404Course · Professional

Private Equity

The capital of established firms.

The Course

Private equity is the capital of established firms. This course teaches the LBO honestly — the transaction, the returns, and the three levers of value creation.

You will finish able to build a small LBO model and judge a PE thesis by its operating claims.

Outcomes

01
Describe the LBO model.
02
Read a management-buyout structure.
03
Judge a PE thesis by its operating claims.

Prerequisites

— 402 — Private Markets.

Pacing

1 week · ~4 hours.

IModule · ~2.5 hours.
The LBO
The transaction that defines the industry.
The leveraged buyout is the defining transaction of PE. The mechanics are learnable.
What You Will Be Able To Do
- — Describe LBO structure.
- — Model a mid-market deal.
- — Compute equity return.
Why here
The LBO model is the industry's central artifact.
1. 01LBO mechanicsArticle12m
2. 02Modeling an LBOInteractive20m
IIModule · ~1.5 hours.
Value creation
The three levers, honestly named.
Financial engineering, operations, and multiple expansion — the three levers, honestly named.
What You Will Be Able To Do
- — Attribute historical returns to the three levers.
- — Judge a thesis by its operating specificity.
- — Detect multiple-expansion pretending to be operations.
Why here
The honest attribution is what separates skill from cycle.
1. 01Financial engineering, operations, multiple expansionArticle12m

A Note from the Faculty

The industry's returns come from three levers. Knowing which one is being pulled is the analytical task.