Private Equity Masterclass: M2 - Real Assets & Infrastructure Private Equity

Module 2 of the Private Equity Masterclass will: Examine the role of traditional PE, real assets and infrastructure PE, private mezzanine financing (PMF), and growth equity in the portfolio Analyse representative transactions and assess the attractiveness of potential transactions in different transaction contexts Illustrate common types and identify classic sources of traditional PE, real assets, infrastructure, PMF and growth equity transactions Examine entry valuation methodologies, including forecasting and modelling Demonstrate how to structure and fund deals Demonstrate how to generate returns through opportunistic entry, improved fundamental performance post-acquisition, use of leverage and performance incentives, and timely exit Profile sources of financing for transactions of different asset classes Examine funds flows and asset ownership changes associated with different products Demonstrate classic post-acquisition operational improvements, such as more disciplined capital spending, reductions in working capital, and performance-related compensation Profile key due diligence issues, including HR due diligence Review exist alternatives, including leveraged recaps, IPOs, and trade sales to a strategic buyers View our 60 Second Interview with the Course Director - Andrew Regan We took the opportunity to ask our expert Course Director a few questions on the current market challenges and how he became involved in this exciting industry. This is what he had to say. Course Summary Alternative assets (AA) have attracted in recent years a considerable amount of attention and enthusiasm for their performance, diversification effects, and growth of assets under management (AUM). Among various alternative asset classes, traditional leveraged private equity and mezzanine finance share numerous characteristics – illiquidity, longterm horizons, and potential for high levels of returns. Infrastructure private equity and real asset investment add diversification plus inflation protection. All these areas can utilise leverage in acquiring the underlying assets. This is Module 2 of the Private Equity Masterclass Private Equity Masterclass (Modular Course) M1: Traditional Private Equity: Leveraged Transactions M3: Mezzanine Private Equity and Growth Equity Who Should Attend? Private equity professionals Venture capitalists Institutional and family office investors Investment bankers Private wealth and other investment managers Corporate strategic planning and development staff Corporate financiers Corporate M&A teams Placement specialists Accountants Lawyers This masterclass provides delegates with a comprehensive understanding of these "illiquid" alternative asset classes, it will: Examine the role of traditional PE, real assets and infrastructure PE, private mezzanine financing (PMF), and growth equity in the portfolio Analyse representative transactions and assess the attractiveness of potential transactions in different transaction contexts Illustrate common types and identify classic sources of traditional PE, real assets, infrastructure, PMF and growth equity transactions Examine entry valuation methodologies, including forecasting and modelling Demonstrate how to structure and fund deals Demonstrate how to generate returns through opportunistic entry, improved fundamental performance post-acquisition, use of leverage and performance incentives, and timely exit Profile sources of financing for transactions of different asset classes Examine funds flows and asset ownership changes associated with different products Demonstrate classic post-acquisition operational improvements, such as more disciplined capital spending, reductions in working capital, and performance-related compensation Profile key due diligence issues, including HR due diligence Review exist alternatives, including leveraged recaps, IPOs, and trade sales to a strategic buyers Attendees will see private equity from the standpoint of both: The buy-side, i.e. investors with capital looking to commit it to uncorrelated, historically higher-return, but illiquid investments The sell-side, i.e. intermediaries assisting in the structuring and financing of private equity transactions Methodology The course will include the analysis of several private equity deals and leveraged buyouts, including a series of Asian transactions. A Socratic approach, with active participation and exercises, will be used. Computer-Based Exercises All delegates should bring a laptop loaded with Microsoft Excel 2003 or later to facilitate in-class studies and exercises. FTS-Eligible This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants’ business activities or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme Directory with the specified validity period. Please refer to www.ibf.org.sg for more information. Please note that this course is only eligible for FTS Funding when registering for all modules.
