Introduction to private equity, presented by James Clarke at the University of Kansas, 2008

1. Introduction to Private Equity James G. Clarke Director Private Equity Investments Kauffman Foundation

5. Definition Private Equity: Private equities are equity securities of unlisted companies . Private equities are illiquid and usually long-term investments . Private equity investments are not subject to the same regulations as securities sold to the general public. Private equity includes two broad classes: Buyouts involve the purchase of an existing company using a combination of debt and equity . Returns are primarily a function of purchasing cheaply/dearly, growing and/or improving the company, the use of leverage and selling cheaply/dearly. Venture capital involves making an equity investment in an immature company in the expectation that the company can grow quickly. Returns are primarily a function of its growth rate, size of its market and the exit environment.

6. Private equity landscape Source: Credit Agricole, see slide 41 for additional details

9. Why invest in private equity? Source: Cambridge Associates, Q1 2008

10. Fund structure and organization Source: EVCA

18. Leverage alone is not the answer Caribbean Restaurants, LLC Sources: All data from public sources including The Lookout from Miradero Capital (Q2 2004) and The Deal , April 18, 2005 1991 Sold 86 stores for $70 million 1994 ~5x return 1996 4x return 1999 2.5x return 2004 Paid $340 million for 165 stores, 174 stores today

24. Buyouts raised record $’s in 2005, 2006 & 2007 $ in billions Source: Dow Jones Private Equity Analyst as of August 2008

25. 9 of 10 Largest Deals Ever Occurred in 2005-07 Source: Andrew Ross Sorkin, New York Times Dealbook, February 26, 2007 citing Dealogic data

26. Money to Burn?

27. Too hot? …ratio of capital raised to invested Source: Venture Economics, U.S. buyouts only

28. Déjà vu all over again? Source: Financial Research Corp - 2001 data through Nov. 30.

30. Venture fundraising rebounding $ in billions Sources:Dow Jones Private Equity Analyst as of August 2008

31. Cleantech investing is hot Source: Cleantech Group, January 2008

32. Emerging market fundraising 2007 2006 2004 2003 2005 Emerging Asia ($Bn) 2005 2004 2003 2006 2007 C. & E. Europe / Russia ($Bn) 2006 2003 2004 2005 2007 Latin America ($Bn) 2003 2004 2005 2006 2007 Middle East & Africa ($Bn) 11.4 Source: EMPEA

34. A career in private equity?

41. Private equity landscape

44. Skill-set scorecard Credit: Inspired by Scott Stallings, Wharton School, University of Pennsylvania, August 2006 with modifications by the author Entrepre-neurship Finance Accting Raw Genius Industry Knowledge Judgment Leader-ship Pedigree; Education Team Player Capital Markets              Strategy Consulting                Corporate Finance                    Hedge Funds                    General Mgmt                  Investment Mgmt                  Private Equity                        Venture Capital                        