Industrial Training Project on “Private Equity and

Venture Capital Investments”

By: Saksham Agrawal α

1. EXECUTIVE SUMMARY

This report presents a comprehensive analysis of Private Equity (PE) and Venture
Capital (VC) investment strategies, structures, and outcomes, illustrated through
two in-depth case studies: a leveraged buyout (LBO) of John Laing Group (JLG)
and a VC evaluation of Deliveroo. It begins by defining PE and VC, tracing their
evolution from mid-20th-century origins—such as ARDC and early LBO
pioneers—to today’s Silicon Valley financing ecosystem. The report contrasts
alternative investments with traditional bank debt and public equity, highlighting
differences in risk–return profiles, investment horizons, governance models, and
value-creation levers.

Next, it maps the global PE/VC landscape, quantifying over $7 trillion in PE assets
under management (AUM) and $850 billion in VC AUM. Key geographic hubs
(North America, Europe, China, India) and major players (Blackstone, KKR,
Carlyle, Sequoia, Accel, SoftBank) are profiled. Regulatory frameworks—SEC in
the United States, AIFMD in Europe, and SEBI in India—are summarized,
illustrating how compliance shapes fund operations.

The report then dissects fund structures and lifecycles: limited partnerships (LPs
and GPs), the “2/20” fee model, and the typical ten-year fund phases of fundraising,
deployment, management, and harvesting. Detailed sections cover deal sourcing,
rigorous due diligence (financial, commercial, legal, ESG), and valuation
methodologies (Discounted Cash Flow, comparables, Pre-/Post-Money, and the VC
Method). Investment stages are delineated from seed rounds through growth equity
to buyouts and distressed turnarounds, supported by key metrics—IRR, MOIC,
DPI, TVPI, CAC/LTV, burn rate, and LBO/VC modeling conventions.

Exit strategies—including Initial Public Offerings (Zomato, Paytm), strategic sales

(Walmart’s acquisition of Flipkart), secondary transactions, and recapitalizations
(Blackstone’s Hilton dividend recap)—are examined for their impact on realized
returns. Emerging trends—ESG/impact investing, AI & DeepTech, blockchain
tokenization, India’s Tier-2/3 startup surge, and SPAC or dual-listing exits—are
analyzed. Finally, principal risks (valuation bubbles, geopolitical/regulatory
shocks, currency volatility, fundraising slowdowns, governance failures) are
assessed, with mitigation strategies (valuation discipline, geographic
diversification, hedging, ERM frameworks).

In conclusion, the report underscores that sustained success in PE and VC demands

rigorous analytics, strategic governance, and adaptive risk management to deliver
superior risk-adjusted returns in a dynamic global marketplace.

2. EXPLAINING VENTURE CAPITAL AND PRIVATE EQUITY

Private Equity (PE) and Venture Capital (VC) represent two pivotal pillars of the
global financial system, playing an instrumental role in fostering
entrepreneurship, accelerating growth, and facilitating economic development.
While often conflated due to their shared characteristics, they are distinct in terms
of investment stages, risk profiles, and value creation strategies. This section
offers a comprehensive overview of PE and VC, exploring their definitions,
historical origins, key characteristics, and how they diverge from traditional
financing mechanisms.

Definition and Conceptual Foundations

Private Equity (PE) refers to investments made in privately held companies or in

public companies with the intent of taking them private, typically through leveraged
buyouts (LBOs). PE investors usually acquire significant or controlling stakes in
mature businesses that exhibit stable cash flows and potential for operational
improvement or strategic repositioning. The investment horizon typically spans 4
to 7 years, with the aim of achieving substantial returns through value creation and
eventual exit via IPOs, strategic sales, or secondary buyouts.

Venture Capital (VC), on the other hand, pertains to equity investments in early-
stage, high-growth startups with unproven business models but significant upside
potential. VC funding is structured in rounds—seed, Series A, B, C, and so on—
each supporting the company at different growth milestones. Unlike PE, VC
assumes a higher risk-reward trade-off, often backing pre-revenue or loss-making
firms in emerging sectors such as technology, biotech, and fintech.

Historical Evolution

American Research and Development Corporation (ARDC), was established in

1946 by Georges Doriot and played a crucial role in seeding the modern VC
industry. ARDC’s notable investment in Digital Equipment Corporation (DEC) set
a precedent for future VC deals, yielding returns that captured widespread investor
interest.

Private equity as a structured asset class gained prominence during the 1980s
leveraged buyout boom. Firms like Kohlberg Kravis Roberts (KKR) executed
massive buyouts, including the landmark $25 billion acquisition of RJR Nabisco in
1989.

Differentiation from Traditional Financing

PE and VC differ fundamentally from traditional financing sources such as bank

loans and public equity markets. Banks primarily extend debt with fixed repayment
terms and limited involvement in business strategy. In contrast, PE and VC firms
offer patient, risk-bearing capital and often engage actively in governance, strategic
planning, and operational execution.

