VENTURE CAPITAL AND PRIVATE EQUITY A Casebook

Fifth Edition

Josh Lerner
Harvard Business School National Bureau of Economic Research

Felda Hardymon
Harvard Business School

Ann Leamon
Harvard Business School

WILEY John Wiley & Sons, Inc.

Table of Contents
ACKNOWLEDGMENTS ABOUT THE AUTHORS INTRODUCTION 1 Private Equity Today and Tomorrow 2 Iris^Running Crane: December 2009
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vi vii

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1 13

MODULE 1: FUND-RAISING 3 4 5 6 7 8 Yale University Investments Office: August 2006 Altoona State Investment Board: December 2008 Note on Private Equity Partnership Agreements Grove Street Advisors: September 2009 Note on the Private Equity Fund-Raising Process The Canada Pension Plan Investment Board

28 33 58 66 77 98 105

MODULE 2: INVESTING 9 10 11 12 13 14 15 16 17 Firm Strategy Vignettes Hardina Smythe and the Healthcare Investment Conundrum Avid Radiopharmaceuticals and Lighthouse Capital Partners Metapath Software: September 1997 Note on Valuation in Private Equity Settings Note on European Private Equity Investcorp and the Moneybookers Bid Note on Private Equity in Developing Countries Hony, CIFA, and Zoomlion: Creating Value and Strategic Choices in a Dynamic Market^ 18 Gobi Partners and DMG 19 Note on Private Equity Securities

130 135 141 154 169 181 201 219 235 259 283 305

MODULE 3: EXITING 20 21 22 23 Warburg Pincus and emgs: The IPO Decision (A) Motilal Oswal Financial Services, Ltd.: An IPO in India Note on the Initial Public Offering Process Between a Rock and a Hard Place: Valuation and Distribution in Private Equity

313 318 338 359 366

MODULE 4: NEW FRONTIERS 24 Village Ventures 25 Microsoft's IP Ventures

395 401 425 ix

Table of Contents 447 479 500 527 545 553

26 Abraaj Capital 27 Actis: January 2008 28 The Blackstone Group's IPO APPENDIX Note on Private Equity Information Sources GLOSSARY INDEX