Outline

Overview

Private equity (PE) is crucial in developing new business ventures and promoting innovation. This unit investigates how PE firms operate, analysing the key strategic issues they face during the fundraising, investing and exit stages of the PE cycle. Topics covered include: the determinants and types of PE fundraising, the organisational structure of PE firms, the PE firm's investment decision, the PE firm-investee company relationship and the design of exit strategies. The role of PE in the broader economy is also discussed. Finally, we introduce some of the ethical issues PE firms face.

Unit details and rules

Academic unit	Economics
Credit points	6
Prerequisites ?	ECON5001 or ECON5040
Corequisites ?	None
Prohibitions ?	None
Assumed knowledge ?	None
Available to study abroad and exchange students	Yes

Teaching staff

Coordinator	Mark Melatos, mark.melatos@sydney.edu.au

Type	Description	Weight	Due	Length
Final exam	Final exam Take home exam. Details to be provided on Canvas.	50%	Formal exam period	2 hours
Outcomes assessed:
Assignment	Reading assignment Assignment allocations will be published on Canvas.	25%	Multiple weeks	2000 words
Outcomes assessed:
Assignment	Case study assignment Assignment allocations will be published on Canvas.	25%	Multiple weeks	2000 words
Outcomes assessed:

Assessment summary

Reading & Case Study Assignments
These will be marked on the clarity and throughness of your answers as well as on the extent to which you critically engage with the material in the reading or case study.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a High distinction indicates work of an exceptional standard, a Distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name	Mark range	Description
High distinction	85 - 100
Distinction	75 - 84
Credit	65 - 74
Pass	50 - 64
Fail	0 - 49	When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

Deduction of 5% of the maximum mark for each calendar day after the due date.
After ten calendar days late, a mark of zero will be awarded.

This unit has an exception to the standard University policy or supplementary information has been provided by the unit coordinator. This information is displayed below:

faculty policy: 2% (of max total marks) per business day.

Academic integrity

The Current Student website provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

Use of generative artificial intelligence (AI) and automated writing tools

You may only use generative AI and automated writing tools in assessment tasks if you are permitted to by your unit coordinator. If you do use these tools, you must acknowledge this in your work, either in a footnote or an acknowledgement section. The assessment instructions or unit outline will give guidance of the types of tools that are permitted and how the tools should be used.

Your final submitted work must be your own, original work. You must acknowledge any use of generative AI tools that have been used in the assessment, and any material that forms part of your submission must be appropriately referenced. For guidance on how to acknowledge the use of AI, please refer to the AI in Education Canvas site.

The unapproved use of these tools or unacknowledged use will be considered a breach of the Academic Integrity Policy and penalties may apply.

Studiosity is permitted unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission as detailed on the Learning Hub’s Canvas page.

Outside assessment tasks, generative AI tools may be used to support your learning. The AI in Education Canvas site contains a number of productive ways that students are using AI to improve their learning.

Learning support

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

Weekly schedule

WK	Topic	Learning activity
Week 01	Introduction, PE structures and compensation	Lecture (3 hr)
Week 02	PE investing	Lecture (3 hr)
Week 03	PE exit and other issues	Lecture (3 hr)
Week 04	PE lifecycles and financing and VC activities and fundraising	Seminar (3 hr)
Week 05	PE compensation and PE structures	Seminar (3 hr)
Week 06	PE investing	Seminar (3 hr)
Week 07	Institutional issues	Seminar (3 hr)
Week 08	PE exit	Seminar (3 hr)
Week 09	PE and the role of government	Seminar (3 hr)
Week 10	Interview cases	Seminar (3 hr)
Week 11	Gobi case	Seminar (3 hr)
Week 12	Lion case	Seminar (3 hr)
Week 13	Yahoo 1 and 2	Seminar (3 hr)