Public equity investors—such as mutual funds and retail shareholders—typically

hold minority, passive stakes in listed firms. Their influence is confined to voting
rights and shareholder resolutions. PE and VC investors, however, negotiate board
representation, protective provisions, and performance milestones to safeguard
their interests and align incentives.
Investment Philosophies and Time Horizons

VC investments are inherently speculative, betting on innovative ideas, disruptive

technologies, and visionary founders. Success depends on portfolio
diversification—since most startups fail—and on capturing outsized returns from a
few ‘unicorns’ (private firms valued at $1 billion or more). PE, conversely, relies
on rigorous due diligence, financial engineering, and operational improvement to
deliver returns.

The time horizon for VC investments ranges from 5 to 10 years, depending on the
startup’s growth trajectory and market conditions. PE investments usually mature
faster, given the focus on cash flow generation and strategic exits. Both models,
however, emphasize exit planning as a critical determinant of performance.

Risk and Return Profiles

VC entails high risk due to uncertainty in product-market fit, regulatory challenges,

and execution hurdles. Returns, if successful, can be exponential—early investors
in companies like Facebook, Google, and Airbnb realized gains exceeding 100x
their initial investment. PE investments offer relatively lower but more predictable
returns, bolstered by leverage and active value creation.

Both asset classes exhibit low correlation with public markets, making them
attractive for portfolio diversification. However, they also entail liquidity risk, long
lock-in periods, and high due diligence costs.
3. ECOSYSTEM AND STAKEHOLDER INVOLVEMENT

The PE/VC ecosystem comprises multiple stakeholders: limited partners (LPs) who
provide capital, general partners (GPs) who manage funds, portfolio companies,
intermediaries (investment banks, legal advisors, auditors), and regulators. The
alignment of interests among these actors is crucial for effective fund performance.

In VC, accelerators, incubators, angel investors, and crowdfunding platforms also

play significant roles in nurturing startups before they reach institutional funding
stages. In PE, consultants, restructuring experts, and operational partners are often
embedded to drive post-investment transformation.

The Private Equity (PE) and Venture Capital (VC) industry has grown to become a
significant force in global finance, driving innovation, restructuring industries, and
facilitating growth across sectors. This section explores the size, geographical
distribution, major players, recent trends, and the regulatory environment shaping
the global PE and VC landscape.

3.1 Global Market Size and Growth

The global PE and VC market has experienced exponential growth over the past
two decades. As of 2023, the global private capital industry—including private
equity, venture capital, private debt, and real assets—manages over $13 trillion in
assets under management (AUM), according to Preqin and McKinsey Global
Private Markets Review. Specifically, private equity accounts for nearly $7 trillion,
while venture capital makes up over $850 billion.

The surge in dry powder (unallocated capital waiting to be invested) has also
reached record highs, with PE funds holding over $2.5 trillion globally. This
increase underscores the confidence of institutional investors in alternative
investments and the intense competition among funds to deploy capital efficiently.
3.2 Key Regions

 United States: Home to the largest share of the PE/VC market, with over
50% of global AUM. Silicon Valley remains the epicenter for venture capital
activity, supporting technology giants and unicorn startups.

 Europe: Countries like the UK, Germany, and France have vibrant PE/VC
sectors. London is considered Europe's financial hub, and the region has
seen increasing deal flow in fintech, biotech, and green energy.

 China: Rapid urbanization, tech innovation, and government support have

made China a significant VC destination. Despite regulatory crackdowns,
Chinese startups in AI, EVs, and ed-tech continue to attract global capital.

 India: One of the fastest-growing VC markets globally. With a young

population, rising internet penetration, and government initiatives like
'Startup India,' India has emerged as a hub for fintech, edtech, and SaaS
investments.

3.3 Prominent Market Players

 Private Equity Firms:

o Blackstone Group: The world’s largest alternative investment firm

with AUM exceeding $1 trillion. Known for diversified investments
across real estate, private equity, and credit.

o KKR (Kohlberg Kravis Roberts): Pioneers of leveraged buyouts.

Significant deals include RJR Nabisco, Toys “R” Us, and more
recently, investments in healthcare and infrastructure.

o Carlyle Group: Active in buyouts, growth capital, and strategic

investments globally.

o Advent International: Known for deep operational involvement and

global reach.
 Venture Capital Firms:

o Sequoia Capital: Iconic VC firm that backed Apple, Google,

WhatsApp, and Zoom.

o Accel Partners: Active in India and the US, known for early bets on
Flipkart and Facebook.

o SoftBank Vision Fund: Backed by Saudi Arabia’s PIF, known for

massive late-stage investments in tech.

o Tiger Global: Aggressive investor in Indian startups, with stakes in

Zomato, Delhivery, and more.

