June 2016 | 

Understanding Private Equity: The Asset Class You Can No Longer Ignore

Understanding Private Equity: The Asset Class You Can No Longer Ignore

With market uncertainties growing, many investors and their advisors are taking a closer look at private equity. In fact, this asset class is now attracting a sizeable segment of the economy, and it has an ecosystem that includes not only private equity firms, but banks that cover their debt, individual investors, and companies looking to sell or being approached for a sale.

“No one needed to understand private equity 30 years ago,” says Wharton private equity professor and director of the school’s Alternative Investments Initiative Bilge Yilmaz. “But today, you can no longer ignore it. Private equity has evolved from deal-making by the ultra-wealthy to an investment option for individuals.” Yilmaz says that with so many people now involved, the bidding can be intense — and the chance of making a costly mistake is great. “You need to be able to see value where others can’t, and understand how a deal is put together. If you’re an investor, you will inevitably have to compete with others, so your ability to do good sourcing and due diligence is key.”

Yilmaz has been teaching private equity to Wharton MBA students for many years, providing them an edge that they can put to use in their first deal. Now, he is bringing the same innovative curriculum to an open-enrollment course for business executives in the four-day program Private Equity: Investing and Creating Value.

“We will help participants gain exposure to the strategies that private equity firms use to structure and finance a deal and create value for their investors. They will understand the key drivers in private equity and gain confidence in evaluating investment opportunities,” he says. In addition to best practices in and tools for structuring a deal, sessions on due diligence, debt negotiations, and exit strategies will show participants how to get maximum value from their investments.

Yilmaz will be joined by other finance faculty and Wharton alumni who are leaders in many areas of the private equity industry. They will share their experiences and discuss their views on the private equity landscape. Outside the classroom, participants will work on deal proposals in small groups, applying what they have learned, using as reference a recent private equity deal. They will apply the tools that private equity firms use to structure and finance a deal, and show how it will create value. “This is the best way to learn,” says Yilmaz. “You need to experience the life of a deal to appreciate the knowledge and strategies that go into it. I want participants to be able to articulate why they want to own this business.”

A deal proposal will be presented to a panel of faculty and alumni who will provide real-time feedback at the end of the program. “This is not just an exercise,” say Yilmaz. “It’s a reality check on what you have learned in the program, how well you can apply it, and what you can do to improve.”