Comments on: Private equity ratchets in practice http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/ A vignette into the aberrant thoughts of a private equiteer Sat, 28 Aug 2010 13:18:38 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Private equity ratchets in practice II | Private Equity Blog - The Private Equiteer http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/comment-page-1/#comment-4786 Private equity ratchets in practice II | Private Equity Blog - The Private Equiteer Sat, 17 Oct 2009 00:33:46 +0000 http://www.theprivateequiteer.com/?p=2290#comment-4786 [...] to incentivise them on the return-side via a ratchet linked to IRR or cash multiple (thanks to a recent reader for this [...] [...] to incentivise them on the return-side via a ratchet linked to IRR or cash multiple (thanks to a recent reader for this [...]

]]> By: The Private Equiteer http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/comment-page-1/#comment-4784 The Private Equiteer Fri, 16 Oct 2009 23:25:23 +0000 http://www.theprivateequiteer.com/?p=2290#comment-4784 Hi Dirk; thanks for the note. Good point about ratchets at exit. I think they make much more sense since they align more closely with the purpose of an investment. That is when we make most of our returns (not always, but usually) and it aligns with the concept of PE being more driven by fundamentals than public markets. In part II of 'ratchets in practice' I'll talk about positive uses and mention exit ratchets. Hi Dirk; thanks for the note. Good point about ratchets at exit. I think they make much more sense since they align more closely with the purpose of an investment. That is when we make most of our returns (not always, but usually) and it aligns with the concept of PE being more driven by fundamentals than public markets.

In part II of ‘ratchets in practice’ I’ll talk about positive uses and mention exit ratchets.

]]> By: Dirk http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/comment-page-1/#comment-4779 Dirk Fri, 16 Oct 2009 12:26:00 +0000 http://www.theprivateequiteer.com/?p=2290#comment-4779 We use ratchets actually quite often, but always on exit value, rather than EBIT/short term performance. This can be especially be helpful when management's interests in the transaction are not completely aligned with ours (the buyers). Structuring can be done in many ways, but is most practical if based on a certain IRR threshold for the PE buyer (so that e.g. additional equity investment is taken into account). But perhaps you use a different term for these kind of structures? We use ratchets actually quite often, but always on exit value, rather than EBIT/short term performance. This can be especially be helpful when management’s interests in the transaction are not completely aligned with ours (the buyers). Structuring can be done in many ways, but is most practical if based on a certain IRR threshold for the PE buyer (so that e.g. additional equity investment is taken into account). But perhaps you use a different term for these kind of structures?

]]> By: The Private Equiteer http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/comment-page-1/#comment-4745 The Private Equiteer Wed, 14 Oct 2009 01:21:25 +0000 http://www.theprivateequiteer.com/?p=2290#comment-4745 You're welcome Alex.. and a big thanks for your note. You’re welcome Alex.. and a big thanks for your note.

]]> By: Alex http://www.theprivateequiteer.com/private-equity-ratchets-in-practice/comment-page-1/#comment-4744 Alex Wed, 14 Oct 2009 01:08:03 +0000 http://www.theprivateequiteer.com/?p=2290#comment-4744 Just a quick comment to say that I really enjoy reading your posts.. I'm relatively new to private equity so it's great to have this site as a resource and as a peek into a PE manager's thought process. Thanks! Just a quick comment to say that I really enjoy reading your posts.. I’m relatively new to private equity so it’s great to have this site as a resource and as a peek into a PE manager’s thought process. Thanks!

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