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More About This Title The Complete Direct Investing Handbook: A Guide for Family Offices, Qualified Purchasers, and Accredited Investors
English
The Complete Direct Investing Handbook provides comprehensive guidelines, principles and practical perspectives on this increasingly attractive private equity investment strategy. Interviews with leading family office investors, qualified private equity buyers, and top direct investing advisors provide essential insights, and attention to the nuanced processes of direct investing. The books is a hands-on resource for family offices and those investors interested in generating returns through private company ownership to be more effective in creating returns in a complex market. Direct investing best practices are explored in-depth, with guidance on strategy and the evaluation and assessment of various investment opportunities. The process begins with a codified and specific investment goal, and a robust strategy tailored to the investor's individual needs. Useful insight on 'narrowing the field' helps investors select the appropriate opportunities to meet their investment goals, and practical tools help streamline the process of capital deployment and in turn providing more opportunities to achieve desired returns.
Despite the growing interest in direct investing, there is little public information available to investors and there is a lack of transparency into practical standards. This book bridges the gap between strategy and execution, with comprehensive guidance and real-world insights.
- Define and craft a focused investment thesis and appropriate timeline specific to your needs
- Identify the right type, size, duration, and risk profile aligned to your investment objectives
- Gain perspective on real-world direct investing and a deeper understanding of the risks and rewards
- Better understand best practices and institutional investment rigor to develop bespoke processes and policies that create better outcomes for independent investors
Historically, extraordinary wealth has been created through equity in privately-held enterprise. Today, family offices and direct investors are looking more and more toward large capital deployment in early-stage and growth-oriented private equity investments, but are constrained by a lack of informed, established practices. The Complete Direct Investing Handbook provides the much-needed guidance and tools that can improve direct investment outcomes.
English
KIRBY ROSPLOCK, PHD, is founder and CEO of Tamarind Partners, a consulting firm that advises family offices, ultra-high-net-worth investors, and the wealth management industry. She is a researcher, scholar, educator, and well-respected speaker around the globe on family wealth, family office, and family business. She is also the author of The Complete Family Office Handbook. For more on Dr. Rosplock and Tamarind Partners, visit www.TamarindPartners.com.
English
Foreword xv
Preface xvii
Acknowledgments xxi
PART I: DIRECT INVESTING AND THE FAMILY OFFICE TEST
CHAPTER 1 Introduction to Direct Investing 3
2008: A Wakeup Call for Investors 5
Role of the Family Office and Private Investors 6
The Opportunity 9
Best Practices 10
Key Considerations 12
Conclusion 15
Notes 16
CHAPTER 2 The Emerging Presence of Private Capital in Direct Investing 18
Contributing Authors: Nathan Hamilton and Sara Hamilton
The Family Office Marketplace 19
The Unique Benefits of Private Capital 21
Increased Interest in Private Equity 24
Conclusion 30
CHAPTER 3 Co-Investment Strategies in Direct Investing 32
Defining Co-Investing and Providing Context 32
Insights on the Popularity of Co-Investing 33
Interest in Co-Investment Strategies 33
Roles of the Co-Investor 35
Going Solo: Why Co-Investing May Not Be Your Choice 40
The Perils and Pearls of Co-Investing 41
Vetting Co-Investors 44
Club Deals 46
Mini Case Study 51
Conclusion 51
Notes 52
CHAPTER 4 Private Equity Strategies: Characteristics and Implications 54
Contributing Author: David McCombie
What Is Private Equity? 55
Real Estate 58
Venture Capital 62
Growth Capital 72
Buyouts 75
Mezzanine Financing 78
Distressed Assets 81
