Iris Running Crane Case Recommendation
2.Case Name: Iris Running Crane: December 20093.Questions asked in the case:Iris has received three job offers: Sunstorm Investment Group, Red Horse Partners and Lepus Capital. Which offer should Iris accept?4.Factors relevant to evaluating the case and reaching a conclusion/recommendationBased on the data in case, I will analyze the questions and reach the conclusion from objective and subjective perspectives. On the one hand, I analyzed the information from objective perspectives based on the opportunities in the private equity in 2009-2010 part. Exhibit 1 shows that shares of commitments to leveraged buyout(LBO) are always more than venture capital(VC) although shares of commitments to VC funds are rising in the late 1990s and then become less. Exhibit 2 shows that LBO usually outpaced those to VC except for 1990s. Exhibit 3 shows that the total value created by VC is larger than VC. Exhibit 4 shows that Private Equity industry growth steady but has fallen abruptly in 2008 due to financial crisis. Exhibit 5 shows that a substantial increasing trend in private equity compensation, especially in the LBO mega-fund. The partner-level salaries were unchanged from 2008 and the total compensation package had fallen by 12%. Compensation for junior staff had risen, with salaries up 6% and the total package up 11.2%. Moreover, carried interests was being shared farther down the organization, with 95% of senior associates sharing in it. The total salary from LBO is higher than that of VC on three level employees in private equity.
I can reach a conclusion that LBO tend to develop better compared with VC concerning market shares, average return and growth rate. Plus, the compensation in LBO is higher than that in VC.In addition, I compared the three offers from advantages and disadvantages. The table below shows that the basic information about three companies.Sunstorm Investment GroupRed Horse PartnersLepus CapitalType of CompanyRespected Buyout GroupsMiddle-market LBO groupLater-stage venture capital, growth equity, and smaller buyoutsType of Investment Private Equity, real estate, corporate debt and advisory servicesBuyout in the lower end of the middle marketAsset Management$70 billion$1.4 billionCompared with Median Benchmark0.8*multipleAverage Net IRRHighestCompensationSenior associateFirst Year: $160000, 30% bonusTwo Years Later:6% deal; 18 b.p., rose 1.5 b.p.Soon become a principal$175000, 50% bonus8% deal; 20 b.p., rose 1.75 b.p.Principal$225000, 100%8% allotted; 33 b.p.Loan herself