5 Insider Lessons from a Wharton MBA Private Equity Class
Lessons You Won’t Find Anywhere Else
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Mar 25, 2025
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Private equity (PE) remains one of the most sought-after and competitive sectors in finance. At Wharton, students have the unique opportunity to delve into this field through Advanced Topics in Private Equity, a course taught by Dan Zilberman, former Head of Europe and current Global Head of Capital Solutions at Warburg Pincus. Far from a standard academic exercise, this class brings real-world PE insights directly from Zilberman’s extensive deal-making experience. The course is designed to provide a hands-on understanding of private equity through practical models, simulated presentations, and key lessons drawn from actual industry transactions. Below is a breakdown of the course structure, core takeaways, and the learning outcomes students gain from their work in the class.
The structure of this class was designed to replicate the real-world process of executing a private equity deal. It centered around an actual transaction completed by Warburg Pincus in 2011—the acquisition of The Mutual Fund Store. From the outset, students were immersed in the practical aspects of private equity, starting with a management presentation delivered by the company’s former CEO, who had been placed in that role by Warburg Pincus.
The class followed a step-by-step progression that mirrored the typical PE deal process:
Due Diligence: Students were given access to a virtual data room containing comprehensive diligence materials, including financials, legal documents, market analysis, and human capital data—closely simulating what private equity professionals encounter during a live deal.
Building Financial Models: Using the information from the data room, students built key financial models, including a leveraged buyout (LBO) model, discounted cash flow (DCF) analysis, and comparable company and transaction analysis (comps), to assess the business’s value and potential.
Simulated Investment Committee: For the final project, students presented their investment case to a simulated Investment Committee (IC). During this session, Professor Zilberman scrutinized their assumptions and challenged their analysis, replicating the high-stakes IC discussions that occur within top PE firms.
Guest Speakers: Throughout the semester, the class welcomed prominent guest speakers from leading private equity firms. These included a Partner from Hellman & Friedman and the Co-Head of Private Equity at Centerbridge Partners, who provided real-world insights and shared practical lessons from their careers.
1. Exit Multiples Have Driven Returns More Than Anything Else
One of the first things students learned is that PE returns haven’t been driven purely by operational improvements or financial engineering—multiple expansion has played a major role.
Multiple Expansion: If you buy a company at 8x EBITDA and sell it at 12x, your returns look great—even if operational improvements fell short.
Implication: This highlighted that buying at the right price is one of the most critical aspects of PE investing.
The professor explained that PE returns are often more dependent on market sentiment than we’d like to admit—and this isn’t something that’s entirely within the control of PE investors.
2. Deploying Dry Powder Under Time Pressure Can Lead to Bad Deals
PE firms often face pressure to deploy capital because they raise funds with a fixed investment period (usually 5-7 years). If they don’t use all the capital, they have to return it to investors—which means they may rush to invest in subpar deals toward the end of a fund’s life.
This dynamic creates challenges:
PE firms may prioritize capital deployment over deal quality.
Carry (profit share from returns) incentivizes some investors to chase deals, even in overheated markets.
3. Carveouts Are Hidden Gems
In the professor’s 25+ years in private equity, his most successful deals were carveouts.
What Is a Carveout? A carveout happens when a company sells a division or subset of its business. For example, if Facebook sold off Instagram, that would be a carveout deal.
Why Carveouts Work: Carveouts often involve neglected assets that PE firms can improve by adding capital and management resources.
Because the parent company may have overlooked these assets, PE firms can unlock significant untapped value through operational improvements and strategic focus.
4. Avoid Falling in Love with a Deal
During the deal process, it’s easy to get caught up in “deal heat” and fall in love with a target business, especially if it’s a hot company. However, that’s a recipe for disaster.
Solution: Proper due diligence (DD) is the best way to stay objective.
In real deals, DD involves extensive meetings with consultants, auditors, and customers—and reviewing hundreds of pages and Excel rows to assess risks.
Key Insight: The professor emphasized that it’s better to lose a deal after spending millions on DD than to buy the company at the wrong price or with insufficient diligence.
5. Every Model Is Wrong, but You Still Need One
Financial models are essential in PE because they help identify key drivers of value, such as margins, leverage, and valuation. However, every model has limitations:
Macro Challenges: It’s impossible to predict the future, so PE investors focus on businesses with large total addressable markets (TAMs) and high margins to provide a cushion against unexpected challenges.
Models Help You Understand Risk: Even though they’ll be wrong, models guide investment decisions by showing the impact of different financial levers on returns.
The Bottom Line
Wharton’s Advanced Topics in Private Equity offers MBA students a rare opportunity to experience the complexities of PE investing firsthand. From financial modeling to investment committee presentations, the course prepares students for the challenges of a career in private equity, while also providing valuable insights into the dynamics that drive PE returns.
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