Private Equity
History, Governance, and Operations
2nd Edition
Published on 2. April 2012
480 pages
978-1-118-22542-4 (ISBN)
Description
An authoritative guide to understanding the world of privateequity (PE) investing, governance structures, and operationalassessments of PE portfolio companies
An essential text for any business/finance professional'slibrary, Private Equity: History, Governance, and Operations,Second Edition begins by presenting historical informationregarding the asset class. This information includes historicalfundraising and investment levels, returns, correlation of returnsto public market indices, and harvest trends. The text subsequentlyanalyzes PE fund and portfolio company governance structures. Italso presents ways to improve existing governance structures ofthese entities. A specific focus on portfolio company operations,including due diligence assessments, concludes the text.
* Seamlessly blends historical information with practicalguidance based on risk management and fundamental accountingtechniques
* Assists the book's professional audience in maximizing returnsof their PE investments
* Highly conducive to advanced, graduate-level classroom use
* Purchase of the text includes access to a website of teachingmaterials for instructional use
Learn more about PE history, governance, and operations with theauthoritative guidance found in Private Equity: History,Governance, and Operations, Second Edition.
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Harry Cendrowski | Louis W. Petro | James P. Martin
Private Equity
History, Governance, and Operations
Book
05/2012
2nd Edition
Wiley
€106.50
Available immediately
Previous edition
E-Book
01/2010
Wiley
€60.99
Available for download
Persons
Harry Cendrowski is a 30-year veteran consultant to and investor in private equity and venture capital funds. He is cofounder and Managing Director of Cendrowski Corporate Advisors, a midwest financial and operations consulting firm based in Chicago, Illinois, and Bloomfield Hills, Michigan.
Louis W. Petro has contributed to Wiley business publications and has written both books and journal articles. He is a professor at the University of Windsor and a CPA.
James P. Martin is Managing Director of Cendrowski Corporate Advisors. He is a seasoned enterprise risk management professional who has performed engagements for private equity funds and their portfolio companies as well as publicly traded organizations.
Adam A. Wadecki is Manager of Operations for Cendrowski Corporate Advisors and a lecturer at the University of Michigan, Ann Arbor.
Content
- Private Equity: History, Governance, and Operations
- Contents
- Preface
- MODULE I: The Private Equity Model and Historical Information
- CHAPTER 1: Introduction to Private Equity
- Introduction
- What Is Private Equity?
- General Terms and Brief Overview
- The Limited Partner Agreement and General Partner Incentives
- Private Equity Firm Structure and Selected Regulations
- Types of Private Equity Investment
- The Private Equity Fundraising Process
- Recent Fundraising Trends
- General Partner Investment Restrictions
- Conclusion
- Notes
- CHAPTER 2: Overview of Historical Trends
- Introduction
- A Brief History of Private Equity
- Private Equity at the Turn of the Century
- Venture Capital Investment and Returns by Fund Stage
- Venture Capital and Buyout Returns by Fund Size
- Secondary Funds
- Conclusion
- Notes
- CHAPTER 3: Trends in Private Equity
- Introduction
- A Changing Tide
- Overall Industry and Fundraising Trends
- Selected Regulatory Changes and Proposals
- Rise of Strategic Buyers
- Conclusion
- Notes
- CHAPTER 4: Harvesting Private Equity Investments Through Initial Public Offering
- Initial Public Offerings
- Basics
- Initial Steps in the ''Going Public'' Process
- Role of the Securities and Exchange Commission and State Policing Bodies
- Post-IPO Underwriter Responsibilities
- Registration Documents
- Historical Trends
- Summary
- Notes
- CHAPTER 5: Legal Considerations in Initial Public Offerings
- Introduction
- Initial Public Offering
- Introduction
- Potential Advantages
- Potential Disadvantages
- Advance Planning Opportunities
- Selection of Advisors
- Securities Counsel
- Accountants
- Underwriters
- Corporate Housekeeping Matters
- Antitakeover Provisions
- Management
- The Initial Public Offering Process
- Principal Parties
- Principal Documents
- Selling Security Holder Documents
- The Registration Process
- Possible Liabilities Faced by a Company and Its Directors and Officers
