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Private Equity as an Asset Class (The Wiley Finance Series)
Guy Fraser-Sampson

Wiley, 2007 - 284 pages

average customer review:based on 5 reviews
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   highly recommended  highly recommended





Usefull and well-written

I was happy to review the author's first book on investment, having been familiar with his articles for many years, and was looking forward to this one too. I was not disappointed.

Fraser-Sampson is one of the world's leading experts on private equity, and it shows in the sheer quality of this book, page after page. Over twenty years' personal experience are coalesced into a mix of practical hints and technical analysis. Even though it is a subject I thought I knew well, it taught me many things that were completely new to me. I particularly liked the glossary of private equity terms, which explains many arcane phrases in everyday terms but also with welcome touches of humour.

I was surprised to learn that this is the only definitive textbook in the world on this exciting class="textlinks">asset class, but a little research on Amazon backs this up. There are casebooks and books on specific aspects of private equity (usually venture capital and/or entrepreneurs raising capital) but nothing which looks at the whole spectrum of the subject from an investor's point of view.

I would imagine this book would be particularly useful to two classes of people. First, business school students and those taking up or seeking entry level positions in buyout or venture capital firms. Second, those looking to raise money for private equity funds, since this book gives a great "view from the other side of the hill" as to what LPs (investors in private equity funds) are looking for.

As with his first book, it is incredibly well written. He really does have a style all of his own. I would recommend it without doubt.



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A well-written, comprehensive, and practical overview of the private equity field

Guy Fraser-Sampson does an outstanding job in introducing the world of private equity in this book. He starts off defining various concepts in this field, explaining the ways to analyze private equity returns and distinguishing between buyouts and venture capital. He follows with a comprehensive discussion of buyouts (including the various types of buyouts, analysis models, and historical buyout returns) and then an equally thorough investigation of venture capital (with a similar structure to that in the buyouts section). Mr. Fraser-Sampson wraps up with a discussion on due diligence and advice on planning your own investment program in private equity.

I greatly enjoyed the book. It is easy to read, and Mr. Fraser-Sampson presents the concepts in a clear and simple manner - suitable for readers completely new to private equity. I like that the author is unafraid to express his own opinions - whether on the state of transparency in the field, on future buyout returns in Europe, or on usefulness of anti-trust legislation. He furthermore makes sure to separate his thoughts from the pure factual data that he provides to support them.

Interestingly, the book does not simply focus on private equity in one area of the world - the United States. It also covers Europe and sometimes ventures (no pun intended) into other parts of the globe, which I think is a breath of fresh air from the typical finance books that concentrate on US markets only. I am pleased to see this, as I strongly feel that a world-wide outlook is very important in the business world today. And, as Mr. Fraser-Sampson concludes himself, we can learn good lessons by examining the state of the private equity field in various geographic locations: "However, history is cyclical and I now see exactly the same sorts of issues which plagued continental Europe in the past rearing their heads anew in developing private equity areas such as Asia and Latin America. For those in such places who are willing to listen, the European experience has some valuable lessons" (61).

I applaud the author for the amount of historical data present throughout the book - both scattered throughout the text and assembled into tables and diagrams. While most of the data comes from a single source (the VentureXpert system) and the author's own calculations based on that data, it is great to see the general trends in buyout and venture capital returns, fund sizes, etc. I also appreciate that, in a few places, Mr. Fraser-Sampson notes that some of the data may not be very reliable since it is new (which is especially important to the private equity field due to the J-curve phenomenon: fresh data often captures the state of the things on the downward portion of the curve). There is, however, one aspect of history that I would have liked to see represented more. It would have been nice to see several examples of interesting or famous buyouts and venture deals, together with their defining characteristics. While many examples are very briefly touched on, none are really explored in detail. For example, I was pretty surprised that, amidst an extensive description of buyout mechanics, there wasn't any mention of the RJR Nabisco LBO in the late 1980s, to which the author could apply, for instance, his discussion of various levels of debt when dealing with huge transactions.

Some neat small features in this work include concise chapter summaries and a glossary at the end of the book. Little things like that make it easier to reinforce concepts and look them up later. I found the chapter summaries especially helpful - each time I read a chapter summary, I was pleasantly surprised on how concisely and accurately it summed up the important ideas presented earlier. Also useful is the practical advice found in the last two chapters of the book - what a fund or company investor should look for when performing due diligence and how to actually plan your private equity investments program (with an emphasis on the Total Return outlook).

Finally, I'd like to mention something about the author himself. I was confused about one of the diagrams in the book (the one on p. 87, featuring the second scenario in analyzing a buyout return), and I e-mailed Mr. Fraser-Sampson with some questions. He replied almost immediately, clarifying the circumstances around the scenario and thanking me for bringing it to his attention, noting that he will make things more explicit in the next edition (strictly speaking, in the diagram on p. 87, the $20M value under "Yr2" is not a cashflow, since no recapitalization took place - debt was simply reduced without an outflow of equity; this hence technically lowers the shown IRR of 124% to 89%). Not only was Mr. Fraser-Sampson helpful, but he was also just very friendly and approachable. That really tops everything for me... I've e-mailed multiple authors before and have received no responses, yet Mr. Fraser-Sampson responded so quickly. I think it's fantastic when readers can ask an author to clarify concepts and receive insightful answers and comments. It brings the book to an entirely new, higher level.

