Describe a scenario where a PE firm would consider using a continuation fund to extend the life of a successful investment, and walk me through the analysis that supports this decision.
An advanced Private Equity question — expect it in final rounds and case-heavy interviews (IB, PE, Big-4 Transaction Services).
THE SHORT ANSWER
In a situation where a portfolio company has significant growth potential and the PE firm believes that additional time and capital are needed to realize this potential, a continuation fund can provide a solution. The analysis would involve evaluating the company's growth prospects, assessing the potential for further value creation, and considering the interests of existing investors.
WHAT INTERVIEWERS LISTEN FOR
- ✓Continuation fund
- ✓Successful investment
- ✓Growth potential
COMMON MISTAKES
- ✗Failing to consider investor interests
- ✗Ignoring potential conflicts of interest
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