Attendance and class requirements

Attendance: According to Faculty Board Resolutions, students in the Faculty of Arts and Social Sciences are expected to attend 90% of their classes. If you attend less than 50% of classes, regardless of the reasons, you may be referred to the Examiner’s Board. The Examiner’s Board will decide whether you should pass or fail the unit of study if your attendance falls below this threshold.
Lecture recording: Most lectures (in recording-equipped venues) will be recorded and may be made available to students on the LMS. However, you should not rely on lecture recording to substitute your classroom learning experience. Note that the seminars which make up the majority of the lectures will involve a great deal of classroom and audience interaction. These interactions may not be captured adequately by the official recording. So class attendance will be necessary to obtain a complete picture of seminar discussion and material.
Preparation: Students should commit to spend approximately three hours’ preparation time (reading, studying, homework, essays, etc.) for every hour of scheduled instruction.

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

Week 4

“Life cycles of growing organizations: A review with implications for knowledge and learning” Robert Phelps, Richard Adams and John Bessant International Journal of Management Reviews (2007)
“The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle” Allen N. Berger, Gregory F. Udell, Journal of Banking & Finance 22 (1998) pp. 613-673
“Venture capitalist value-added activities, fundraising and drawdowns” Douglas Cumming, Grant Fleming, Jo-Ann Suchard, Journal of Banking & Finance 29 (2005) pp. 295–331
“Entrepreneurs' Access to Private Equity in China: The Role of Social Capital”, Bat Batjargal and Mannie (Manhong) Liu, Organization Science, Vol. 15, No. 2 (Mar. - Apr., 2004), pp. 159-172

Week 5

“An analysis of compensation in the US venture capital partnership” Gompers, P and Lerner, J., Journal of Financial Economics 51 (1999) pp. 3-44
“Venture Capital Limited Partnership Agreements: Understanding Compensation Arrangements”, Kate Litvak, The University of Chicago Law Review, Vol. 76, No. 1 (Winter, 2009), pp. 161-218
“Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance”, Robinson, David T. Sensoy, Berk A., Review of Financial Studies, 26 (11), pp. 2760-2797
“The Use of Covenants: An Empirical Analysis of Venture Partnership Agreements, Paul Gompers and Josh Lerner, The Journal of Law & Economics, Vol. 39, No. 2 (Oct., 1996), pp. 463-498

Week 6

“Chapter 2: the deal process and preliminary matters”, Geoff Yates and Mike Hichliffe, A Practical Guide to Private Equity Transactions, Cambridge University Press, May 2010.
“Chapter 3: Transaction structures and deal documents”, Geoff Yates and Mike Hichliffe, A Practical Guide to Private Equity Transactions, Cambridge University Press, May 2010.
“Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts”, Steven N. Kaplan and Per Strömberg, The Review of Economic Studies, Vol. 70, No. 2 (Apr., 2003), pp. 281-315
“Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses”, Steven N. Kaplan and Per Strömberg, The Journal of Finance, Vol. 59, No. 5 (Oct., 2004), pp. 2177-2210

Week 7

“Venture capital and the structure of capital markets: banks versus stock markets”, Bernard S. Black and Ronald J. Gilson, Journal of Financial Economics 47 (1998) 243-277
“An institutional view of China’s venture capital industry: Explaining the differences between China and the West”, Garry D. Bruton and David Ahlstrom, Journal of Business Venturing 18 (2003) 233–259
“Founder-CEO Succession and the Paradox of Entrepreneurial Success”, Noam Wasserman, Organization Science, Vol. 14, No. 2 (Mar. - Apr., 2003), pp. 149-172
“Fund managers under pressure: Rationale and determinants of secondary buyouts”, Sridhar Arcot, Zsuzsanna Fluck, José-Miguel Gaspar, Ulrich Hege, Journal of Financial Economics 115(2015) pp. 102–135