SALES
USA Europe China India

3%
9%

26%

62%
4. INDUSTRY LANDSCAPE

Private equity (PE) and venture capital (VC) funds operate under distinct structures
and life cycles, tailored to optimize capital deployment, management efficiency,
and investor returns. This section delves into the structural mechanics of these
funds, the key stakeholders involved, and the lifecycle phases from fundraising to
exit.

4.1 Fund Structure: LPs and GPs

PE and VC funds typically operate as limited partnerships (LPs), consisting of two

primary parties:

 General Partners (GPs): These are the fund managers responsible for
making investment decisions, managing portfolio companies, and driving
value creation. They receive a management fee and a performance-based
incentive called 'carried interest'.

 Limited Partners (LPs): These are institutional or high-net-worth investors

who commit capital to the fund but do not participate in day-to-day
management. Common LPs include pension funds, endowments, sovereign
wealth funds, family offices, and insurance companies.

4.2 Fundraising and Capital Commitment

Raising a PE/VC fund typically takes 12–18 months and involves pitching to
potential LPs, negotiating fund terms, and closing capital commitments. Investors
agree to a 'commitment size', which is drawn down over the fund's life as deals are
sourced and closed.

 Commitment Period: The initial 3–5 years during which the GP can call
capital from LPs to make new investments.

 Investment Period: Overlaps with or follows the commitment period.

Active investment phase during which the fund deploys capital into
portfolio companies.
 4.3 Fund Lifecycle Phases

A typical PE/VC fund has a 10–12 year lifecycle:

1. Fundraising: Marketing the fund, securing commitments.

2. Investment: Sourcing deals, performing due diligence, deploying capital.

3. Management: Supporting portfolio companies with strategic, operational,

or financial guidance.

4. Exit: Divesting through IPOs, acquisitions, or secondary sales to return

capital and generate returns.

Fundraising Investment Management Exit

5. DEAL SOURCING AND EVALUATION

In the world of private equity (PE) and venture capital (VC), the process of finding,
assessing, and finalizing investments is both an art and a science. Deal sourcing and
evaluation are central to a firm’s ability to deliver consistent returns to investors.
These processes involve a combination of strategic networking, rigorous due
diligence, and valuation expertise to identify the most promising opportunities.

5.1 Deal Sourcing Mechanisms

Investment opportunities in PE and VC are primarily sourced through networks,

proprietary deal flow, and intermediaries.

 Networking and Relationships: Many deals come through long-term

relationships with entrepreneurs, industry executives, bankers, and other
investors. Having a strong network helps in accessing proprietary deals
before they are widely shopped.

 Investment Banks and Brokers: Especially in PE, investment banks play

a vital role in sourcing larger deals. They run structured processes to find
buyers for companies.

 Accelerators and Incubators: In VC, early-stage deals often emerge from

startup accelerators (e.g., Y Combinator, Techstars) and incubators, which
groom founders and introduce them to VCs.

 Corporate Spin-Offs and Divestitures: PE firms often acquire non-core

units spun off by large corporations, offering a chance to unlock value.

 Proprietary Research: Some funds invest in research teams to identify

macro trends, niche markets, and emerging technologies proactively.
5.2 Screening Investment Opportunities

Once potential deals are sourced, they are screened to determine if they align with
the fund’s investment mandate. This includes:

 Stage Fit: Seed, growth, buyout, or distressed.

 Sector Focus: Many funds specialize in sectors like fintech, healthcare,

consumer, etc.

 Geographical Focus: Regional strategies often limit investment locations.

 Ticket Size: Minimum and maximum investment thresholds.

5.3 Due Diligence Process

Diligence is an in-depth evaluation of all aspects of the target company. It can take
weeks or months depending on the complexity and size of the deal.

 Financial Due Diligence: Analyzing financial statements, forecasting

performance, identifying revenue drivers, margin trends, cash flow quality,
and accounting risks.

 Commercial Due Diligence: Assessing the company’s competitive

positioning, market size, customer concentration, pricing strategy, and
growth potential.

 Legal Due Diligence: Reviewing incorporation documents, contracts,

intellectual property, litigation risks, regulatory compliance, and
employment agreements.

 Operational Due Diligence: Evaluating the efficiency of internal

operations, supply chains, IT infrastructure, and scalability.

 Environmental, Social, and Governance (ESG): Increasingly critical,

ESG diligence ensures responsible investing and risk mitigation.
5.4 Valuation Methodologies

Valuation is the bridge between what an investor is willing to pay and what the
seller expects. Valuation methodologies differ by investment stage and company
maturity.

 Discounted Cash Flow (DCF)~ Fundamental Valuation Key Method:

Projects future cash flows and discounts them back to present value using a
risk-adjusted discount rate. Suitable for stable, cash-flow-generating
businesses.

 Comparable Company Analysis~ Relative Valuation: Uses valuation

multiples (EV/EBITDA, P/E, etc.) from peer companies to benchmark the
target’s valuation.

 Pre-Money and Post-Money Valuation (VC-specific):

o Pre-Money Valuation: The value of a company before new capital

is injected.

o Post-Money Valuation: The value after the capital is added. This

determines investor ownership.