Conclusion: Putting It All Together 85
Notes 86
PART II: DIRECT INVESTING IN ACTION
CHAPTER 5 Family Office Considerations to the Direct Investment Process 91
Source of Wealth: Lens of the Family Office 92
SWOT Analysis for Direct Investing 93
Three Phases to the Direct Investing Process 94
AThree-Phase Direct Investing Process 97
Case Study 111
Conclusion 113
Notes 114
CHAPTER 6 Designing a Direct Investment Thesis 115
Defining the Direct Investment Thesis 115
Asset Mix and the Direct Investment Thesis 117
Family Pathways and the Direct Investment Thesis 119
The Barbell Approach and the Direct Investment Thesis 122
Entrepreneurial Orientation and the Direct Investment Thesis 124
Family Investment Style and the Direct InvestmentThesis 128
Case Study 132
Conclusion 137
Notes 138
CHAPTER 7 Sourcing, Deal Flow, Screening, and Deploying Direct Investments 141
Contributing Author: Euclid Walker
Industry Professionals and Thought Leaders 142
Investment Bankers/Business Brokers 143
Professional Service Providers 144
Commercial Banks 144
Private Equity Funds/Family Offices 145
Screening Process 146
Due Diligence 151
Investment Memorandum 154
Investment Decision Process 155
Conclusion 156
Notes 156
CHAPTER 8 Direct Investments: Deal Structures, Terms, and Portfolio Construction 157
Contributing Author: Jolyne Caruso
How to Get Started 158
Portfolio Construction 159
The Capital Stack 160
Equity Transactions 162
Types of Debt Instruments 165
Mezzanine Debt 166
Case Study: Early-Stage Solar Energy Finance Company 168
A Primer on Important Term Sheet Items 170
Conclusion 175
CHAPTER 9 Investment Monitoring, Exit Strategies, and Harvesting Returns 177
Contributing Author: Adam Goodfriend
Introduction 177
Alignment of Objectives 178
Monitoring Direct Investments as a Minority Stake Owner 178
Why Timing of an Investment Exit and Not Just the Investment Return Is Critical 179
Importance of Company Lifecycles with Respect to Timing and Harvesting Returns 181
Exit Valuations and Multiples 184
Maximizing Liquidity of Illiquid Investments through Pre-Negotiated Rights 186
Exit Value Drivers 188
Common Exit Strategies 189
Mergers and Acquisitions 192
Working with Investment Bankers and Key Advisors to the Exit Strategy 192
Conclusion 194
Notes 195
PART III: DIRECT INVESTING PERSPECTIVES
CHAPTER 10 The CIO Perspective 199
Contributing Author: Robert G. Blabey
Sourcing Top CIOs to Oversee Direct Investing in the SFO 200
What’s the Edge? 202
What Defines Success for the CIO? 203
The CIO Fit 207
Risk Management at the Investment Level and Portfolio Level 209
CIO Compensation 211
Conclusion 216
CHAPTER 11 The Millennials and Direct Investing: A Look at Impact Investing 218
Contributing Author: Temple Fennell
Who Are the Millennials and What Do They Care About? 219
Millennials’ Respect for the Senior Generation 220
Growing Interest in Impact Investing 222
Making the Case for Impact Investing 222
How to Source Impact Investments 227
Experiential Returns: Intangible Benefits of Impact Investing 231
Common Challenges and Barriers to Impact Investing 232
SystemsThinking: Creating and Sustaining Family Knowledge 235
Conclusion 238
Notes 239
CHAPTER 12 SCIE: Sustainable Cycle of Investing Engagement 242
Contributing Author: Temple Fennell
The Purpose of SCIE 244
The SCIE Framework 246
Family Purpose, Values, and Mission 247
Framing Strategy 249
Developing Strategy 253
Implementing Strategy 259
Capture and Communicate Learning 264
Conclusion 269
Notes 269
CHAPTER 13 International Direct Investing 271
Contributing Author: Anna Nekoranec
Why Consider International Direct Investing? 272
Key Differences between Investing Abroad versus Investing in the United States 274
How to Determine Where to Invest 276
How Population Change Can Impact Target Market Opportunities 278
Keys to Success in International Direct Investing 282
The Role of a Partner in International Investing 284
Common Mistakes Made by Investors Venturing Abroad 286
Risk Mitigation 288
Foreign Families in the United States 290
Conclusion 291
Notes 292
APPENDIX A Private Equity Strategies Summary 293
APPENDIX B Sample Due Diligence Checklist 299
APPENDIX C Glossary 306
About the Author 316
About the Chapter Authors 318
Index 323
