Insights

Per Michael Porter there are two ways to compete, by charging lower prices or by developing differentiated products and offerings. In this context product differentiation is the only way to avoid a race to the bottom.

In an LBO model the sources and uses table is a convenient way to track the sources and uses of cash required to close a transaction. Building a sources and uses table can appear to be a process that is without a proper sequence, but there is definitely an order that can be followed. To understand it, let’s first explore concise definitions of the two terms. Think of sources and uses as follows:

This video is Part 4 of an introduction to private equity. In this video you will learn more about the individuals involved in the process of sourcing, structuring and closing transactions. The video provides an introduction to the independent sponsor (aka fundless sponsor), and explains certain advantages dealmakers have over their competition. The conclusion covers a brief comparison of the independent sponsor structure and the private equity fund structure.

This video is Part 3 of an introduction to private equity. In this video we will explore how to determine the appropriate amount of leverage for a target investment.

This post is Part 2 of an introduction to private equity. In this video we will explore how leverage can both create and destroy value. To highlight the benefits and dangers of excessive leverage two examples are included below in both video and text format. The first was a wild win for investors in the early 80s, and the second a modern-day private equity horror story.