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Private Equity and Venture Capital in Europe
book

Private Equity and Venture Capital in Europe

by Stefano Caselli
November 2009
Beginner content levelBeginner
368 pages
11h 24m
English
Elsevier Science
Content preview from Private Equity and Venture Capital in Europe

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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Publisher Resources

ISBN: 9780123750266