Module 3 · Alternative Investments

Investments in Private Capital: Equity and Debt

EN: Private equity strategies and private debt categories.
VN: Chiến lược private equity và các loại private debt.

1. Private Equity Strategies Concept

Venture capital Stages: seed, early, expansion, late. High failure rate, J-curve returns.
Growth equity Minority stake in profitable, scaling companies.
LBO Leveraged buyout — acquire mature company with significant debt, improve operations, exit.
Distressed Buy debt of troubled companies; restructure or take control.

2. PE Exit Routes Concept

About: IPO (max valuation), strategic sale (acquirer synergies), secondary (PE-to-PE), MBO (management buy back), recap (dividend without exit).Tóm tắt: IPO, strategic sale, secondary, MBO, recap.

IPO Public listing — highest valuation potential.
Strategic sale Sell to corporate acquirer.
Secondary Sell to another PE fund.
MBO Sell back to existing management.
Recap Refinance with debt to pay sponsor dividend (no exit).

3. Private Debt Categories Concept

About: Direct lending, mezzanine (with warrants), distressed, real-estate/infra debt, venture debt. Provides yield premium for illiquidity.Tóm tắt: Direct lending, mezzanine, distressed, RE/infra debt, venture debt. Premium cho illiquidity.

Direct lending Senior secured to mid-market firms.
Mezzanine Junior debt, often with equity warrants.
Distressed Buy beaten-down debt at deep discount.
Real-estate / infrastructure debt Project-finance type loans.
Venture debt Loans to VC-backed startups.

Practice problem Practice

Practice problem

A PE firm acquires a mature, cash-generative manufacturer using 70% debt financing, plans to improve margins, then sell in 5 years. Which strategy?

Show solution

Mature target, heavy debt, operational improvement = LBO.

Distressed: troubled target.

Venture: young/unprofitable.

Leveraged buyout (LBO)