COMMERCE 3FA3 Lecture Notes - Lecture 7: Investment Banking, Exit Strategy, Private Equity

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 3FA3
• Professor: Anwar Husain

Document Summary

Above breakeven -> adding debt will increase eps and roe. Below breakeven -> adding debt will decrease eps and roe. Raising equity for small company: venture capital, private equity (angel investors) Raising equity for large company: public share issues (stock exchange, first time its called ipo (initial public offering, after its called seo (seasonal equity offer) After investment -> they get seat on board of directors. Goal is to get to ipo or sale of company. List shares on stock exchange (cid:894)nyse, tsx, nasdaq (cid:895) Pros: access to more equity, sets a market price for your company, existing shareholders have ability to sell. Cons: regulation and admin, a lot of info becomes public, expensive -> pay underwriters (investment banks) How do you go public: hire investment bank, guide through process, help in setting price, file prospectus, first issue (ipo, do ipo. Bought deal (firm commitment) -> underwriter buys the full issue of equity at a set price.