Private Equity — DU Bachelor of Business Administration (Financial Investment Analysis) Previous Year Question Papers

Private Equity BEA (FIA) Q1. (a) Define Private Equity and explain its importance in modem financial markets. Discuss the various forms of Private Equity investments and their role in business growth and restructuring. ( 10) (b) A PE firm acquired a company for €150 crore using €60 crore equity and €90 crore debt. After 4 years, the company was sold for €260 crore and the outstanding debt at exit was €30 2. 1. Equity value at exit Total profit earned by pE investors 3. Return multiple on equity invested Explain the impact of leverage on investor returns. (8) Q2. (a) Explain the stages involved in the Private Equity investment cycle and discuss the major challenges faced by pE firms at each stage. (10) a) A Private Equity .firm plans to invest in technology and logistics startups in India. The flrm faces difficulties in identifying scalable businesses, managing operational risks, and maintaining profitability during expansion. Analyze the role of PE flrms in identifying investment opportunities and improving the long-tem performance of portfolio companies. Support your answer with suitable examples. (8) Q3. (a) Discuss the opportunities and risks associated with Private Equity investments. Explain why institutional investors allocate funds to Private Equity despite its long investment horizon and limited liquidity. (8) a) A Private Equity firm invested in a food processing company that had strong brand recognition but weak supply chain management and declining profit margins. The investors plan to improve operational efficiency, strengthen management practices, and expand into intemational markets. However, the company also faces risks arising from changing consumer preferences, inflation, and market competition. Discuss how the PE firm can improve the company's financial and operational performance. Also explain the major challenges and risks as.sociated with the investment. (10) a) A Private Equity firm is planning to exit from an investment made six years ago in a consumer electronics company. The company has achieved stable growth and improved profltability under PE ownership. The investors are now evaluating different exit routes including IPO, strategic sale, and secondary buyout. Discuss the factors that should influence the PE firm's exit decision. Also explain the advantages and limitations of different exit strategies available to private Equity investors. (8) Q5. (a) Discuss the role of leverage in Private Equity deals. Explain the benefits and risks associated with the use of debt financing in leveraged buyouts. (9) a) A Private Equity firm is evaluating a fintech startup for investment. Although the company has shown strong growth potential, the investors are concerned about uncertainties related to government regulations, cyber risks, and intense competition in the fintech industry. The PE firm estimates that there is a 25°/o probability of regulatory changes that may result in a loss of €18