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30 Cards in this Set
- Front
- Back
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LBO Process
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(1) Term Sheet or LOI
(2) Buyer Due Diligence (3) Sourcing of Debt and Equity Financing (4) Negotiation of Definitive Agreement |
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IRR Achievement in LBOs
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(1) Appreciation of Equity
(2) Deleveraging (3) Growth (4) Multiple Expansion |
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"Boom" M&A Periods
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(1) Late 1980s
(2) Late 1990s (3) 2004-2007 |
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Late 1980s M&A Market Charateristics
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(1) Buyout Shops
(2) Lower equity requirements (3) Junk bond financing (4) Deleveraging grew IRR |
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Late 1990s M&A Market Characteristics
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(1) More debt financing sources emerged to replace junk bonds
(2) Non bank lenders and securitized offerings (3) Ended with tech bubble |
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2004-2007 M&A Market Characteristics
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(1) Massive liquidity
(2) Debt was larger and much more complex (3) Aggressive underwriting complex debt structures (4) Massive purchase price multiples |
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Fred Smith 5 Secrets of Success
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(1) Compelling business idea that is differentiated and sustainable
(2) Be a zealot (3) Have a conservative business plan (4) Work effectively with others (5) Change and grow as your business grows |
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Tommy Davis
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Founder: Davis & Rock; Mayfield Fund
(1) Winner: 10x return (2) Back the right people (3) Pick a horse that wants to run (4) Everything must be sold (5) Sophisticated product with existing market (6) Software > Hardware |
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Valuation Alternatives for LBOs/M&As
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(1) Book Value Multiple
(2) Stock Market Valuation (3) Comparable Company (4) DCF (5) Targeted IRR |
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2 Approaches to Leverage or Debt Financing
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(1) Asset Based
(2) Cash flow or EV Lending |
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Business Decisions and Trade Offs
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(1) Revenue Sources
(2) Cost Drivers (3) Investment Size (4) Critical Success Factors |
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Analyzing the Business Model
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(1) Determine actual and projected revenues
(2) Determine actual and projected expenses (3) Determine total investment (4) Plot cash flow versus time to illustrate financing needs (5) Perform sensitivity anaylsis |
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Revenue Models
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(1) Subscription/Membership
(2) Volume/Unit (3) Advertising (4) Licensing and Syndication (5) Transaction Fee |
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Revenue Sources
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(1) Single Stream
(2) Multiple Stream (3) Interdependent (4) Loss Leader |
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Cost Structres
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(1) Payroll Centered (Direct)
(2) Payroll Centered (Support) (3) Inventory (4) Space/Rent (5) Marketing/Advertising |
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Cost Drivers
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(1) Fixed
(2) Semi-variable (3) Variable (4) Non-recurring |
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RightNow Technologies Info
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Hosted CRM service based on customer needs
Gianforte-founder and CEO, loved "bootstrapping" Myer- VP Development Cartnesen- CFO Forbes- new strategy and direction Accept offer from software acquirer? |
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Key Components of a Business Plan
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(1) People
(2) Opportunity (3) External Context (4) The Deal |
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Great Business Characteristics
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(1) World class management
(2) Sustainable business model (3) Options for expansion (4) Exit Options (5) Favorable environment (6) Incentives (7) Value adding partners (8) Fair financing terms |
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Questions about Opportunity
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(1) Who is the customer
(2) How do they make buy decisions (3) Can you economically access the customer |
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Vermeer Technologies Info
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Internet software company that created an easy to use online site without any coding needed
Charles Ferguson- Founder Randy Forgaard- Partner and architect Andy & Peter- Project Leaders VC wanted a new CEO, 2 of 4 board seats, and 51% |
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Charles Test
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Tests:
(1) Business judgement (2) Maturity (3) Psychological fit (4) Emotional fit |
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Randy Test
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Series of 9 specific and mutlipart questions regarding 9 different programming areas, each graded from F to A+, bottom 2 thrown out and the rest averaged, B+ or better is very good
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VC Preference for P/S
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(1) PCP no Cap
(2) PCP with Cap (3) CP (4) RP |
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Famous VC Firms
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Accel: Palo Alto
Sequoia: Menlo Park KPCB: Menlo Park Doll Capital Management: Menlo Park Benchmark Capital: Menlo Park |
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Largest VC Investors
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(1) Pension Funds
(2) Insurance/Finance (3) Endowment (4) Individuals (5) Corporations |
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Jobs and Roles of GPs
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(1) Select
(2) Structure (3) Monitor (4) Exit-> IPO, Sale, Repurchase |
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How VCs Add Value
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(1) Board Representation
(2) Corporate Governance (3) Human Resources (4) Matchmaking (5) Strategy |
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Components of VC Discount Rate
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(1) Base (Rf)
(2) Liquidity Premium (3) Value Added Premium (4) FCF Adjustment |
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Famous Venture Capitalists
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Arthur Rock
Tommy Davis (Mayfield) Eugene Kleiner (KPCB) Tom Perkins (KPCB) Don Valentine (Sequoia) John Doerr (KPCB) James Breyer (Accel) Bob Kagle (Benchmark) |