Week 8

“Contracts and Exits in Venture Capital Finance”, Douglas Cumming, The Review of Financial Studies, Vol. 21, No. 5 (Sep., 2008), pp. 1947-1982
“Initial Public Offerings: An Analysis of Theory and Practice”, James Brau and Stanley Fawcett, The Journal of Finance, 61(1), pp. 399-436
“The Post-Issue Operating Performance of IPO Firms”, Bharat Jain and Omesh Kini, The Journal of Finance 49(5), pp. 1699-1726
“Leveraged Buyouts and Private Equity”, Steven N. Kaplan and Per Stromberg, Journal of Economic Perspectives 23(1) pp.121–146

Week 9

“Government policy towards entrepreneurial finance: Innovation investment funds”, Douglas Cumming, Journal of Business Venturing 22 (2007) 193– 235
“The Legislative Road to Silicon Valley”, John Armour and Douglas Cumming, Oxford Economic Papers, Vol. 58, No. 4 (Oct., 2006), pp. 596-635
“The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?”, Tobias Moskowitz and Annette Vissing Jorgensen, The American Economic Review 92(4) pp.745-778
“Regulation of private equity”, Andreas Heed, Journal of Banking Regulation, Vol. 12, No. 1, pp. 24–47, 2010.

Week 10: Interview Cases

The Future of Private Equity: Beyond the Mega Buyout, Mark Bishop, Palgrave MacMillan 2012

Week 11: Gobi Case

Week 12: Lion Case

Week 13: Yahoo! Cases 1 and 2

Learning outcomes

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

Outcomes
Graduate qualities

At the completion of this unit, you should be able to:

LO1. demonstrate skills in oral and written communication
LO2. demonstrate skills in problem solving
LO3. demonstrate critical thinking
LO4. understand the different elements of the PE/VC cycle
LO5. understand the nature of the strategic relationship between venture capitalists, entrepreneurs and investors
LO6. identify possible private equity investment opportunities and explain how they may be implemented
LO7. understand the role of government and regulation in the private equity industry
LO8. understand the role of private equity in innovation
LO9. feel sufficiently informed to confidently participate in public policy discussions on the impact of the private equity industry.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1	Depth of disciplinary expertise Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.
GQ2	Critical thinking and problem solving Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.
GQ3	Oral and written communication Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.
GQ4	Information and digital literacy Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.
GQ5	Inventiveness Generating novel ideas and solutions.
GQ6	Cultural competence Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.
GQ7	Interdisciplinary effectiveness Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.
GQ8	Integrated professional, ethical, and personal identity An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.
GQ9	Influence Engaging others in a process, idea or vision.

Outcome map

Learning outcomes	Graduate qualities
Learning outcomes

Responding to student feedback

This section outlines changes made to this unit following staff and student reviews.

No changes have been made since this unit was last offered

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.

Current students

Overview

Overview

Unit details and rules

Teaching staff

Assessment

Assessment

Assessment summary

Assessment criteria

Late submission

Academic integrity

Learning support

Learning support

Simple extensions

Special consideration

Using AI responsibly

Weekly schedule

Weekly schedule

Attendance and class requirements

Study commitment

Required readings

Learning outcomes

Learning outcomes

Graduate qualities

Outcome map

Responding to student feedback

Responding to student feedback

Disclaimer

On this page

Useful links

Media

Student links

About us

Connect

Current students

ECON6024: Private Equity

Semester 1, 2020 [Normal day] - Camperdown/Darlington, Sydney

Overview

Overview

Unit details and rules

Teaching staff

Assessment

Assessment

Assessment summary

Assessment criteria

Late submission

Academic integrity

Learning support

Learning support

Simple extensions

Special consideration

Using AI responsibly

Weekly schedule

Weekly schedule

Attendance and class requirements

Study commitment

Required readings

Learning outcomes

Learning outcomes

Graduate qualities

Outcome map

Responding to student feedback

Responding to student feedback

Disclaimer

On this page

Useful links

Media

Student links

About us

Connect