The only problems I have with this book stem from the fact that I want to see more. Specifically, I would have liked to see the math behind the calculations in some of the numbers that the author presents. I also found myself looking up a lot of extra information outside the book about the IRR - how it is calculated and used. A more in-depth, separate section on IRR would have been great (the author does mention how the money multiple drives the IRR and not vice versa throughout various sections of the book, but a more consolidated discussion would have, in my opinion, been more helpful).

These are very minor cons, and some may argue that they aren't really cons at all, but rather an indication that the author did a splendid job in making me interested in the field of private equity. He wishes to keep his analyses and explanations simple and understandable without burdening the reader with hefty calculations or overly advanced topics. I can certainly respect that. But the absence of this information keeps the reader more at a "birds-eye view" level without allowing him/her to dig deeper into certain concepts. This is just something to keep in mind. In a strict classroom setting for a private equity course, this book would work well as a textbook when complemented by some sort of workbook with detailed analysis models and problems.

In conclusion, this book is an excellent introduction to the world of private equity. I knew very little about this field before reading this work, and I feel that it has given me an excellent well-rounded overview. The book is thorough, yet easy to read and understand. When the only cons I can think of are really just me wanting to learn more, there's not much else I can say about the book other than to highly recommend it to those new to the private equity field.

Pros:
+ clear and comprehensive presentation of the concepts
+ a more complete world-wide view on private equity, compared to most other books
+ lots of historical data on various aspects of buyouts and venture capital
+ great concise summaries at the end of each chapter and a glossary at the end of the book
+ practical advice in due diligence and planning your private equity investment program
+ the author himself is very responsive and helpful

Cons:
- could use more detailed analyses of real-world examples when discussing the structure and characteristics of buyout and venture capital deals
- no math shown for calculating many of the values presented
- lacks an in-depth discussion of advanced topics like the various uses of IRR and how to calculate it


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the Insider's Guide to Private Equity

The author shares many lessons learnt over 20 years in the PE business.

Would be very helpful to many, including PE investors looking to avoid investing in PE funds that will not make them money (most, unfortunately, after fees) and PE funds that make many of the mistakes the author so clearly explains.

Ken Fagan
traducteur private equity
www.privateequitytrad.com







Brilliantly written ! Makes very easy reading out of what are very complex issues.

I have had the advantage of reading the manuscript of this book in advance, and one of the comments on the cover is my own.

Unlike other books on the subject, this one does not dive straight off into complicated areas such as return analysis, nor does it deal with such nebulous matters as the GP/LP relationship (indeed, the writer states that he considers this last topic to be something of a red herring). Instead, the book sets out to be a comprehensive account of private equity from first principles onwards, and will guide you steadily through the intricacies of the class="textlinks">asset class until you find yourself quite happily using very complex analysis models to look at buyout and venture returns. More importantly, it focuses on explaining the principles which underlie all of this, so you will actually understand what you are doing, and why. As the writer says repeatedly "don't just look at the figures - try to think what lies behind them."

Fraser-Sampson has twenty years experience of the private equity industry, and the depth and range of his knowledge shines through every page. I was a great fan (and a reviewer) of his first book "Multi Asset Class Investment Strategy", and ideally they should be read together. The first explains why you should be allocating 25% of your portfolio to private equity, and this one explains how you should actually go about it. Just as the first one came up with a whole new way of looking at investment in general, so this one makes some very innovative points, not all of which will make happy reading in some quarters. For example, he believes that private equity performance should be judged across an investor's whole allocation (what he calls Total Return investing) rather than, as presently, on just that small part of it which may be invested at any one time.

Both books are brilliantly written and make very easy reading out of what are very complex issues.



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Guy Fraser-Sampson draws upon twenty years' private equity experience to provide a practical guide to mastering the intricacies of this highly specialist class="textlinks">asset class. Aimed equally at investors, professionals and business school students, it starts with such fundamental questions as "what is private equity?" and progresses to detailed analysis of venture and buyout returns. It also unveils a totally new concept which looks set to revolutionise thinking in the industry: Total Return investing.

Often unfairly reviled, and frequently misunderstood, private equity differs from all other asset classes in various important respects, not least in the nature and timing of its returns, which require a whole new approach for those reared on more traditional investments such as bonds and shares. This book shows how a good grasp of the basic structure of private equity vehicles and returns (including the dreaded J-curve) can lead to full understanding of the techniques needed to measure and analyse performance.

Key points include: A glossary of private equity terms Venture funds and transactions Buyout funds and transactions Understanding private equity returns Analysis of historic returns How to plan a fund investment programme How to conduct effective due diligence Total Return investing


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