 Venture Capital Method: Backward valuation based on exit value, desired

return, and dilution expectations

 5.5 Investment Committees and Term Sheets

Post diligence and valuation, if the deal is greenlit internally, it proceeds to the
investment committee.

 Investment Committee: A panel of senior partners or advisors who

evaluate the deal’s strategic fit, risks, and expected returns.

 Term Sheet: A non-binding document that outlines key investment terms

such as valuation, amount, ownership, board seats, liquidation preferences,
anti-dilution rights, etc.
 6. STAGES OF INVESTMENT

Stage Description Funding Use

Seed Idea stage R&D, MVP

Series A Product-market fit Scaling operations

Series B Growth stage Expanding market

Series C+ Pre-IPO or M&A prep International expansion

Buyouts (PE) Mature companies Restructuring, cost optimization

6.1 Term Sheets and Negotiations

The term sheet is a non-binding document outlining the principal terms of the
investment. It sets the stage for legal documentation and negotiation.

Key elements of a term sheet include:

 Valuation (Pre- and Post-Money)

 Investment Amount

 Type of Security Issued

 Ownership Stake and Cap Table Post-Investment

 Board Composition

 Voting Rights and Protective Provisions

 Liquidation Preference: Often 1x or 2x return before common

shareholders are paid.
 6.2 Common Investment Instruments

 Equity: Common and preferred shares are the most straightforward.

Preferred equity often includes preferential treatment on dividends and
liquidation.

 Convertible Notes: A debt instrument that converts into equity at a later

round, often with a discount and valuation cap.

 SAFE (Simple Agreement for Future Equity): A flexible instrument

granting future equity without creating debt.

 Mezzanine Financing: Used in PE, it blends debt and equity, offering

higher returns than senior debt.

 Earn-Outs: Conditional future payments based on achieving milestones or

targets, aligning incentives.

6.3 Structuring Leveraged Buyouts (LBOs)

In PE-specific scenarios, deal structuring often involves LBO mechanics:

 Debt Sizing and Syndication: Determining how much debt can be placed
on the target based on cash flows.

 Equity Contribution: From PE fund and sometimes co-investors.

 Covenants and Conditions: Financial ratios and performance metrics to be

met post-acquisition.
7. KEY METRICS AND ANALYSIS TOOLS

In private equity (PE) and venture capital (VC), metrics and analysis tools form the
backbone of decision-making across the investment lifecycle. From deal screening
to portfolio monitoring and final exit, quantitative metrics enable investors to
measure performance, estimate risk-adjusted returns, benchmark outcomes, and
justify capital allocation. This section explores the most important performance
indicators, analytical tools, and financial techniques used by PE and VC
professionals globally.

7.1 Internal Rate of Return (IRR)

IRR is a core performance metric in both PE and VC. It is the annualized effective
compounded return rate that makes the net present value (NPV) of all cash flows
(inflows and outflows) from a particular investment equal to zero. It accounts for
the timing of cash flows, making it a preferred measure over absolute return.

1
𝐹𝑢𝑡𝑢𝑟𝑒𝑉𝑎𝑙𝑢𝑒 𝑁𝑢𝑚𝑏𝑒𝑟𝑜𝑓𝑃𝑒𝑟𝑖𝑜𝑑𝑠
 Formula: ( ) −1
𝑃𝑟𝑒𝑠𝑒𝑛𝑡𝑉𝑎𝑙𝑢𝑒

 Use: A higher IRR indicates a more profitable investment. However, IRR

can be distorted by early returns and reinvestment assumptions.

7.2 Multiple on Invested Capital (MOIC)

MOIC is a simpler metric that compares the amount returned to investors relative
to the amount invested. It ignores time value of money, making it easy to calculate
and useful in tandem with IRR.

𝑅𝑒𝑎𝑙𝑖𝑠𝑒𝑑𝑉𝑎𝑙𝑢𝑒 +𝑈𝑛𝑟𝑒𝑎𝑙𝑖𝑠𝑒𝑑𝑉𝑎𝑙𝑢𝑒
 Formula:
𝑇𝑜𝑡𝑎𝑙𝐼𝑛𝑖𝑡𝑖𝑎𝑙𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

 Benchmark: A MOIC of 3.0x means the investor received 3 times their

invested capital.
7.3 Distributions to Paid-In Capital (DPI)

DPI measures realized returns. It is the ratio of total distributions (cash returned to
LPs) to the total capital paid-in by LPs.

𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛𝑠
 Formula:
𝑃𝑎𝑖𝑑𝑖𝑛𝐶𝑎𝑝𝑖𝑡𝑎𝑙

 Significance: DPI reflects actual cash returned and is important for LPs
concerned with liquidity.

 7.4 Total Value to Paid-In Capital (TVPI)

TVPI includes both realized returns (DPI) and unrealized value (NAV of remaining
investments). It provides a comprehensive measure of fund performance.

