Deck 9: The Private Equity Market

Question 1

Which of the following is a way that private equity firms can extract money from the targets they take over:

A)LBOs
B)Dividend recapitalizations
C)Additional acquisitions
D)All of the above
E)None of the above

Answer 1

B

Question 2

Phalippou and Gottschalg analyzed the same return data as Kaplan and Schoar but found that private equity returns trailed the S&P 500 when unexited deals were taken into account.

Answer 2

True

Question 3

Glode and Green theorize that the findings of Kaplan and Schoar may be due to insufficient disclosure by private equity firms.

Answer 3

True

Question 4

Officer et al.found that target companies received higher takeover premiums in club deals.

Question 5

Kaplan and Schoar found which of the following with respect to private equity firms?

A)Growth in the industry
B)Decline in the industry
C)Persistence in returns
D)All of the above
E)None of the above

Question 6

Private equity firms have typically been compensated according to the following "formula":

A)2% of invested capital
B)5 and 1
C)2 and 20
D)None of the above

Question 7

Examples of the types of institutions that become limited partners in private equity funds include:

A)insurance companies
B)pension funds
C)endowments
D)all of the above
True or False

Question 8

Private equity firms used to be referred to as LBO firms.

Question 9

Drexel Burnham and Lambert and Michael Milken were pioneers in the development of the hedge fund industry.

Question 10

Which of the following are examples of private equity firms?

A)KKR
B)Blackstone
C)Morgan Stanley
D)Apollo Group
E)All of the above
F)Both a and c
G)a, b, and d

Question 11

Carried interest refers to the gains on transactions by private equity firms.