Bachelor Thesis subject, making it too complex?

Bachelor student from a European economics university here looking for advice/help.

To complete my bachelor I need to write a thesis about any subject or field I like before the end of the year (July/August).
My interest goes out to Private Equity, since throughout my study it's been my favorite topic.
Even though nothing too in-depth material hasn't been treated, I have read a lot about it in my free time.

However, even though I really want to grasp the nettle with the private equity subject, I am afraid I might be making it too complicated for myself, after all, it's just a Bachelor Thesis, not a Master's one.

So I am reaching out of help/idea's; What would be a nice, not too complex (i'll save complex one's for my master's) introductory thesis subject in the field of Private Equity?

The following list is what I have found so far, but in my understanding these would be more suited for a more extensive and complex master thesis (or am I wrong).

  • Structure of Private Equity Funds,LP, covenants
  • Motivation to invest in PE (different types of investors)
  • PE Strategies
  • Investment Performance
  • How does experience and education influence Investment Perfomance
  • Value Creation, VC sided
  • Risk and Return of PE
  • PE in Emerging Markets
  • LBO build-ups and internationalization of portfolio firms
  • LBO market, entry and balance issue
  • LBO impossible sectors (no predictable cash flows, maturity?, no high expenses on capex?)

So to conclude; any tips?

 

If you want to work in private equity, I would focus on a subject which would both help you on the job once you're there and indicate to prospective PE firm employers that you researched something which demonstrates understanding of how private equity works.

One big question which may determine which research subjects are feasible would be: What data sources do you have? Preqin, Bloomberg, CapIQ, etc?

If you're limited in what data you can access, you could do something more theoretical in nature.

Something practical possibly worth examining would be how (i) recurrence of cash flows (ii) EBITDA to FCF conversion, (iii) cyclicality, (iv) ROIC, etc. affect the attractiveness of companies in certain industries as LBO targets (i.e. what multiple of EBITDA you would be willing to pay). Of course the answer directionally is obvious, but putting some hard numbers to the analysis would be an interesting thing which most practitioners would enjoy reading if it were well-researched and sent as a work sample. I'd think that this is something which is general enough that it could be used when talking to plenty of firms. Damodaran has some nice industry-specific data which could be used.

Also, as a general comment, I think many of your ideas orient your work toward how an investor in PE would think about things, not how a direct PE investor would think about things. Not bad in itself, but I think it makes sense to research something which you'd be interested in doing long term and I'm not sure what your plans are (i.e. working as an allocator or direct PE investor).

 

Dear Texan,

Thanks for the extensive reply.

I'll start by answering your questions:

What data sources do you have? Preqin, Bloomberg, CapIQ, etc?

I have acces to numerous databases, naming a couple: -Bloomberg terminal is present at my university -Wharton Research Data Service (includes lots of databases like CapIQ, TAQ, MSCI, I/B/E/S, etc) -SDC (via ThomsonOne) -ThomsonOneBanker

So I would argue that more than enough data is available.

I'm not sure what your plans are

direct PE Investor, however as I am trying to portray in my original post, this is my Bachelor thesis, not my master thesis. Wouldn't the pratical possible subjects you provided be more suited for a master's one?

This is just me spitting out an idea; What if I look at PE strategies in general, and somehow tie an interesting practical research question to it. I get to learn and get myself familar with how private equity works, what strategies there are, how they work and then as the icing on the cake I tie a practical research topic to it. (Question still remains what research question that would be).

I know this is quite general and introductiory, but that's exactly what I think is suited for a bachelor thesis. Next year i'll do my master and will go for Private Equity courses, and i'll have a big headstart.

 
Best Response

Sounds like you're in great shape on data then.

Regarding the feasibility of the subjects I suggested, is your worry that it could become too extensive and time consuming? Perhaps it would be challenging as a bachelor's thesis; however, I do think that if you want to do direct PE investing, you should (i) focus on something which would improve / demonstrate aptitude as a direct PE investor and (ii) have something general enough which you could use in various PE investment strategies. You could end up in any of a number of PE strategies coming out of university, so keeping things general but transferable would help.

I kind of like your idea of researching value creation (generally speaking - not just VC, but also in PE). This would also let you research various investment strategies and understand how PE can create value in companies.

Methods of "value creation" could include:

-Optimization of capital structure (i.e. increasing EV through a debt tax shield - see. Modigliani-Miller) -"Buy-and build" / "Roll-up" strategies which can harness synergies of combined entities. -Reallocations of capital in poorly managed companies -etc...

 

I'd caution on the access to data part, PE is notoriously difficult to get reliable and consistent data, so I'd try to stay away from deal-specific data. You'll need Preqin if you want to start slicing and dicing broader returns.

Pros and Cons to having a PE allocation in an endowment or foundation, looking at returns vs broader macro returns, with some in-depth analysis on sub-asset classes? This would be pretty high level, but again I caution on the access to data issue.

 

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