𝐶𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛+𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙𝑉𝑎𝑙𝑢𝑒
 Formula:
𝑃𝑎𝑖𝑑𝑖𝑛𝐶𝑎𝑝𝑖𝑡𝑎𝑙

 Use: Often used to benchmark fund managers.

7.5 Gross vs Net Returns

 Gross IRR/MOIC: Before fees, carried interest, and expenses.

 Net IRR/MOIC: After accounting for all costs, showing true investor
returns.

Institutional investors focus on net metrics.

7.6 Burn Rate and Runway

These are critical in VC-stage companies:

 Burn Rate: Monthly cash outflow.

 Runway: How many months the company can survive at the current burn
rate.
7.7 Key Performance Indicators (KPIs)

KPIs vary by stage and industry but include:

 Revenue Growth Rate: Especially relevant in SaaS and consumer tech.

 Gross Margin: Indicates core profitability.

 Monthly Recurring Revenue (MRR) & Annual Recurring Revenue

(ARR)

 Active Users, Retention Rates, Engagement Levels

 EBITDA Margins: Widely used in PE to assess operating profitability.

 Debt/EBITDA: A measure of leverage in LBO models.

7.8 Portfolio Monitoring Tools

GPs regularly monitor portfolio performance using dashboards, reporting tools, and
reviews.

 Quarterly Reports

 Board Meeting Packs

 Third-party Valuation Firms

 ESG and Impact Monitoring

8. EXIT STRATEGIES AND RETURNS

Exit strategies are a critical component of the private equity (PE) and venture capital
(VC) investment lifecycle. They represent the final phase where the investors
realize returns by exiting their stake in portfolio companies. The choice of exit route
can significantly affect the internal rate of return (IRR), multiple on invested capital
(MOIC), and investor confidence. This section explores the major exit types, their
mechanics, real-world examples, and implications for returns.

8.1 Common Exit Types

1. Initial Public Offering (IPO)

An IPO involves listing the portfolio company on a public stock exchange, allowing
investors to sell their shares to the public.

 Example – Zomato (India): Backed by Info Edge and Sequoia, Zomato

launched its IPO in July 2021 and was oversubscribed 38x. Despite not
being profitable, it saw strong interest due to growth potential.

Advantages:

 Provides liquidity and visibility.

 Higher valuation multiples possible in public markets.

Challenges:

 High regulatory scrutiny.

 Market volatility affects valuation.

2. Strategic Sale

A strategic sale involves selling the portfolio company to another company—often

a larger player in the same or complementary industry.

 Example – Walmart buys Flipkart: In 2018, Walmart acquired 77% of

Flipkart for $16 billion, giving investors like Tiger Global and SoftBank
significant returns.

Advantages:

 Faster exit with potentially attractive valuations.

 Strategic buyers may pay premiums for synergies

Challenges:

 Longer negotiation cycles.

 Antitrust and regulatory approvals.

3. Secondary Sale

Secondary sales involve one investor selling their stake to another investor,
typically another PE/VC fund or institutional investor.

 Common in later-stage VC or growth PE rounds.

 Often structured as a partial exit.

Example: Sequoia India selling part of its stake in Byju’s to Silver Lake.

Advantages:

 Allows earlier liquidity.

 Less reliance on company readiness for IPO or M&A.

Challenges:

 May come at lower valuation than strategic sale.

9. LEGAL AND REGULATORY FRAMEWORK

Private equity (PE) and venture capital (VC) investments operate within complex
legal and regulatory landscapes that vary by jurisdiction but share common
elements designed to protect investors, portfolio companies, and the broader
market. This section examines the principal legal documentation, fund structures,
compliance obligations, and regulatory bodies governing PE and VC. Detailed
analysis covers key contracts, anti-dilution mechanisms, tax considerations, and
emerging global regulatory trends.

9.1 Fund Formation and Structure

PE and VC vehicles are typically structured as limited partnerships (LPs) or limited

liability companies (LLCs), with distinct roles for General Partners (GPs) and
Limited Partners (LPs). Key formation documents include:

 Limited Partnership Agreement (LPA): Defines GP/LP roles, capital

commitments, management fees, carried interest, investment scope, and
withdrawal restrictions.

 Private Placement Memorandum (PPM): Provides prospective LPs with

comprehensive disclosures on fund strategy, risk factors, fee structure,
conflicts of interest, and subscription terms.

 Subscription Agreement: Formalizes LP capital commitments, including

representations, warranties, and anti-money laundering covenants.
9.2 Investment Documentation
Once a target deal is agreed, firms execute binding legal contracts:

 Term Sheet: Non-binding summary of valuation, investment amount,

security type (equity, convertible note, SAFE), board seats, liquidation
preferences, anti-dilution, voting rights, and protective provisions.

 Shareholders’ Agreement (SHA): Governs rights and obligations among

shareholders, covering board composition, transfer restrictions, pre-emptive
rights, and drag-along/tag-along clauses.