Module Two Real Assets and Infrastructure Private Equity Day 3 Introduction Infrastructure and real asset investing vs. traditional project finance Established, "stabilised" assets and cashflows vs. "greenfield" projects Infrastructure and real assets vs. Traditional real estate investing Infrastructure as an alternative to premier Class A properties Role of real assets and infrastructure private equity in a portfolio: Current returns, diversification, inflation hedge Transaction types: All-equity acquisition of existing infrastructure or real assets Leveraged acquisition of existing infrastructure or real assets Target screening: Infrastructure assets Barriers to entry: "Irreplaceability" Geographic location Tariff structure: Freedom, predictability, enforceability in pricing of the use of asset Technical characteristics: Physical condition, maintenance burdens, operational complexity Types: Transportation, communication, power generation, social infrastructure Target screening: Real assets Supply and demand Geographic location Tariff structure: Freedom, predictability, enforceability in pricing of the exploitation of the resource Technical characteristics: Ease of extraction and transport, maintenance burdens, operational complexity, cost predictability Market condition Types: Fossil fuels, metals, timberlands, agricultural land A target investment problem: Finding quality assets A shortage of established assets in developed economies Developing economies: Governments as willing sellers in environments of excessive uncertainty The unsuitability of "greenfield" assets for infrastructure/real asset private equity Infrastructure: Politically sensitive sectors - water, electricity, social infrastructure Real assets: The sensitivity of "selling the family silver" Financial performance assessment Cashflow consistency: Noncyclicality, tariff stability and visibility, limited technological change Financial strategy assessment Incremental capital investment needs Cash generation and capital use Historical, target and current capital structures Funding modes and sources Forecasts: Debt capacity and future cashflows "Topline" revenue growth rate projections Forecasting margins Forecasting capital expenditures and other capital outlays Forecasting debt service burdens Levered equity cashflows Return requirements and discount rates Target IRRs Other return measures The capital structure decision: Role in the portfolio Conservative capitalisation: Seeking inflation-adjusted current returns More aggressive capitalisation: Some bias toward capital gains Exit strategies: “Harvesting” returns Strategic buyers: A shortage of them in infrastructure assets Financial buyers: Other infrastructure/real asset investors, direct investment by pension funds Public market exit: The Macquarie Model Leveraged recapitalisation: Episodic capital gains, with some current return No exit: “Buy-and-hold” for longterm inflation-protected current returns Review of target valuation in real assets and infrastructure assets Transaction structure and funding Debt funding Bank and other senior debt Bridge funding Bonded debt financing Subordinated and other long-term debt finance Securitisation and structured finance Credit analysis and credit ratings Equity-linked debt Equity funding Publicly-traded open-end and closed-end infrastructure funds: The Macquarie Model Private infrastructure/real asset funds Direct investment by pension funds, sovereign wealth funds, and endowments "Strategic partner" investment by suppliers, vendors to the specific type of project/sector Use of funds: Capital structure and returns Debt capacity Leveraged vs. Unleveraged structures Equity-linked securities and dilution impacts: Warrants with-debt, convertibles, pay-in-kind securities Transaction process Due diligence, deal documentation and structuring highlight for real assets and infrastructure assets Sources of returns/manager value-added in real assets/infrastructure private equity Timely entry Financial: Aggressive substitution of debt for equity, with careful cashflow management, especially disciplined in cost control and capital expenditure Operational: Post-closure performance improvement due to enhanced managerial resources, more highly-motivated management and workers Strategic: Well-situated, "irreplaceable" assets with tariff autonomy in infrastructure, and scarce resources with consistent, price-insensitive demand in real assets Timely exit Public infrastructure/real asset managers: The Macquarie Model Private real asset/infrastructure managers: Organisational structures and associated funds flows General vs. Limited partners Legal: Specified life, withdrawal prohibitions, transfer restrictions, liability Capital flows: "Takedown" schedules, capital calls, distributions Manager fees and compensation, reporting and accounting policies Case studies: Morgan Stanley infrastructure partners Macquarie international infrastructure fund Australia’s Transurban spurns $4.4bn buy-out bid for Tollroad Assets Ontario Teachers Pension Plan buys marine container port assets GE/Credit Suisse infrastructure fund acquisition of London City Airport and Gatwick Airport Edinburgh Airport Buyout Ferrovial SpA Potential LBO of HK Telecom via PCCW LBO of Australian Hospitals with State Contracts