Subject: Palamon Capital Partners
Details: I. Palamon Capital Partners/TeamSystem S.p.A.
1. What is private-equity investing? Who participates in it and why? How is Palamon positioned in the industry?
2. How does private-equity investing compare with public-market investing? What are the similarities and differences between the two?
3. Why is Palamon interested in TeamSystem? Does it fit with Palamon's investment strategy?
4. How much is 51% of TeamSystem's common equity worth? Use both a discounted-cash-flow and multiple-based valuation to justify your recommendation.
5. What complexities do cross-border deals introduce? What are the specific risks of this deal?
6. What should Elson recommend to his partners? Go/no go? If "go," what non-price terms are important? If "no go," what counterproposal would you make
The question wants you to examine an investment decision by Palamon Capital Partner, a financial institution making private purchase of Equity in European Companies. To help make the decision you are to consider the financial factors as well as the non-financial factors and allow the company to make a well considered decision.
The problem makes several assumptions, first it compares the two companies, there is no basis to reach the conclusion that the two companies are comparable. Palamon is a financial institution and TeamSystem is an IT company with interest in virtual education. Second, the problem assumes that Palamon has a fixed investment strategy; this is not supported by evidence. We do not have the details of the entire portfolio of Palamon. It is possible that one low-risk investment maybe balanced with another higher risk investment. Thirdly, the problem on the basis of limited information wants a go/no go decision. This is unreasonable, usually there are negotiations regarding structure, agents and markets then a decision is made. Finally, the problem encourages us to mainly evaluate the company on the basis of financial...
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