants via recommendations or brand-name experience applicants will they actually read the bullets and select you based on what you did.

Goldman CEO Lloyd Blankfein Is King of the World

Now if only he could just enjoy it. Last year, Blankfein, the Brooklyn-born, Harvard-educated son of a postal worker made $68.7 million and bought a $27 million apartment at 15 Central Park West. In the midst of the subprime crisis, his firm just had the best year ever. So why is he so unhappy? "I worry that we're too smug," the Goldman Sachs CEO tellsFortune, "and then I see everyone wringing their hands over the worry that we're too smug, and then I think we're too nuts, and we're destined to have unhappy lives, and we'll always be miserable strivers." Later on in Fortune's lengthy profile, Blankfein says, self-deprecatingly, that "the business media focus on [Goldman] like People focuses on movie stars, except they're better-looking and have more fun." Aw, shucks! Lloyd worries, just like Us!

Are we being played by a man who is actually hyperaware of the media and his own self-image? "I'm always imagining how much worse the headline about Goldman will be when we screw up if we have a quote out there claiming magnificence," he told Goldman's managing directors at a meeting in London in October. "People are dying for us to misstep." After all, as one former Goldman executive puts it, Blankfein may be "funny and self-deprecating," but he "can reach across the table and rip your throat out when it's warranted."

Some Unuseful Stuff

http://www.exinfm.com/free_spreadsheets.html

The True I.Banker Look

Suits: Wearing black suits is restricted to funerals and evening activities. The colours of business are dark grey/charcoal and dark navy blue. If you must get pinstripes, please get very thin ones. Make sure your suit jacket is double vented at the back lest you look like a bible salesman

Shirts: Two colours only: White and light(!) blue. Blue with white stripes is also ok. By all means steer clear of any “smart” colours like purple, pink, green etc. if you can’t pull it off properly (if you are an intern you can’t do it by default). Grey and yellow/beige shirts are hideous to look at when combined with a suit (usually without a suit as well). Don’t buy a shirt with a button-down collar if you plan on wearing a tie with it. Barrel cuffs are ugly, but I reckon wearing french cuffs with proper cufflinks might alienate a few guys on the street when worn by an intern. Get the french cuffs when you are promoted.

Ties: When combining patterned ties with a patterned shirt, you quickly look like an optical illusion. Can’t go wrong if you only purchase solid ties (very very small patterns look solid from further away).

Shoes: You forgot a key ingredient of adequate “white shoe firm” footwear: A leather sole! Stop bitching about expensive shoes. You pay for what you get, good ones will last you a long time. But thanks for helping readers to stay away from those square-toe, rubber-soled abominations by Kenneth Cole et al.

Seven Ways to Tell if Your Suit Fits

Your list of "Signs Your Suit Don't Fit" said we should go down a jacket size if the sleeves are too long, and two if the jacket is too full. I think those two situations should generally be fixed by tailoring. A more useful accompanying guide might have shown how a correctly fitting suit should look. -- Gary Southon, Seattle Wash.

We've provided many such tips in the past. Just for you, we went back and found the best of them. -- Editors

1. Shoulder pads end with your shoulders.

2. Your flat hand should slip easily into your suit under the lapels when the top (or middle) button is fastened. If you put a fist in, the suit should pull at the button.

3. The top button of a two-button suit -- or the middle button of a three-button suit -- should not fall below your navel.

4. With your arms at your sides, your knuckles should be even with the bottom of your jacket.

5. Jacket sleeves should fall where the base of your thumb meets your wrist.

6. Between a quarter and a half inch of shirt cuff should be visible.

7. One inch of break.

Interviewing - Brainteasers

What is the sum of numbers from 1 to 100?

The trick here is that you have 50 pairs which each sum to 101 (e.g. 1+100, 2+99, 3+98, etc.).  So, 50 times 101 = 5050.

What is the angle between the hour-hand and minute-hand of a clock at 3:15?

At quarter past the hour, the minute-hand is exactly at 3:00 but the hour-hand has moved 1/4 of the way between 3:00 and 4:00.  Therefore 1/4 times 1/12 = 1/48 of the clock.  With the clock having 360 degrees, 360/48 = 7.5 degrees.

You’ve got a 10 x 10 x 10 cube made up of 1 x 1 x 1 smaller cubes. The outside of the larger cube is completely painted red. On how many of the smaller cubes is there any red paint?

First, note that the larger cube is made up of 1000 smaller cubes.  The easiest way to think about this is how many cubes are NOT painted?  8 x 8 x 8 inner cubes are not painted which equals 512 cubes.  Therefore, 1000 – 512 = 488 cubes that have some paint.  Alternatively, we can calculate this by saying that two 10 x 10 sides are painted (200) plus two 10 x 8 sides (160) plus two 8 x 8 sides (128).  200 + 160 + 128 = 488.

A car travels a distance of 60 miles at an average speed of 30 mph. How fast would the car have to travel the same 60 mile distance home to average 60 mph over the entire trip?

Most people say 90 mph but this is actually a trick question!  The first leg of the trip covers 60 miles at an average speed of 30 mph.  So, this means the car traveled for 2 hours (60/30).  In order for the car to average 60 mph over 120 miles, it would have to travel for exactly 2 hours (120/60).  Since the car has already traveled for 2 hours, it is impossible for it to average 60 mph over the entire trip.

You are given a 3-gallon jug and a 5-gallon jug. How do you use them to get 4 gallons of liquid?

Fill the 5-gallon jug completely.  Pour the contents of the 5-gallon jug into the 3-gallon jug, leaving 2 gallons of liquid in the 5-gallon jug.  Next, dump out the contents of the 3-gallon jug and pour the contents of the 5-gallon jug into the 3-gallon jug.  At this point, there are 2 gallons in the 3-gallon jug.  Fill up the 5-gallon jug and then pour the contents of the 5-gallon jug into the 3-gallon jug until the 3-gallon jug is full.  You will have poured 1 gallon, leaving 4 gallons in the 5-gallon jug.

You are given 12 balls and a scale. Of the 12 balls, 11 are identical and 1 weighs slightly more. How do you find the heavier ball using the scale only three times?

First, weigh 5 balls against 5 balls (1st Use of Scale).  If the scale is equal, then discard those 10 balls and weigh the remaining 2 balls against each other (Second Use of Scale).  The heavier ball is the one you are looking for.
If on the first weighing (5 vs 5), one group is heavier, then of the heavier group weigh 2 against 2 (2nd Use of Scale).  If they are equal, then the 5th ball from the heavier group (the one not weighed) is the one you are looking for.  If one of the groups of 2 balls is heaver, then take the heaver group of 2 balls and weigh them against each other (Third Use of Scale).  The heavier ball is the one you are looking for.

You are given 12 balls and a scale. Of the 12 balls, 11 are identical and 1 weighs EITHER slightly more or less. How do you find the ball that is different using the scale only three times AND tell if it is heavier or lighter than the others?

Significantly harder than the last question!  Weigh 4 vs 4 (1st Weighing).  If they are identical then you know that all of 8 of these are “normal” balls.  Take 3 ”normal” balls and weigh them against 3 of the unweighed balls (2nd Weighing).  If they are identical, then the last ball is “different.”  Take 1 “normal” ball and weigh against the “different” one (3rd Weighing).  Now you know if the “different” ball is heavier or lighter.
If, on the 2nd weighing, the scales are unequal then you now know if the “different” ball is heavier (if the 3 non-normal balls were heavier) or lighter (if the 3 non-normal balls were lighter).  Take the 3 “non-normal” balls and weigh 1 against the other (3rd Weighing).  If they are equal then the third ball not weighed is the “different” one.  If they are not equal then either the heavier or lighter ball is “different” depending on if the 3 “non-normal” balls were heavier or lighter in the 2nd Weighing.
If, on the 1st Weighing, the balls were not equal then at least you know that the 4 balls not weighed are “normal.”  Next, take 3 of the “normal balls” and 1 from the heavier group and weigh against the 1 ball from the lighter group plus the 3 balls you just replaced from the heavier group (2nd Weighing).  If they are equal then you know that the “different” ball is lighter and is 1 of the 3 not weighed.  Of these 3, weigh 1 against 1 (3rd Weighing)  If one is lighter, that is the “different” ball, otherwise, the ball not weighed is “different” and lighter.
If, on the 2nd weighing from the preceding paragraph, the original heavier group (containing 3 “normal” balls) is still heavier, then either one of the two balls that were NOT replaced are ”different.”  Take the one from the heavier side and weigh against a normal ball (3rd Weighing).  If it is heavier, it is “different,” and heavier otherwise the ball not weighed is “different” and lighter.  If, on the 2nd weighing, the original lighter side is now heavier, then we know that one of the 3 balls we replaced is “different.”  Weigh one of these against the other (3rd Weighing).  If they are equal, the ball not weighed is “different” and heavier.  Otherwise, the heavier ball is the “different” one (and is heavier).
If you get this right and can answer within the 30 minutes alloted for the interview, then you probably do deserve the job.

A windowless room has 3 lightbulbs. You are outside the room with 3 switches, each controlling one of the lightbulbs. If you can only enter the room one time, how can you determine which switch controls which lightbulb?

Turn on two switches (call them A and B) on and leave them on for a few minutes.  Then turn one of them off (switch B) and enter the room.  The bulb that is lit is controlled by switch A.  Touch the other two bulbs (they should be off).  The one that is still warm is controlled by switch B.  The third bulb (off and cold) is controlled by switch C.

Four investment bankers need to cross a bridge at night to get to a meeting. They have only one flashlight and 17 minutes to get there. The bridge must be crossed with the flashlight and can only support two bankers at a time. The Analyst can cross in 1 minute, the Associate can cross in 2 minutes, the VP can cross in 5 minutes and the MD takes 10 minutes to cross. How can they all make it to the meeting in time?

First, the Analyst takes the flashlight and crosses the bridge with the Associate.  This takes 2 minutes.  The Analyst then returns across the bridge with the flashlight taking 1 more minute (3 minutes passed so far).  The Analyst gives the flashlight to the VP and the VP and MD cross together taking 10 minutes (13 minutes passed so far).  The VP gives the flashlight to the Associate, who recrosses the bridge taking 2 minutes (15 minutes passed so far).  The Analyst and Associate now cross the bridge together taking 2 more minutes.  Now, all are across the bridge at the meeting in exactly 17 minutes.   Note, that instead of investment bankers, you’ll often see the same question using members of musical bands (usually either the Beatles or U2).

Three envelopes are presented in front of you by an interviewer. One contains a job offer, the other two contain rejection letters. You pick one of the envelopes. The interviewer then shows you the contents of one of the other envelopes, which is a rejection letter. The interviewer now gives you the opportunity to switch envelope choices. Should you switch?

The answer is yes.  Say your original pick was envelope A.  Originally, you had a 1/3 chance that envelope A contained the offer letter.  There was a 2/3 chance that the offer letter was either in envelope B or C.  If you stick with envelope A, you still have the same 1/3 chance.  Now, the interviewer eliminated one of the envelopes (say, envelope B), which contained a rejection letter.  So, by switching to envelope C, you now have a 2/3 chance of getting the offer and you’ve doubled your chances.
Note that you will often get this same question but referring to playing cards (as in 3-Card Monte) or doors (as in Monte Hall/Let’s Make a Deal) instead of envelopes.

