Saturday, June 09, 2007

The REP secret (partially) uncovered

REP is at last over. It was becoming a drag, although it was a nice class. The format of REP diverges somehow from other classical INSEAD methodology: usually, there's a big mystery awaiting for us, that is being uncovered bit by bit over the course, as a compelling framework. REP is very practical. It's the LBO side of entrepreneurship. You find a company and assess its potential and present it to real PE guys. The fun of this class is to make it as real as possible. We created a Website and a PE bogus fund. Then we approached our targets.
Ours presented the full monty of small and medium sized businesses issues: 3rd generation curse, poor management unable to react to competitive changing dynamics, but very strong expertise and local clout. In a way, we experienced in 3 months all of the frustrations of LBO entrepreneurship: ducks, entrepreurial heat syndrome (getting too excited), entrepreneurs valuations way over the rational valuation...

In the end, we did not win the competition, nor are we likely to pursue the deal for real -just remembering that none of the past class groups going for real have ever succeeded. Because, let's be frank: for INSEAD that we may be, the lack of credibility in this business (through connections, experience etc.) makes it natural that we should come across firms that nobody else wants.

Takeaways: LBO business is good, lots of businesses to be bought; junk companies can be really attractive too, Management in LBO is tough and requires lots of experience and pressure handling, and this is as successful as and potentially less risky than New Venture entrepreneurship.

This class will be entirely reengineered next year, fyi.




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