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Private Equity

Lecture 5-6: Deal Structuring (Financing)

Comprehensive exam-prep quiz covering leveraged finance: sources and uses of funds, management incentives and equity structuring, the leverage effect on EV and equity, key factors determining leverage, LBO debt structures, loan underwriting options, and loan agreements.

Question 13 of 50

Sort each management incentive alternative into the correct description.

Drag each statement into the correct group.

Sort every statement: place all cards into a group, then check your answer.

Statements

4

Drag each statement into the correct group.

Remuneration that mirrors the returns shares would have earned, without holding the shares themselves; main drawback is typically the tax treatment

Extra equity awarded to management when PE returns exceed a specific threshold (e.g. above 1x, management gets additional percentage points of equity)

Management receives a portion of the fund's return above a specified hurdle (e.g. 50% of the return over a 25% IRR)

An award of shares granted if and when specific thresholds are achieved

Ratchet

0

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Shadow shares

0

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Stock options

0

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Share of return over hurdle

0

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