I am currently reading VC & PE - A Casebook by Lerner, Hardymon & Leamon (HBS Profs). Was wondering if you guys could recommend any other books on this topic as well as HFs. My aim is to develop a working knowledge of these asset classes as well as a sense of their place in financial history.
I like the Lerner book as well. One other book you might consider is called “Private Equity as an Asset Class” (Wiley Finance Series) – keep in mind though that this book is from the perspective of someone that invests in PE funds, rather than the PE investor. I think that’s what you’re looking for, right? I am not as familiar with VC but am aware that there are a number of books on the topic. Most of the good ones cover a certain stage of the investment process or industry classification. In other words, I’m not aware that there’s a good “catch-all” book for VC investing…if there is, I’d be curious to know
What about a good book on LBO’s? Any suggestions?
For more academic purposes, I’d recommend “Applied Mergers & Acquisitions” or “Valuation: Mergers, Buyouts and Restructuring.” However, LBO’s are surprisingly rare in literature, and a number of books on the topic had come out a while ago (pre-1990). That said, these books are the most comprehensive ones on the transaction process, and if you have the time, dedication and money, these are great textbooks to have. If you’re just looking to learn anecdotally about LBO’s, you might consider reading “Barbarians at the Gate: The Fall of RJR Nabisco.” This is more of a novel, but definitely a fun read. You get a pretty intriguing and amusing sense of all the personalities involved, and the book pretty much documents a mega-buyout gone wrong (and probably the least successful buyout in KKR’s history). If you’re interested broadly in the LBO investment process from execution to exit, the Lerner casebook on Private Equity and Venture Capital is highly recommended. The case reviews do tend to be anecdotal in nature, but it’s interesting to learn how different deals in different industries were consummated, as well as the various issues and complications that can come up during a private equity investment. Finally, if you just want to better understand the key considerations of an LBO investor, and more importantly how they can be applied more generally to any other company in order to accelerate growth and create value, I highly recommend “Memo to the CEO: Lessons from Private Equity Any Company Can Use” by Orit Gadiesh (Chairman of Bain & Co.). I just started reading this a couple nights ago; it’s a very quick read and is extremely practical. It obviously has its roots in the private equity investment criteria, but you can definitely see how the fundamental qualities stressed in the book are also important traits to assess in public companies. As someone who used to cover public companies but recently moved to private equity, I think it’s very relevant and useful in helping someone become a “smarter investor” (as well as a better executor, for those of you that aspire to be C-level personnel sometime down the line.) Most of the reading I did prior to getting into private equity involved the Lerner book, as well as a bunch of investment banking training guides on LBO and M&A modeling. Probably the most useful thing I did though was to read the Wall Street Journal every day (when big buyouts were actually happening), and also speak with my friends in the PE industry to learn about the deals. But all the books I mentioned above are pretty useful…unfortunately there isn’t a catch-all book on leveraged buyouts, but if you’re serious about the field, you’ll read everything good that you can get your hands on. Hope this helps.
For hedge funds I enjoyed: Hedgehogging - Barton Biggs Inside the House of Money - Steven Drobny
That’s funny, I just found both these books in my office’s mini-library this afternoon.!
Thanks Numi and j-rad. I will definitely take a look and pick some of these up. Can’t wait to dive in.
When Genius Failed.
no problem…speaking of PE as an asset class, there is a good article from the Federal Reserve (67 pages) that broadly discusses the PE market, how PE partnerships work, and who invests in them. plus, it’s free…definitely read this if you’re interested in the history of PE and want to get a broad overview of the industry http://www.federalreserve.gov/pubs/staffstudies/1990-99/ss168.pdf
Just getting into the Lerner book. Its funny… who would have thought an Ivy League endowment would be run by such badasses?
nirjraina Wrote: ------------------------------------------------------- > Just getting into the Lerner book. Its funny… > who would have thought an Ivy League endowment > would be run by such badasses? i don’t know why that would be surprising
No I just meant I was surprised to see such a heavy emphasis on PE, absolute return investments and an active hedging stance. I’m fairly new to finance and have very little exposure to how asset allocations are made in the real world so this was a very interesting section for me.
I see what you’re saying. Well, PE investments are favorable by pension and endowment funds, because they tend to have a long-term horizon (3-5 years, usually) that fits well with the goals of the pension/endowment fund. In addition, because private equity firms not only own the companies in their portfolio but also take an activist approach in managing and growing them, the best private equity funds typically are among the best types of investments year-in and year-out. The best private equity funds easily outperform most stock portfolios simply because the partners at the helm of at the best PE firms understand what it takes to not only grow a company aggressively, but to also generate returns for their investors, whereas most public equity investments are done from the perspective of a minority investor who often doesn’t have much influence over the direction of the companies they invest in. All of this is not to say that you should just invest in any PE fund; the key is to invest in the BEST ones, as they know what they’re doing and they have a track record to prove it. And the best ones beat public equity investments year in and year out. If you’re further curious about this topic, I highly recommend reading “Memo to the CEO: Lessons from Private Equity Any Company Can Use” by Orit Gadiesh. She provides pretty compelling arguments not only as to why the top private equity funds make good investments for long-term investors, but also explains why the PE investment strategy is so effective and how it can also be applied to public companies (which for the most part are too lazy, short-sighted, or averse to change to apply these strategies, she argues).
numi u done with CFA?
if you’re interested in VC, check out The Handbook of Financing Growth: Strategies and Capital Structure by Kenneth H. Marks. If you’re new to the field, it might be a little technical but I think it’s one of the best non-academic books out there. He’s had experience taking a few companies from start up to buy out (usually middle market)
equity_research_nds Wrote: ------------------------------------------------------- > numi u done with CFA? nope…no plans to finish the CFA program either. i just don’t think it’s something i need thanks for the book suggestion Onegin. nice to see you’re still out there. btw i got your e-mail the other day and will try to write back this weekend or early next week. hope all is well.