- Liabilities under Federal Securities Laws
- The Sarbanes-Oxley Act and Dodd-Frank Act
- Public Company Filing Obligations
- Initial Public Offering Alternative: Reverse Mergers
- Advantages
- Disadvantages
- Conclusion
- CHAPTER 6: Harvesting Investments Through Mergers and Acquisitions
- Introduction
- M&A Basics
- Types of Takeovers
- Reverse Takeovers
- The Takeover Process and Financial Advisor Selection
- Analyzing Potential Buyers
- The Sale Process
- The Bidding Process
- Reaching an Agreement
- Historical M&A Trends
- Conclusion
- CHAPTER 7: Legal Considerations in Sale Transactions
- Introduction
- Sale Transactions
- Prior to the Sale Transaction
- Use of an Investment Banker
- Marketing Process
- Due Diligence
- Negotiations Phase
- Key Deal Issues
- Valuation and Pricing Issues
- Special Issues in Sales of Private Equity Fund-Owned Businesses
- Sale and Acquisition Structure
- Merger
- Asset Purchase
- Stock Purchase
- Employee Incentive Issues
- Cash Retention Bonus
- Stock Bonuses
- Recapitalizations
- The Sale Transaction Process
- Letter of Intent
- Disclosure of Acquisitions
- Time and Responsibility Schedule
- Definitive Agreements
- Necessary Consents
- Conclusion
- CHAPTER 8: Intellectual Property and Private Equity
- Introduction
- Intellectual Property Rights and Remedies
- Patents
- Trademarks
- Copyrights
- Trade Secrets
- Pre-Acquisition Due Diligence
- Established Barriers to Entry-Evaluating Investment Value
- Freedom to Practice-Assessing Risk of Proposed Acquisition
- Creating Intellectual Property Value During Management
- Leveraging and Monetizing Patent Rights
- Bolstering Technological Advantages
- Boosting Brand Development Efforts
- Preserving Knowledge-Based Resources of the Workforce
- Positioning the Exit-Reverse Due Diligence
- Minimizing Exposure of Representations and Warranties
- Notes
- MODULE II: Governance Structures in Private Equity
- CHAPTER 9: The Private Equity Governance Model
- Introduction
- A New Model for Corporate Governance
- An Analogy to Physics
- Corporate Governance and the Management of Crisis
- Public Corporations and the Private Equity Model
- The Magic of the Private Equity Governance Model
- Conclusion
- Notes
- CHAPTER 10: Value of Internal Control
- Introduction
- Introduction to COSO and Internal Control
- COSO Background
- Internal Control Defined
- Components of Internal Control
- Control Environment
- Risk Assessment
- Enterprise Risk Management
- Control Activities
- Information and Communication
- Monitoring
- Limitations of Internal Control
- Control Objectives and Control Components
- Effectiveness of Internal Control
- Internal Control and the Private Equity Firm
- Value of Internal Control for Private Equity Fund Operations
- Value and the Control Environment
- Value and Risk
- Value and Control Activities
- Value and Information and Communication
- Value and Monitoring
- Value of Internal Control for Target Companies
- Operational Value
- Financial Reporting Value
- Compliance Value
- Conclusion
- Notes
- CHAPTER 11: Internal Control Evaluation
- Introduction
- PCAOB Auditing Standard No. 5
- Phase 1: Planning the Audit
- Risk Assessment
- Scaling the Audit
- Fraud Risk
- Using the Work of Others
- Materiality
- Phase 2: Using a Top-Down Approach
- Identifying Entry-Level Controls
- Control Environment
- Period-End Financial Reporting Process
- Identifying Significant Accounts and Disclosures and Their Related Assertions
- Understanding Likely Sources of Misstatement
- Selecting Controls to Test
- Phase 3: Testing Controls
- Testing Design Effectiveness
- Testing Operating Effectiveness
- Relationship of Risk to the Evidence to Be Obtained
- Special Considerations for Subsequent Yearly Audits
- Phase 4: Evaluating Identified Deficiencies
- Phase 5: Wrapping Up
- Forming an Opinion
- Obtaining Written Representations
- Communicating Certain Matters
- Phase 6: Reporting on Internal Controls
- Conclusion
- Notes
- CHAPTER 12: Financial Statement Fraud and the Investment Decision
- Introduction
- Money Laundering
- Categories of Fraud
- What Is Fraud?
- The Required Elements of Fraud
- Financial Statement Attestation
- Tax Return Preparation
- Compilation
- Review
- Audit
- Recommendations
- Do Not Rely Solely on Financial Statements
- Pay Attention to Details
- Follow Up on Unexpected or Interesting Items
- Maintain Professional Skepticism
- Explanations Should Be Rational, Reasonable, and Verifiable
- What Do the Financial Statements Say about the Entity's Ability to Meet Its Objectives?
