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Printable Handouts
Navigable Slide Index
This material is restricted to subscribers.
Topics Covered
- Private equity markets
- Leveraged buyouts
- The makings of a good private equity deals
- Cash flows in a typical private equity deal
- PetSmart buyout case study
Talk Citation
McDonald, M. (2015, October 29). Petsmart: a case study in private equity buyouts [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved August 31, 2024, from https://doi.org/10.69645/UBEW1233.Export Citation (RIS)
Publication History
Extended-form Case Study
Petsmart: a case study in private equity buyouts
Published on October 29, 2015
19 min
Transcript
Please wait while the transcript is being prepared...
0:00
Hello.
My name's Michael McDonald.
Today we're going to be
talking about PetSmart:
A case
in private equity buyouts.
0:08
Private equity markets
are some of the most significant
but misunderstood markets
in the world today.
Essentially,
private equity markets
are venues where
non-publicly traded equity
and debt securities are managed,
bought, sold, et cetera.
In these markets,
we have firms that invest in
and manage
private equity investments.
These firms are called
private equity firms.
This is distinct
from the investments
that these firms make.
So we have
a private equity firm,
let's say,
Blackstone, as an example.
They buy and sell
portfolio companies
and manage these
portfolio companies.
Blackstone would be referred
to as a private equity firm.
The companies they buy and sell
within their investments,
those are called
portfolio companies.
It's important
to understand the distinction
or none of what we're going
to talk about from here on out,
will make much sense.
So these private equity firms,
they're generally buying
publicly traded companies
in their entirety
and then they take
these companies private,
turn them
into a portfolio company.
The goal in doing this
kind of a buyout,
that is taking these
publicly traded companies
and taking them private,
is to improve the value
in the company,
that is, the private equity firm
is trying to make money.
They do that, they earn money
by improving on a business
and then reselling it
in the future.
Generally, what this means
is that they have some sort
of target public company
that they think is being
mismanaged in some way.
There's an opportunity
to improve its operations.
Sometimes
that can be simply making
fundamental changes
to management.
One of the most common practices
is also levering up
a portfolio company.
We'll talk about
that in a second.