ICM513: Private Equity and Venture Capital

Module code: ICM513

Module provider: ICMA Centre; Henley Business School

Credits: 20

Level: Postgraduate Masters

When you'll be taught: Semester 2

Module convenor: Dr Keith Arundale, email: k.arundale2@icmacentre.ac.uk

Pre-requisite module(s):

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded:

Placement information: NA

Academic year: 2024/5

Available to visiting students: No

Talis reading list: No

Last updated: 28 May 2024

Overview

Module aims and purpose

The principal aim of the module is to familiarise students with the private equity (PE) and venture capital (VC) fund raising and investment process and with M&A deals. The purpose is to develop students’ appreciation of the practical aspects of investing by PE and VC firms, understanding the dynamics between the PE and VC investor and the entrepreneur, and also the practicalities of raising PE&VC funds from institutional investors and transacting M&A deals. The focus of the module is on PE and VC and high-growth ventures from the viewpoints of both the entrepreneur or management team and of the investing institution (general partner), although private equity as a whole is covered (including management buyout transactions) as well as the relationship between the private equity or venture capital firm and its own investors (limited partner institutions) as are mergers and acquisition deals. adherence to environmental, social and corporate governance (ESG) and diversity & inclusion (D&I) considerations.  
 
This is a highly practical module; extensive use will be made of case studies and a group project in addition to guest seminars from invited experienced practitioners and entrepreneurs. 
This module is intended for students who may be interested at some stage in their careers in raising private equity or venture capital finance for an entrepreneurial venture or management buyout, or who see themselves working in a professional investment capacity (eg with a private equity firm as an investment executive or with an investment bank) or as an investor with a pension fund, bank or insurance company or as a corporate finance adviser, or who simply want to gain an understanding of how the private equity & venture capital fundraising and investment and M&A processes work.

Module learning outcomes

By the end of the module, it is expected that students will be able to: 

• Explain the characteristics of private equity as an alternative asset class and how these compare to mainstream asset classes of public equity and debt and other alternative asset classes (eg real estate, commodities, hedge funds, art and antiques) and discuss other sources of entrepreneurial finance, such as business angels, crowdfunding, government sources and bank debt. 
• Describe the different strategies for raising a private equity fund, the contents of a private placement memorandum for raising a private equity fund and the basic terms and conditions which codify the obligations of, and the relationship between, the general partner and the limited partners. 
• Describe the private equity investment process including how private equity and venture capital firms assess, structure (both equity and debt capital) and monitor their deals for both venture capital deals and management buyouts, including conducting initial and external due diligence and the negotiation of offer letters (term sheets) for the investment and how they achieve exits for their investments, with the pros and cons of each route to exit and measure the returns on their investments. 
• Prepare a business plan for the purpose of raising finance for an early-stage, expansion or management buyout proposition and critically assess the scope/motives of merger and acquisitions (M&As), including buy and build strategies, the pros and cons of alternative financing methods and value creation potential in M&A.

Module content

The content will be delivered over 10 lectures covering:  

#1 Introduction to private equity and venture capital / Stages of investment / Data and trends  

#2 Private equity funds / The GP/LP relationship / PPMs /PE as an asset class 

#3 Business planning process  

#4 The venture capital investment process / deal generation / term sheets    

#5 Management buyout deals  

#6 M&A deals; value creation; other sources of entrepreneurial finance 
#7 Due diligence / Legal agreements 

#8 Different strategies; sector focus; ESG; diversity & inclusion  

#9 Monitoring the investment / Adding value / Exit routes 

#10 Valuation, Regulation, Measuring PE performance 
 
Core reading material (available on Blackboard): 

• Guide to Private Equity (2010) BVCA (written by module convenor) 
• Gilligan J and Wright M (2014) Private equity demystified - an explanatory guide. 3rd edition   

Structure

Teaching and learning methods

The core theory and concepts will be presented during 10 face to face two hour lectures, supplemented by 10 face to face one hour seminars (class exercises and discussion of various cases, drawn from the lecturer’s range of contacts with venture capital firms, business angels and entrepreneurs). Guest speakers from the venture capital industry and/or entrepreneurs will be invited to discuss practical issues related to the topics covered on the course. Students will engage, in groups, in the preparation of a business plan (Group project) and subsequently individually on answering set questions on their group’s business plan in essay format (Essay). The digital discussion board will be used to discuss current press articles on PE&VC and M&A deals and various aspects of the course. One to one and group meetings will be held digitally over Teams (or face to face if preferred and by arrangement). 

Study hours

At least 30 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

50% weighted average mark

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Students will have the option to present their business plan prepared for the first assessment to a panel of judges who will provide informal, oral feedback on their plans. The presentations will take place prior to the written plan submission deadline so that students can incorporate any recommendations in their plans prior to submission. The module convenor will provide formal written feedback on the students’ group written business plan prior to the deadline for submission of the essay in the second assessment.

Reassessment

Additional costs