6QQMN562 ASSESSMENT OVERVIEW AND MARKING CRITERIA
Your assessment for the Private Equity & Venture Capital module will be based on the submission of an “Investment Paper” recommending a buyout investment as if you were an executive in a private equity firm.
For the avoidance of doubt this means that you are writing the paper for people who know all about Private Equity and therefore want to read your conclusions – NOT A PAPER EXPLAINING WHAT PRIVATE EQUITY IS.
Whilst this will not cover all the items in an actual Investment Paper (or reach the levels of detail often needed), it will provide you with an opportunity to demonstrate the key learnings which the module will focus on, namely:
- How Private Equity works and how the approach differs between venture, growth and buyout investments;
- How a commercial view of the investment impacts on valuation, risk and transaction structures;
- How to evaluate risk; and What other considerations an investor should take into account when making the investment.
- We will use the tutorials to ensure that you are clear on the technical aspects of a transaction (e.g. financial, structural, valuation/returns) and blend these with the core commercial reason for making the investment.
6QQMN562 ASSESSMENT OVERVIEW AND MARKING CRITERIA
We will also consider the suggested topics that you will need to include in your submission – recognising that each section will have a higher or lower relevance depending on the transaction itself and that you will need to focus on the really key items that your analysis prioritises. The paper needs thought, not just process. A high level of perception as to the fundamental investment considerations will drive a higher grade.
Excess words that do not add to the reader’s understanding of your recommendation will have a negative impact – but, of course, your narrative will still need to have a natural logical flow. Half-way through the module, you will be offered some choices as to the illustrative investment candidate using real publicly quoted businesses but you may choose to write a paper on any company you wish providing you have enough information to do so. 6QQMN562 ASSESSMENT OVERVIEW AND MARKING CRITERIA
YOU MUST ASSUME THAT THE BUSINESS YOUR WRITE ABOUT IS NOT A PUBLIC COMPANY FOR THE PURPOSES OF THE ASSESSMENT BUT INSTEAD A PRIVATE ONE WHERE THE EXISTING FAMILY SHAREHOLDER WISHES TO SELL TO THE INCUMBENT MANAGEMENT TEAM.
References to the share price performance of the company, market value, and dividend yield are therefore completely irrelevant.
In relation to the companies offered as potential investments, 6QQMN562 ASSESSMENT OVERVIEW AND MARKING CRITERIA you will also have a base case model with 5-year “management” forecasts which you should consider as to their reasonableness – and adopt or amend as you see fit.
You will need to add your view on the EBITDA multiple used for determining the entry (and exit) valuation as well as suggest a leverage multiple and then allocate enough equity to management to result in a good result for them and also a good result for the PE firm.
Please ensure that you copy and paste your model into your assessment so I can see what you have assumed.
The contents of the Investment Paper will probably include the following – but it is your choice as to inclusion or not, how you would order each topic, whether or not there is something missing – and how much commentary to put in each section of your paper.
Investment Paper – Potential Content Headings
- Executive Summary
- Process
- The Business and the Commercial Opportunity
- Market Context
- Management
- Business Plan (Headline Financials and Narrative)
- Risks
- Valuation
- Investment Returns
- Due Diligence
- Exit Options
- Recommendation
Your submission should be limited to 3,000 words. This word count excludes diagrams, tables, headings and references – the use of which are encouraged to help make your case as compelling as possible.
Lastly, reading your paper before submission and checking for errors is a basic need for every paper and has a very negative impact on the reader.
Marking Criteria
The examiners will adopt the perspective of the Investment Committee at the Private Equity firm with the following rubric being used when marking your submission. Marks will be awarded based upon the following five criteria are weighted as follows:
Criteria Weighting Examples
Demonstrating your understanding of Private Equity – and correctly applying the relevant investment considerations to your chosen investment.
25%
- Matching the investment opportunity to the right type of Private Equity structure
- Understanding how the transaction might look
- Articulating a logical, holistic, recommendation to the Investment Committee
15%
- Submitting an Investment Paper which presents a balanced view of the opportunity and the risk – and which leads the reader to agree with the recommendation as articulated
- Use of relevant benchmarks (e.g in valuation), showing logical thinking as to capital structure and correctly calculating investment returns.
20%
- Highlighting key financial considerations in relation to the transaction – to include thoughts as to the business plan, valuation and available returns
Demonstrating original thought 25%
▪ Drawing a subjective conclusion from the facts you have identified
▪ Making a commercial case for the business beyond what is obvious
▪ Thinking about the type of exit in more than a formulaic manner
▪ Highlighting risk items which are not immediately obvious
Presentation 15%
▪ Drafting a document which looks professional and is easy for the reader to navigate
▪ Use of appropriate charts, tables, models
How will you be graded?
The following scale reflects the examiners satisfaction from not being satisfied at all that the assessment criteria have been met through to the very high bar of “all expectations surpassed”.
Criteria Weighting 1 2 3 4 5 6 7 8 9
Demonstrating your understanding of
Private Equity – and correctly applying
the relevant investment considerations
to your chosen investment.
25%
Articulating a logical, holistic,
recommendation to the Investment
Committee
15%
Use of relevant benchmarks (e.g in
valuation), showing logical thinking as
to capital structure and correctly
calculating investment returns.
20%
Demonstrating original thought 25%
Presentation 15%
Where:
1. No objectives demonstrated – 0% of weighting
2. Minimal achievement of objectives – 12.5% of weighting
3. Limited achievement of objectives – 25% of weighting
4. Objectives mostly satisfied – 37.5% of weighting
5. Objectives satisfied – 50% of weighting
6. Very Good – 62.5% of weighting
7. Excellent – 75% of weighting
8. Exceptional – 87.5% of weighting
9. All expectations surpassed – 100% of weighting
