Task 1
"The private equity world is in its golden era right now ...the stars are aligned."
-Henry Kravis, Banking Conference, May 2007
That provocative quote from the head of Kohlberg, Kravis & Roberts, one of the world's largest private equity firms, smacks of hubris. Yet, given the astonishing growth of private equity funds in recent years, Mr. Kravis' zeal is perhaps justified. Private equity has been around for a long time and has undergone booms before, from the leveraged buyouts (LBOs) of the 1980s to the dot.com venture capital frenzy in the late 1990s. But nothing has matched the remarkable growth of the private equity market in the past five years, with some $1.2 trillion under management globally at the end of 2006. The fastest growing sector of private equity has been buyout funds, which comprised $710 billion of that total, up two and a half times from 2000.
Required:
Citing relevant literature, discuss the key drivers in the expansion of private equity firms since 2000. Explain why might some private equity groups consider going public? Discuss how is this done.
Task 2
Why do some mergers fail miserably while others prosper? Is there a common denominator for the failures? What role do CEOs play in the success/failure equation? These are three of the most important research questions in the field of academic study on mergers and acquisitions. Choose one well known example of merger failure and analyse:
i) The extent of the failure using financial results and share price analysis;
ii) The reasons for the failure, including where appropriate actions both before and after the acquisition; and
iii) The role, if any, that the CEO played in bringing about the failure.