 Share Purchase Agreement (SPA): Legally binding document specifying

purchase terms, price adjustments, representations and warranties,
indemnities, and conditions precedent.

 Investor Rights Agreement: Grants LPs information rights

(quarterly/annual reporting), registration and piggyback rights, and vetoes
on major corporate actions.

9.4 Regulatory Regimes

 United States:

o Securities Act of 1933 & Exchange Act of 1934 regulate public

offerings and trading.

o Investment Advisers Act of 1940 requires large private fund

managers to register, imposing fiduciary duties and Form PF
reporting.

o Dodd–Frank Act expanded oversight on systemic risk, leverage, and

transparency for private funds.
 Europe:

o AIFMD (2011) harmonizes authorization, capital requirements, risk

management, and disclosure for Alternative Investment Fund
Managers.

o UCITS and PRIIPs regulations set standardized disclosure for

certain retail-targeted fund products.

 India:

o SEBI AIF Regulations (2012) classify funds into Category I (social

impact, start-ups), Category II (PE/VC with limited leverage), and
Category III (hedge-like strategies), each with investment and
reporting norms.

o FEMA & FDI Policies govern foreign capital inflows, including

approval thresholds (e.g., Press Note 3 for neighboring-country
investments).
10. PRIVATE EQUITY CASE STUDY: JOHN LAING GROUP (JLG)

Company Overview

John Laing Group plc, headquartered in London, is a leading infrastructure

investor specializing in public-private partnership (PPP) projects and green energy
assets, such as hospitals, schools, roads, and renewable energy facilities. Founded
in 1848, JLG operates across Europe, North America, and Asia-Pacific, managing
a portfolio valued at £1.795 billion (net asset value, NAV) in 2020. Its business
model generates stable, availability-based cash flows from long-term concessions,
making it an attractive target for private equity due to predictable revenue streams
and resilience to economic cycles. In 2020, JLG reported revenue of £25 million, a
pre-tax loss of £66 million (due to project impairments), and an equity-only profit
of £95 million, reflecting the value of its infrastructure investments (Investing.com
Financials).

The Deal: KKR’s Acquisition

In May 2021, KKR, a global private equity giant, partnered with Equitix, a UK
infrastructure fund, to acquire JLG for £2 billion (~$2.8 billion) in a take-private
leveraged buyout (LBO). The offer price of 403 pence per share represented a 27%
premium over JLG’s pre-announcement share price of ~317 pence, valuing the
company at ~1.1x its 2020 NAV. The deal was financed with £1.467 billion in debt
(£550 million term loan, £917 million bridge facility) and £533 million in equity,
with KKR and Equitix sharing ownership. Additionally, KKR committed £175
million immediately and £50 million later to JLG’s pension fund, ensuring
stakeholder alignment (KKR Acquisition).

Strategic Rationale

The acquisition aligned with KKR’s focus on infrastructure as a high-growth,

defensive asset class. JLG’s green infrastructure pipeline, including renewable
energy projects, positioned it to capitalize on global demand for sustainable
investments. The company’s predictable cash flows from PPP contracts, with
long-term government-backed payments, offered stability for leveraged financing.
KKR aimed to enhance JLG’s portfolio through operational improvements,
strategic project acquisitions, and capital recycling, targeting value creation over a
5–7-year horizon. The deal also reflected market timing: JLG’s share price was
depressed in 2020 due to pandemic-related uncertainties, making it an opportune
buy (Guardian KKR Deal).

Financial Model Highlights: LBO Analysis

An LBO model was constructed to simulate KKR’s acquisition, projecting cash

flows, debt repayment, and investor returns over a 5-year horizon (2021–2028). The
model uses public data from JLG’s 2019–2020 annual reports and deal filings, with
assumptions informed by management commentary and industry benchmarks.

Key Assumption

Pre-project maturity revenue growth

rate 8%
Post-project maturity revenue growth
rate 6%
EBITDA Margin 2%
CapEx 8% of revenue each year

FCF Conversion 30% of EBITDA

Working Capital 2.5% of revenue annually

Debt Structuring
Senior Debt £400M (5% Interest rate)
Mezzanine Debt £140M (8.5% Interest rate)
Total Debt £540M

Exit Assumptions
Hold Period 5 years (2028)
Exit Multiple 10.0x
Exit EBITDA £70M
Exit EV £700M
 Debt Outstanding at Exit £500M (after armortization)
Equity Value at Exit £200M

Sponsor Return Target

Target IRR 25%
Target MoIC ≥ 2.5×

Key Outputs

 Revenue CAGR: 6%, driven by new green projects and stable PPP
contracts.

 EBITDA Margin: ~18%, consistent with infrastructure businesses.

 IRR: ~20.2% over 5 years, assuming a £2.4 billion exit.

 MOIC: ~2.0x (£1,050 million equity value / £533 million invested).

