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The Complete Direct Investing Handbook

Book Description

The practical guide to direct investing strategies and best practices

The Complete Direct Investing Handbook provides comprehensive guidelines, principles and practical perspectives on this increasingly attractive private equity investment strategy. Interviews with leading family office investors, qualified private equity buyers, and top direct investing advisors provide essential insights, and attention to the nuanced processes of direct investing. The books is a hands-on resource for family offices and those investors interested in generating returns through private company ownership to be more effective in creating returns in a complex market. Direct investing best practices are explored in-depth, with guidance on strategy and the evaluation and assessment of various investment opportunities. The process begins with a codified and specific investment goal, and a robust strategy tailored to the investor's individual needs. Useful insight on 'narrowing the field' helps investors select the appropriate opportunities to meet their investment goals, and practical tools help streamline the process of capital deployment and in turn providing more opportunities to achieve desired returns.

Despite the growing interest in direct investing, there is little public information available to investors and there is a lack of transparency into practical standards. This book bridges the gap between strategy and execution, with comprehensive guidance and real-world insights.

  • Define and craft a focused investment thesis and appropriate timeline specific to your needs
  • Identify the right type, size, duration, and risk profile aligned to your investment objectives
  • Gain perspective on real-world direct investing and a deeper understanding of the risks and rewards
  • Better understand best practices and institutional investment rigor to develop bespoke processes and policies that create better outcomes for independent investors

Historically, extraordinary wealth has been created through equity in privately-held enterprise. Today, family offices and direct investors are looking more and more toward large capital deployment in early-stage and growth-oriented private equity investments, but are constrained by a lack of informed, established practices. The Complete Direct Investing Handbook provides the much-needed guidance and tools that can improve direct investment outcomes.

Table of Contents

  1. Cover
  2. Title Page
  3. Foreword
  4. Preface
  5. Acknowledgments
  6. Part I: Direct Investing and the Family Office Test
    1. Chapter 1: Introduction to Direct Investing
      1. 2008: A Wakeup Call for Investors
      2. Role of the Family Office and Private Investors
      3. The Opportunity
      4. Best Practices
      5. Key Considerations
      6. Conclusion
      7. Notes
    2. Chapter 2: The Emerging Presence of Private Capital in Direct Investing
      1. The Family Office Marketplace
      2. The Unique Benefits of Private Capital
      3. Increased Interest in Private Equity
      4. Conclusion
    3. Chapter 3: Co-Investment Strategies in Direct Investing
      1. Defining Co-Investing and Providing Context
      2. Insights on the Popularity of Co-Investing
      3. Interest in Co-Investment Strategies
      4. Roles of the Co-Investor
      5. Going Solo: Why Co-Investing May Not Be Your Choice
      6. The Perils and Pearls of Co-Investing
      7. Vetting Co-Investors
      8. Club Deals
      9. Mini Case Study
      10. Conclusion
      11. Notes
    4. Chapter 4: Private Equity Strategies: Characteristics and Implications
      1. What Is Private Equity?
      2. Real Estate
      3. Venture Capital
      4. Growth Capital
      5. Buyouts
      6. Mezzanine Financing
      7. Distressed Assets
      8. Conclusion: Putting It All Together
      9. Notes
  7. Part II: Direct Investing in Action
    1. Chapter 5: Family Office Considerations to the Direct Investment Process
      1. Source of Wealth: Lens of the Family Office
      2. SWOT Analysis for Direct Investing
      3. Three Phases to the Direct Investing Process
      4. A Three-Phase Direct Investing Process
      5. Case Study
      6. Conclusion
      7. Notes
    2. Chapter 6: Designing a Direct Investment Thesis
      1. Defining the Direct Investment Thesis
      2. Asset Mix and the Direct Investment Thesis
      3. Family Pathways and the Direct Investment Thesis
      4. The Barbell Approach and the Direct Investment Thesis
      5. Entrepreneurial Orientation and the Direct Investment Thesis
      6. Family Investment Style and the Direct Investment Thesis
      7. Case Study
      8. Conclusion
      9. Notes
    3. Chapter 7: Sourcing, Deal Flow, Screening, and Deploying Direct Investments
      1. Industry Professionals and Thought Leaders
      2. Investment Bankers/Business Brokers
      3. Professional Service Providers
      4. Commercial Banks
      5. Private Equity Funds/Family Offices
      6. Screening Process
      7. Due Diligence
      8. Investment Memorandum
      9. Investment Decision Process
      10. Conclusion
      11. Notes
    4. Chapter 8: Direct Investments: Deal Structures, Terms, and Portfolio Construction
      1. How to Get Started
      2. Portfolio Construction
      3. The Capital Stack
      4. Equity Transactions
      5. Types of Debt Instruments
      6. Mezzanine Debt
      7. Case Study: Early-Stage Solar Energy Finance Company
      8. A Primer on Important Term Sheet Items
      9. Conclusion
    5. Chapter 9: Investment Monitoring, Exit Strategies, and Harvesting Returns
      1. Introduction
      2. Alignment of Objectives
      3. Monitoring Direct Investments as a Minority Stake Owner
      4. Why Timing of an Investment Exit and Not Just the Investment Return Is Critical
      5. Importance of Company Lifecycles with Respect to Timing and Harvesting Returns
      6. Exit Valuations and Multiples
      7. Maximizing Liquidity of Illiquid Investments through Pre-Negotiated Rights
      8. Exit Value Drivers
      9. Common Exit Strategies
      10. Mergers and Acquisitions
      11. Working with Investment Bankers and Key Advisors to the Exit Strategy
      12. Conclusion
      13. Notes
  8. Part III: Direct Investing Perspectives
    1. Chapter 10: The CIO Perspective
      1. Sourcing Top CIOs to Oversee Direct Investing in the SFO
      2. What's the Edge?
      3. What Defines Success for the CIO?
      4. The CIO Fit
      5. Risk Management at the Investment Level and Portfolio Level
      6. CIO Compensation
      7. Conclusion
    2. Chapter 11: The Millennials and Direct Investing: A Look at Impact Investing
      1. Who Are the Millennials and What Do They Care About?
      2. Millennials' Respect for the Senior Generation
      3. Growing Interest in Impact Investing
      4. Making the Case for Impact Investing
      5. How to Source Impact Investments
      6. Experiential Returns: Intangible Benefits of Impact Investing
      7. Common Challenges and Barriers to Impact Investing
      8. Systems Thinking: Creating and Sustaining Family Knowledge
      9. Conclusion
      10. Notes
    3. Chapter 12: SCIE: Sustainable Cycle of Investing Engagement
      1. The Purpose of SCIE
      2. The SCIE Framework
      3. Family Purpose, Values, and Mission
      4. Framing Strategy
      5. Developing Strategy
      6. Implementing Strategy
      7. Capture and Communicate Learning
      8. Conclusion
      9. Notes
    4. Chapter 13: International Direct Investing
      1. Why Consider International Direct Investing?
      2. Key Differences between Investing Abroad versus Investing in the United States
      3. How to Determine Where to Invest
      4. How Population Change Can Impact Target Market Opportunities
      5. Keys to Success in International Direct Investing
      6. The Role of a Partner in International Investing
      7. Common Mistakes Made by Investors Venturing Abroad
      8. Risk Mitigation
      9. Foreign Families in the United States
      10. Conclusion
      11. Notes
  9. Appendix A: Private Equity Strategies Summary
  10. Appendix B: Sample Due Diligence Checklist
  11. Appendix C: Glossary
  12. About the Author
  13. About the Chapter Authors
  14. Index
  15. End User License Agreement