Claudia Zeisberger’s Book (P5 electives for PE/VC and Managing Corporate Turnarounds)
Mastering Private Equity - 1st Edition (2017) .pdf
Private Equity (PE) is capital invested in companies that are not listed on public stock exchanges. PE firms raise money from investors (the LPs), pool it into a fund (an SPV), deploy it into private companies (or take public ones private), create value over a holding period, and return capital ideally with a significant return on top.
PE firms believe they can acquire or invest in a business, actively improve it (operationally, financially, or strategically), and sell it at a higher valuation than they paid. Unlike public market investing, PE is illiquid and not widely accessible.
| Venture Capital (VC) | Growth Equity / Capital (GE) | Buyout (LBO) | |
|---|---|---|---|
| Stage | Early-stage (pre-revenue to early traction, sometimes only MVP) | Expansion stage (proven business model, scaling) | Mature companies (stable cash flows, established market position) |
| Risk Profile | Very high (high failure rate) | Medium | Lower (relative, but still equity risk) |
| Revenue Driver / Value Creation | Revenue growth + multiple expansion (driven by innovation & team) | Revenue growth + margin improvement (scaling + operational efficiency) | Deleveraging + operational improvement + strategic repositioning + multiple arbitrage |
| Investment Period (Holding) | 7–10+ years | 4–7 years | 3–5 years |
| Typical Returns (Gross IRR targets) | 25–40%+ (power-law distribution, few big winners) | 15–25% | 15–20% (sometimes 20–25% for top funds) |
| Stake | Minority | Minority or Majority | Majority (control deals) |
| Leverage Usage | None / minimal | Low | High (core of LBO model) |
| Cash Flow Profile | Negative / reinvestment phase | Break-even to positive | Strong, stable, predictable |
A PE fund raises capital from LPs and invests it into companies. For each of these investments, the fund creates a separate legal entity called and SPV (Special Porpose Vehicle) or also known as a “Holding”, which will be used to actually acquire the target company through. This structure is used as to isolate risk at the deal level, allows efficient debt financing (per deal leverage), and provides flexibility to include co-investors. At exit, the proceeds flow from the SPV back to the fund and then to the LPs.
Limited Partners (LPs) are passive investors in the fund. They provide the capital but have no say in investment decisions. Their liability is limited to the amount they commit**,** hence the name of “limited”.
Typical LPs include: Pension funds, Sovereign Wealth Funds, Insurance companies, Endowments and Foundations, Family Offices, Funds-of-Funds
General Partners (GPs) are the PE firm itself basically. They raise, manage, and deploy the fund. They have unlimited liability (legally) and bear reputational and operational responsibility for the fund. They also commit a one-digit % of fund capital themselves, called the “GP commit” or the “skin in the game”, as to ensure that their incentives are aligned with the ones of LPs.