Title of the research:

The scenario of PE and leveraged buyouts in india

Rationale of proposed investigation:

Private equity and leveraged buyouts is a new & upcoming concept in india and this study will help in
finding out the trends contributing in the success of private equity funds in western countries and how
the learning’s from there can help to implement it in our country successfully

Though academic interest for turnaround investments has risen, little systematic research has been
done in this field so far. Who are the players in this market? How do their investing strategies look like?
What are the characteristics of the turnaround investing process? What do the most successful investors
do differently? What are the performances attributes of this asset class? The purpose of my dissertation
is to answer these questions. The dissertation includes a research of turnaround investors as well as case
studies on successful turnarounds.

Review of work already done on the subject:

Sharing deal insight: European financial services M&A news

and views from PwC
16 Nov 2010. Source: PricewaterhouseCoopers.

Acquisition values rose sharply in the third quarter of 2010 as the impetus for M&A
continues to accelerate. While restructuring is still a strong theme, the upsurge in cross-
border deals confirms that growth is firmly back on the agenda. More than half of the
value and six of theten biggest deals in the quarter involved foreign buyers.

For international groups looking to develop and strengthen their presence in fast-growth
emerging markets, it would be difficult to ignore the Middle East, one of the world’s richest and
most economically critical regions. The region’s banking sector has weathered the financial
storm and is set for renewed growth. Islamic finance is showing particularly strong resurgence
and future potential. However, with a fresh round of consolidation on the cards and valuations
set to rise, it will be important to act soon or face higher entry costs in the future.

Another key focus for growth is Turkey, a rapidly expanding but still underpenetrated banking
market. The Turkish banking sector underlined its investment potential by sustaining profitability
and growth throughout the global financial crisis. Turkey’s relatively young and expanding
population will help to drive economic growth and increasing demand for credit in the years to
come.
Private equity secondary market valuation analysis, a report by
Arnaud van Tichelen
09 Nov 2010. Source: Arnaud van Tichelen

During the current liquidity crisis, the private equity industry has been reshaped and
experienced a significant increase in the level of interest and activity in the secondary
market. However, despite its growth, the market is still inherently inefficient and pricing
tends to vary widely among bidders. Investors need to be aware of the challenges and
dynamics of this fast evolving market and to carefully analyse each potential sourced
opportunity.

Arnaud van Tichelen, Caracalla Capital and Scalar Partners are pleased to announce the
publication of this study on the Private Equity Secondary Market. We hope the market
intelligence and data provided in this report will allow investors to better understand the
secondary market and seize its growing opportunities.

This research paper attempts to analyse the characteristics of the private equity secondary
market. Furthermore, it analyses the valuation in the market and provides an actual valuation of
a real secondary investment opportunity supported by the development of a secondary
valuation model. This analysis is based on more than 25 interviews conducted with expert
participants in secondaries.

 Currently, transaction volume for secondaries is near an all-time high which generates further
liquidity and benefits the asset class as a whole. Near-term and long-term factors are driving a
fast growing market which many expect will grow about 16 per cent annually (CAGR) in the next
five years. However opportunities on the market are mirrored by significant challenges. Although
the top-down method is helpful in determining the value of a potential secondary, empirical data
clearly shows that a bottom-up valuation is crucially important in determining the value of an
asset in the secondary market.

Has private equity reached a crossroads?, a PwC report

26 Jan 2010. Source: PricewaterhouseCoopers

With cheap, easy credit no longer available the private equity model based on high
leverage and financial engineering is no longer viable. Private equity has an important
role to play in helping companies survive and thrive in a harsher financial and economic
environment, but must adapt and go back to the basic principles that the private equity
industry was founded on.
The sharp recession sparked by the global financial crisis has left UK companies facing
their toughest challenge in several decades. In this significantly changed environment
cost control and efficiencies have become paramount and growth is critical to all
businesses. A private equity model based on achieving operational improvements
therefore has a vital role to play in returning the economy to sustainable growth.

Based on in-depth interviews among private equity-backed companies from the 2006-
2008 transaction vintages, PwC’s qualitative research shows that most of the private
equity backed companies interviewed, across a range of industry sectors, have been
adversely affected by the recession. Many private equity backed companies, however,
must cope not only with the economic downturn, but also with the added burden of a
highly leveraged debt structure. Most of the companies interviewed say that the burden
of debt they are operating under has seriously restricted their ability to carry out their
strategy. For already highly leveraged companies, funding for acquisitions and capital
expenditure has become difficult, if not impossible, while most believe there are no
alternative debt structures available and that debt restructuring is not a realistic option

Feeling the pulse of private equity

02 Nov 2010. Source: Partners Group.
Private equity investments are characterized by two types of cash flows: once the
investment manager of a fund has identified an investment opportunity, capital will be
called from investors. Typically, after three to six years investors are rewarded with a
distribution after the company has successfully been exited. An obvious question is the
dependence of these cash flows on the prevailing economic climate.

Data suggest a strong dependence of distribution activity and GDP growth. This is also a natural
reflection of the incentive schemes that govern private equity. With investment managers
participating in the value created for investors, exits are mainly executed in times where
attractive valuations are achieved. The transaction activity of investment managers on the other
hand is observed to be largely independent of the economic climate except for severe economic
crises, where financing is scarce and managers are heavily involved in their existing portfolio
companies.

The year 2009 has been characterised by a historically low cash flow activity. Distribution
activity was less than one fifth of a normal year, similarly investment activity only stood at
around 50 per cent of a normal year. With GDP growth rates estimated at slightly over 3 per
cent in 2010 and 2011 in the US and at 1.2 per cent in 2010 and further increasing to 1.8 per
cent in 2011 in the Eurozone, investors can be confident that the distributions will continue to
increase from  the historically low levels observed in 2009.

At the same time, GDP growth in developed economies is anticipated to remain below potential
growth for an extended period of time and loose monetary policy may lead to an increase in
inflation in the mid-term. In such a stagflationary environment, investment activity is anticipated
to outpace exit activity. For investors that pursued an aggressive commitment strategy, liquidity
may remain tight in the years to come.

As many investors are still ramping up their private equity portfolio, demand from new entrants
for the asset class will remain strong – existing investors will need to see realisations before
capacity for new investments is freed up. This is expected to further the consolidation process in
the industry.

Objective(s): 1. Main objective:

A) To analyse the process framework & working of PE funds in India.

B) To find out

 the critical success factors for a leveraged buyouts.

 Implementation barriers
 Selection of a potential turnaround

Materials and methods: .

1. Secondary data will be collected on entire framework of PE funds and leveraged buyouts
through internet, journals ,articles and research papers.

Tentative chapter wise details of proposed research

1. Introduction

2. Literature review
3. Research Methodology
4. Data analysis n Findings
5. Conclusions
6. Recommendations/Suggestion
7.Refrences
Bibliography
 8. Annexure

References cited:

 “PricewaterhouseCoopers”- Sharing deal insight: European financial services M&A news

and views from PwC-

 “Arnaud van Tichelen”- Private equity secondary market valuation analysis, a report by
Arnaud van Tichelen

 “Partners Group”- Feeling the pulse of private equity-

http://www.altassets.com/private-equity-knowledge-
bank/article/nz19528.html
 “PricewaterhouseCoopers”- Has private equity reached a crossroads?, a PwC report-

http://www.altassets.com/private-equity-knowledge-
bank/article/nz17769.html