Framework for evaluating P.E. Deals: Private equity deals in media and infrastructure; analysis and investment opportunities

Abstract

This report aims at analyzing the idea of a framework for evaluating Private Equity deals in the Media and Entertainment and Infrastructure industries. These are industries which have been viewed in positive light by private equity firms with increase in investment activity seen in the past five years. This involves a thorough understanding of the industry, followed by an understanding of the growth drivers, key trends and challenges that currently plague these sectors. We also analyzed the various subsectors within these industries in order to identify attractive investment opportunities which provide investors lucrative returns and good investment sense. We have also looked at some PE deals and FDI investments in these sectors in the recent past. The framework for analyzing a sector/subsector should evaluate the strategic as well as financial sense ofinvesting in the sector, with a clear understanding of the future prospects and potential opportunity in the industry. In this context, we have analyzed 2 subsectors within the Media industry Print media and TV Content, which we believe are very lucrative subsectors with tremendous potential for PE players. We have analyzed practical valuations prevailing in the industry today the P/E, EV/EBITDA, operating margins, etc of these companies and how these trends have been changing over time. Within the Infrastructure industry, we believe that construction, especially real estate have very high earnings potential with strong drivers of value expected to propel the industry in a profitable growth trajectory. With the help of the five forces of analysis, we have looked at the rationale for a few private equity investments within these sectors What is the investment sense of the deal, what are the risks involved, how the investment makes sense and the potential flexibilities that arise out of the deal. The report aims at evaluating the conceptual framework of a PE deal with an understanding of investment sense within the identified subsectors, and does not cover actual valuation of deals, which is based on pure application of frameworks.