A common method of valuing the equity in highly leveraged transactions is the flows-to-equity method. When applying this method various formulas can be used to calculate the time-varying cost of equity. In this paper we show that some commonly used formulas are inconsistent with the assumptions...

"We review the theory and evidence on venture capital (VC) and other private equity: why professional private equity exists, what private equity managers do with their portfolio companies, what returns they earn, who earns more and why, what determines the design of contracts signed between (i)...

Modern corporations use complex debt instruments and pursue acquisitions. In order to analyze the properties of some of these contracts in the event of an acquisition, this paper considers a company that has an incumbent capital structure, comprising one of five practically important structured...

We show how temporary ownership by private equity firms affects industry structure, competition and welfare. Temporary ownership leads to strong investment incentives because equilibrium resale prices are determined by buyers incentives to block rivals from obtaining assets. These incentives...

We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves...