8.4. Debt Raising
As previously mentioned, the profitability of an investment is strictly connected to the value created by debt leverage. The financial structure of a venture capital deal is generally a mix of debt and equity (capital structure) used to acquire the target company.
Defining optimal capital structure is a topic that has always interested academics and market insiders. The most relevant and well-known theory about leverage use is formalized by Modigliani and Miller (M + M I) through three statements.
The first statement states that the mix of debt and equity does not create any impact on the company value in a world:
- Without tax
- Without any type of financial distressed costs
- Without any form of information asymmetry
- With ...
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