Analysis

The LBO model demonstrates KKR’s ability to generate strong returns through
leveraged financing and stable cash flows. The 20.2% IRR aligns with PE targets
for infrastructure, driven by JLG’s predictable revenue and modest growth
assumptions. Risks include interest rate hikes or project delays, mitigated by long-
term contracts and KKR’s operational expertise. The deal underscores the appeal
of green infrastructure, with JLG’s renewable energy assets aligning with global
sustainability trends.
10.2 VENTURE CAPITAL CASE STUDY: DELIVEROO

Company Overview

Deliveroo, founded in 2013 by Will Shu, is a UK-based food delivery platform

operating a three-sided marketplace connecting restaurants, riders, and consumers.
By 2020, it served 14 countries, partnered with 80,000 restaurants, and employed
60,000 riders, with a gross transaction value (GTV) of £4.08 billion and revenue of
£1,190.8 million. Despite rapid growth, Deliveroo remained unprofitable, posting
a £226.4 million net loss in 2020 due to high operating costs and competition.

Investment History

Deliveroo raised ~$1.53 billion across multiple VC rounds, with key investors
including Amazon, Index Ventures, T. Rowe Price, Fidelity, and Greenoaks. In
May 2019, Amazon led a $575 million Series G round, valuing Deliveroo at ~$4
billion (~£2.9 billion), acquiring a ~16% stake. The funds supported R&D,
expansion of “Editions” cloud kitchens, and hiring engineers (TechCrunch Amazon
Investment). In March 2021, Deliveroo went public on the LSE at a £7.6 billion
valuation (390 pence/share), raising £1.5 billion. However, shares fell 26% to 287
pence on debut, reflecting investor concerns over losses and gig worker regulations

Challenges

Deliveroo faces heavy competition from Uber Eats and Just Eat, requiring
significant marketing and rider incentives. Regulatory scrutiny over gig worker
rights, including potential reclassification as employees, poses risks to its cost
structure. The 2021 IPO’s poor performance highlighted market skepticism about
profitability, despite strong pandemic-driven growth.
Financial Model Highlights: VC-Style Analysis

A VC-style financial model was developed to project Deliveroo’s growth from 2023
to 2028, focusing on revenue, EBITDA margins, and cash burn.

Key Outputs

 Revenue CAGR: 7.5%, reaching £2,054 million by 2028.

 EBITDA Margin: From -1.4% to +4%, achieving breakeven by 2027.

 Burn Rate: Reduced to near-zero by 2026, supporting sustainability.

 Valuation: £6 billion in 2028, implying a 2x return for IPO investors.

Analysis

The VC model suggests Deliveroo can achieve sustainable profitability by

FY2027, driven by controlled cash burn and operating leverage. The 7.5% revenue
CAGR reflects a maturing market, while improving EBITDA margins (+4% by
2028) indicate cost discipline. Challenges include regulatory risks and competition,
which could delay breakeven. The 2021 IPO’s 26% drop underscores investor
skepticism, but long-term growth potential supports a £6 billion valuation by 2028,
offering value for VC investors like Amazon.
Comparative Insights and Lessons

The JLG and Deliveroo case studies highlight distinct PE and VC strategies:

 PE (JLG): Leveraged financing and stable cash flows enable high IRR
(20.2%) through disciplined debt management and modest growth. KKR’s
focus on green infrastructure reflects long-term value creation.

 VC (Deliveroo): High-growth, loss-making startups require patient capital

to scale, with profitability delayed but achievable (2027). The IPO’s
volatility shows the risks of public market exits.

 Lessons: PE thrives on predictable cash flows and leverage, while VC bets

on disruptive growth with higher risk. Both require rigorous due diligence
and strategic alignment.

 The John Laing Group LBO and Deliveroo VC case studies demonstrate the
power of financial modeling in evaluating investment strategies. JLG’s
acquisition showcases PE’s ability to unlock value in stable, cash-generative
businesses, with a 20.2% IRR driven by green infrastructure demand.
Deliveroo’s journey highlights VC’s focus on growth over profitability,
with a path to breakeven by 2027 despite regulatory and competitive
hurdles. These models, supported by charts and tables, provide actionable
insights for investment banking professionals.
11. CURRENT TRENDS & FUTURE OUTLOOK

The Private Equity (PE) and Venture Capital (VC) landscape is evolving rapidly,
shaped by technological disruption, sustainability, and financial innovation. Key
trends and the road ahead are outlined below:

1. Green & Impact Funds (ESG Focus)

 ESG investing has surged, with over $1.5 trillion globally aligned with
sustainability goals (Preqin, 2024).

 Firms like TPG Rise and LeapFrog prioritize climate impact and social
inclusion.

 In India, Aavishkaar Capital and Omidyar Network back clean tech and ed-
tech ventures.

 SEBI’s BRSR compliance is pushing transparency.

 Outlook: ESG will be a non-negotiable filter for fund managers and LPs.

2. AI & DeepTech Investing

 Global AI investments surpassed $90B in 2023, driven by a16z, SoftBank,

etc.

 India’s DeepTech ecosystem is growing through IIT/IISc incubators and

government backing (IndiaAI mission).

 Startups like Sarvam AI and Niramai show global potential.

 Outlook: By 2030, AI-native companies may dominate VC portfolios.

12. CHALLENGES & RISK FACTORS

Private Equity (PE) and Venture Capital (VC) drive innovation and economic
growth but face escalating risks amid global uncertainties. This analysis outlines
five critical challenges: overvaluations, political risks, currency fluctuations,
fundraising slowdowns, and governance failures.

Overvaluations in Bull Markets

Bull markets often inflate startup valuations, driven by abundant liquidity and
competitive deal-making. Factors include excessive unallocated capital, euphoria
in sectors like AI and fintech, empowered founders dictating terms, and crossover
investors pushing multiples. Consequences include down rounds diluting equity,
IPO failures (e.g., WeWork), and compressed returns. In India, companies like
Byju’s and Paytm faced sharp corrections post-2021’s valuation surge. In 2024–25,
VCs prioritize disciplined valuations, focusing on revenue quality and profitability,
though cyclical risks persist.

Political Risks
Political instability disrupts PE/VC portfolios. China’s 2021 tech crackdown,
targeting firms like Ant Group and Didi, erased $1.5 trillion in valuations,
impacting global funds. Broader risks include U.S.-China tech decoupling,
Russia-Ukraine disruptions, and rising protectionism. India benefits from capital
flight from China but faces delays from regulations like Press Note 3, requiring
approval for investments from neighboring countries. Mitigation involves
geographic diversification, offshore legal structures, and regulatory engagement to
anticipate policy shifts.

Currency Risk in Cross-Border Investments

Currency fluctuations threaten returns when funds invest in foreign-denominated

assets. A depreciating Indian rupee, down 35% against the dollar over a decade,
erodes U.S. investors’ exits. Drivers include global macro trends, political stability,
and commodity prices. Hedging via forward contracts or currency swaps is costly
and complex in emerging markets.
13. CONCLUSION

Private Equity (PE) and Venture Capital (VC) are pivotal in shaping modern
economies, fueling innovation, and scaling enterprises. By providing capital,
strategic guidance, and operational expertise, they bridge entrepreneurial vision and
commercial success. Analyzing the leveraged buyout (LBO) of John Laing Group
(JLG) by KKR and Deliveroo’s VC-driven journey reveals their distinct roles,
shared principles, and evolving relevance.

Private Equity: Structured Value Creation

The JLG-KKR case exemplifies PE’s strength in transforming undervalued assets.

KKR’s LBO of JLG, an infrastructure firm, leveraged debt to amplify returns while
optimizing operations and cash flows. PE thrives on established companies with
predictable revenues, such as those in infrastructure or manufacturing. Through
rigorous due diligence, financial engineering, and governance, PE unlocks hidden
value. However, high leverage exposes investments to economic volatility,
underscoring the need for precise timing and macroeconomic awareness. PE is
about refining existing businesses, prioritizing stability and long-term value over
speculative growth.

Venture Capital: Betting on Disruption

Deliveroo’s VC-backed rise illustrates the high-risk, high-reward nature of VC.

Early investments from Amazon and Accel fueled its scalability, logistics
innovation, and global expansion, culminating in a London IPO. VC targets pre-
profit startups with exponential potential, often in tech-driven sectors. Success
hinges on mentorship, board involvement, and market timing, balancing visionary
risks with disciplined execution. Deliveroo’s mixed IPO performance highlights the
challenge of aligning business fundamentals with market sentiment, yet its journey
validates VC’s role in creating category leaders.

Shared Foundations: Due Diligence and Foresight

Both PE and VC demand meticulous due diligence and strategic foresight. PE

focuses on cash flow models, operational efficiencies, and synergies, while VC
evaluates team strength, product vision, and market fit. Both require deep risk
assessment to ensure resilient, return-driven investments. Strategic exit planning—
via IPOs, acquisitions, or recapitalizations—is critical, as mistimed exits can erode
value. These shared disciplines underscore the importance of insight over mere
capital.

Global Trends and Future Outlook

PE and VC are evolving amid global shifts. ESG criteria now shape investment
decisions, while AI, deeptech, and blockchain redefine portfolio strategies. Impact
investing reflects a dual focus on financial and societal returns. In emerging markets
like India, Tier-2 and Tier-3 cities attract VC due to digital growth, while PE
sharpens focus through sector-specific funds. Despite 2023’s fundraising
slowdown, capital flows to mission-driven projects.

In conclusion, PE and VC, though distinct, converge in their pursuit of outsized

returns through strategic involvement. PE drives operational excellence; VC fuels
visionary growth. Both demand rigor, patience, and risk appetite, forming the
backbone of modern enterprise financing.
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