Scottish Whisky Distilleries

• Aberfeldy, Aberfeldy, Perth and Kinross/Highlands (Midlands)
• Aberlour, in Charlestown-of-Aberlour, Speyside
• Allt-á-Bhainne, Glenrinnes/Speyside, 2002 closed since 28 May 2005, still in business.
• Ardbeg, Port Ellen/Isle of Islay
• Ardmore, Kennethmont, Speyside
• Arran, Lochranza/Isle of Arran
• Auchentoshan Dalmuir/Lowlands, the only Lowland whisky distilled with Highland water from Cochna Loch
• Auchroisk, Mulben/Highlands
• Aultmore, Banffshire/Speyside
• Balblair, Edderton/Northern Highlands just nine miles (14 km) from Glenmorangie
• Balmenach, Cromdale/Speyside, on the southern border of the region
• Balvenie, Dufftown, Speyside, founded by William Grant, owner of Glenfiddich
• Ben Nevis, Fort William/Western Highlands
• BenRiach, Morayshire/Speyside, back in business since 2004
• Benrinnes, Banffshire/Speyside
• Benromach, Speyside
• Bladnoch near Wigtown/Lowlands, Scotland's southern-most distillery, back in business as of 2000
• Blair Athol, Pitlochry, Perthshire/Highlands, not to be confused with place and castle Blair Atholl Castle, about five miles (8 km) north of Pitlochry
• Bowmore, Isle of Islay, founded 1779, oldest Scottish distillery
• Brackla, Nairn/Speyside, also "Royal Brackla"
• Bruichladdich, Isle of Islay, once again privately-owned; pronounced (orig. Islay): Bruch-lat-tich (also: Bruch-lade-di(ch))
• Bunnahabhain, Port Askaig/Isle of Islay, pronounced Buh-na-haa-venn
• Cardhu, Knockando/Speyside, most important division of Johnnie Walker Blends
• Caol Ila, Port Askaig/Isle of Islay
• Clynelish, Brora/Northern Highlands, built across from the now-dormant Brora
• Cragganmore, Speyside, on the Ballindalloch
• Craigellachie, Speyside
• Dailuaine, Aberlour/Speyside, important division of Johnnie Walker Blends
• Dalmore, Alness/Northern Highlands
• Dalwhinnie, Dalwhinnie/Highlands
• Deanston, Doune/Highlands
• Drumguish, Kingussie/Speyside
• Dufftown, Banffshire/Speyside
• Edradour, Pitlochry/Highlands, Scotland's smallest distillery
• Fettercairn, Laurencekirk/Highlands
• Glenallachie, Banffshire/Speyside
• Glenburgie, Morayshire/Speyside
• Glendronach, Aberdeenshire/Speyside, since 14 May 2002 back in business after a seven year lull
• Glendullan, Banffshire/Speyside
• Glen Elgin, Morayshire/Speyside
• Glen Grant, Rothes/Speyside
• Glenfarclas, Ballindollach/Speyside, at the foot of Ben Rinnes
• Glenfiddich, Dufftown/Speyside
• Glen Garioch, Oldmeldrum/Highlands, pronounced Glen-gih-ri
• Glengoyne Dumgoyne/Highlands, twelve miles (19 km) from Glasgow, right on the Highland Line
• Glen Keith, Keith/Speyside
• Glenkinchie, Pencaitland/Lowlands
• The Glenlivet, Ballindalloch/Speyside, in the moorlands of Minmore
• Glenlossie, Elgin/Speyside
• Glenmorangie, Tain/Northern Highlands
• Glen Moray, Elgin/Speyside
• Glen Ord, Muir of Ord/Northern Highlands, formally Ord and Glenordie
• Glenrothes, Rothes/Speyside
• Glen Scotia, Campbeltown, Mull of Kintyre
• Glen Spey, Speyside
• Glentauchers Keith/Speyside
• Glenturret north of Crieff/Highlands, on the banks of the Turret
• Highland Park, Kirkwall/Isles of Orkney
• Inchgower, Buckie/Speyside
• Isle of Jura, Jura/Isle of Jura
• Kilchoman, Kilchoman/Islay
• Knockando, Knockando/Speyside
• Knockdhu, in Huntly/Speyside, the 12-year malt is called An Cnoc
• Lagavulin, Port Ellen/Isle of Islay
• Laphroaig, Port Ellen/Isle of Islay (pronounced (orig. Islay)): La-frúe , but also La-fraig
• Linkwood, south of Elgin/Speyside
• Loch Lomond, Alexandria/Highlands
• Lochnagar Ballater/Highlands also Royal Lochnagar
• Longmorn, between Rothes and Elgin/Speyside
• The Macallan, Craigellachie/Speyside, known as the best in Speysides
• Macduff, Banff/Speyside
• Mannochmore, Elgin/Speyside, also sold as "Loch Dhu"
• Miltonduff, Elign/Speyside
• Mortlach, Keith/Speyside
• Oban, Oban/Western Highlands
• Port Charlotte, Port Charlotte/Islay
• Pulteney Wick/Northern Highlands, northernmost distillery on the Scottish Festland
• Scapa, Kirkwall, Isles of Orkney
• Speyburn, Rothes/Highlands
• The Speyside, Speyside
• Springbank, in Campbeltown, Mull of Kintyre
• Strathisla, Keith/Speyside oldest distillery in Speyside still in operation, since 1786, also called the most beautiful one by some
• Strathmill, Speyside
• Talisker, Carbost/Isle of Skye.
• Tamdhu, Aberlour/Speyside
• Teaninich, Alness/Highlands
• Tobermory, Isle of Mull, the "smoky" version from Tobermory is called Ledaig
• Tomatin, Tomatin/Speyside
• Tomintoul, Ballindalloch/Speyside
• Tormore, Grantown N Spey/Speyside
• Tullibardine, Blackford/Highlands, after 8 years in respite, back in operation in 2003