1. Why are private equity investments said to be riskier than those in listed companies (please note there may be more than one correct answer)?
a) Because PE firms invest in smaller companies
b) Because PE investments are illiquid investments
c) Because PE investments cannot be valued on a regular basis
d) Because PE investments can be majority or minority investments
2. Which investment strategy is not a private equity one?
a) Invest equity in a start-up company
b) Invest equity as growth capital to an unlisted company
c) Invest equity on the stock market
d) Invest equity in a leveraged buyout
e) Invest equity in the purchase of a real estate asset
f) Invest in a public to private transaction
3. Which of the following statements regarding General Partners (GPs) and Limited Partners (LPs) is false? Note there may be more than one correct answer.
a) GPs do not invest into the funds they manage
b) Once their capital has been invested into a fund, LPs cannot decide which company investments the fund’s capital is made into
c) LPs earn management and performance fees
d) GPs earn management and performance fees
4. What are the drivers to value creation for a leveraged buyout transaction (LBO)?
a) Replace existing management with a new one
b) Improve profitability and cash flow generation during the LBO investment period
c) Inject new capital to grow the company during the LBO investment period
d) Trade the company up between the LBO acquisition and the sale to a new owner
e) Repay as much debt as possible during the LBO investment period