- Fraud and Due Diligence Procedures
- Background Investigation of Key Employees
- Testing of Journal Transactions
- Check File Metadata
- Conclusion
- Notes
- CHAPTER 13: Professional Standards
- Introduction
- Federal Trade Commission
- Federal Antitrust Legislation
- Sherman Antitrust Act (1890)
- Clayton Antitrust Act (1914)
- Federal Trade Commission Act (1914)
- Robinson-Patman Act (1936)
- Celler-Kefauver Antimerger Act (1950)
- Hart-Scott-Rodino Antitrust Improvement Act (1976)
- Federal Consumer Protection Legislation
- Securities and Exchange Commission
- Securities Act (1933)
- Securities Exchange Act (1934)
- Public Utility Holding Company Act (1935)
- Trust Indenture Act (1939)
- Investment Company Act (1940)
- Investment Advisers Act (1940)
- Foreign Corrupt Practices Act (1977)
- Sarbanes-Oxley Act (2002)
- Public Company Accounting Oversight Board
- Auditor Independence
- Corporate Governance
- CEO/CFO Certifications
- Enhanced Financial Disclosure
- Civil and Criminal Penalties
- ''Private'' Equity Going Public
- Introduction to Public Standards
- Public Company Accounting Oversight Board Standards
- PCAOB Auditing Standard No. 1
- PCAOB Auditing Standard No. 2
- PCAOB Auditing Standard No. 3
- PCAOB Auditing Standard No. 4
- PCAOB Auditing Standard No. 5
- The Standard Is Less Prescriptive
- Scalable Audits
- Audit Focus
- Using the Work of Others
- PCAOB Auditing Standard No. 6
- PCAOB Auditing Standard No. 7
- PCAOB Auditing Standard No. 8
- PCAOB Auditing Standard No. 9
- PCAOB Auditing Standard No. 10
- PCAOB Auditing Standard No. 11
- PCAOB Auditing Standard No. 12
- PCAOB Auditing Standard No. 13
- PCAOB Auditing Standard No. 14
- PCAOB Auditing Standard No. 15
- American Institute of Certified Public Accountants Auditing Standards
- SAS 99, ''Consideration of Fraud in a Financial Statement Audit''
- SAS 1 Amendments
- SAS 85 Amendments
- SAS 82 Replacements
- Descriptions and Characteristics of Fraud
- Professional Skepticism
- Engagement Team Discussions
- Fraud Risks
- Identifying Risks
- Assessing Risks
- Responding to the Risk Assessment
- Evaluating Audit Evidence
- Auditor Communication
- Audit Documentation
- SAS 104, ''Amendment to Statement on Auditing Standards No.1, 'Codification of Auditing Standards And Procedures (''Due Professional Care in the Performance of Work'')' ''
- SAS 105, ''Amendment to Statement on Auditing Standards No. 95, Generally Accepted Auditing Standards''
- SAS 106, ''Audit Evidence''
- SAS 107, ''Audit Risk and Materiality in Conducting the Audit''
- SAS 108, ''Planning and Supervision''
- SAS 109, ''Understanding the Entity and Its Environment and the Risks of Material Misstatement''
- SAS 110, ''Performing Audit Procedures in Response to Assessed Risks and Evaluation of the Audit Evidence Obtained''
- SAS 111, ''Amendment to Statement on Auditing Standards No. 39, 'Audit Sampling' ''
- SAS 112, ''Communicating Internal Control Related Matters Identified in an Audit''
- SAS 113, ''Omnibus Statement on Auditing Standards''
- SAS 114, ''The Auditor's Communication With Those Charged With Governance''
- SAS 116, ''Interim Financial Information''
- American Institute of Certified Public Accountants Accounting and Review Standards
- SSARS 10
- SSARS 12
- Institute of Internal Auditors Standards
- Information Systems Audit and Control Association
- Conclusion
- Notes
- MODULE III: Understanding Operations
- CHAPTER 14: Contemporary Business and Competitive Intelligence
- Introduction
- Contemporary Business Intelligence
- Sources of Information
- Public Records Searches
- News Archives
- Legal Proceedings
- Patent Awards and Applications
- Social Networking
- Employees
- Competitive Intelligence and the External Environment
- Normalizing Performance
- Cost of Capital and the Option to Invest
- Developing Unique Intelligence
- An Economic View of Quality
- Developing Relationships and Navigating Crises
- Application to Private Equity
- Investment Decision
- Strategic Management of Portfolio Companies
- Exit Strategy
- Conclusion
- Notes
- CHAPTER 15: Organizations as Humans
- Introduction
- Purpose of the Organization
- Genesis
- Development and Specialization
- Parts of the Whole and Maturation
- Environmental Adaptation
- Environmental Influence and Interaction
- Maturity Creates ''The Machine''
- Death of the Organization and Rebirth
- Strengths and Weaknesses of the Organizations as Humans Metaphor
- Conclusion
- Notes
- CHAPTER 16: Beginning the Lean Transformation
- Introduction
- The Origins of Lean Operations: Lean Manufacturing
- Potential Pitfalls of Lean
- Organizational Development
- Discipline Building
- What Private Equity Means for Lean
- Conclusion
- Note
- CHAPTER 17: Performing Manufacturing Due Diligence Assessments
- Introduction
- Performing the Assessment
- Employee Satisfaction
- Customer Satisfaction and Perceived Quality
- Corporate Vision and Mission
- Equipment and Facility Maintenance
- Visual Management
- Inventory Management and Product Flow
- Operational Data and Cost of Sales
- Conclusion
- Notes
- About the Authors
- Glossary
- Index
