PE Maestros, Hardos, and Aficionados. Grab a mug and sit down.
The goal of this page is to share some of the best stories of financial engineering in Private Equity, and to uncover some of the learning gems, and the 'I wish I knew about these when I was training-s' for advanced methods of financial engineering.
I've found a few good comments and threads on this topic, but never one that's packed with good recommendations, stories, and materials (plz point in the direction if I'm wrong).
As an IB analyst I've found the absolute best part of the job to be the creativity of PE negotiations and structurings around the deal; braiding financial incentives, debt structures, facilities for bolt-ons and other operations... the list goes on.
- What are some of the best personal (or other) accounts of financial engineering/deal structuring you've come across on a deal?
(A personal favourite, Nomura's Guy Hands securitising Angel Train's cash flows and selling as individual instruments achieving 100% leverage within 3 months post a 100% equity acquisition, late 90s/early 2000's).
- What are some of the best resources, books, or podcasts you've come across on this topic?
All contributions appreciated,
I'll take a look and see if I can dig out any good materials as I've come across some in the past but can't find them on current laptop. Check out TXU's $45bn buyout by KKR, Goldman, and TPG. I remember seeing some crazy intricate debt structuring and use of energy derivatives at acquisition. Also not sure how relevant but I remember TPG securitising Ducati's (the motorbike company) IP to raise more debt when they had maxed out their asset-backed lending, reminded me of the trains example.
Bump! Awesome Q
agree
Any good writeups on the Angel Train structuring? Looks interesting
No write-ups I've read, but now you mention i'll have a look. I'd listen to the Guy Hands episode from the MoneyMaze Podcast, pretty good summary.
I've read Guy Hands' book and listened to some other podcasts he's done (50mins+) long which have been fantastic.
He started his career in the securities and re/structuring division and was highly valued at GS in his youth. He applied his knowledge of securitising cash flows and detailed restructuring to the investing process, which was fairly unique in PE at the time; this gave him an edge from the late 90's to just before the GFC. He dabbled with a few pub rollups in and around that time, and then had a famous crash of a particular PortCo which was music related. The PortCo tried to capitalise on the digitalisation era (transitioning from records to electronic distribution of music), I think he was fairly early to digitalisation and the combination of a lack of beleif in the transition or the speed of the transition, alongside his approach of either B2B or B2C digitalisation concluding it would have been more appropriate the other way round (sorry i forget), and some financing issues, he lost a significant amount of cash.
If you’re talking about EMI in 2007, the key issue was that he overpaid by like 40-50%. No one understood and people thought they had missed something while evaluating the deal, because how else could these guys pay THAT MUCH more…? Turns out there were simply wrong and that became apparently pretty quickly - and in many ways the start of the end for Terrafirma. Can’t structure yourself out of a bad idea is the moral of the story
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