DES Chapter 9 The Starting Point for Corporate Valuation: Historical Financial Statements
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The specialist in highly technical, market-driven banking and corporate finance training
Business Valuation Courses
web: redliffetraining.co.uk email: [email protected] phone: +44 (0)20 7387 4484
The specialist in highly technical, market-driven valuation training
Valuation Courses
web: redliffetraining.co.uk email: [email protected] phone: +44 (0)20 7387 4484
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Brochure Content
PUBLIC COURSES
Bank Valuation Real Estate Modelling The Advanced LBO Modelling Course The Corporate Finance Modelling Masterclass The M&A Course The Modelling for M&A Course Valuing a Business Valuing Start Up and Pre IPO Companies Valuing a Pharmaceutical Company Valuing a Technology Company
IN-HOUSE COURSES
Advanced Business Valuation and Modelling Training Advanced M&A Modelling: A Practical 3 Day Workshop Advanced Valuation - Valuing Rapid Growth Companies Applied Financial Mathematics in Excel Training Course Emerging Market Bank Modelling & Valuation Excel Auditing Workshop Lease Modelling in Excel Modelling Service-Based Businesses VBA and Macros Valuation Masterclass - Valuing Difficult Businesses
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IN-HOUSE COURSES
Valuing Commodity Companies and Sectors Valuing Cyclical Companies and Sectors - Advanced Valuing Declining and Distressed Companies - Advanced Valuing Early Stage and Start Up Companies - Advanced Valuing Financial Companies Valuing Emerging Market Companies
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Corporate Membership Scheme
Our Corporate Membership Schemes are not valid on any courses held on an in-house basis and are in line with our standard Terms & Conditions
If you would like to enquire about one of our Corporate Membership Schemes then please call or email us for more information.
Email: [email protected] Tel: +44 (0) 20 7387 4484
Our Corporate Membership Scheme gives clients the benefit of discounted course places with absolutely no
restrictions.
Clients pay an annual subscription fee of 595 + VAT to receive 20% discount on all public course and conference
bookings irrespective of the numbers booked.
You Corporate Membership Scheme can be used once payment is received and will be valid for one year.
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Course Content
Bank ValuationDate: 18-19 June 2018, 25-26 Oct 2018
Location: London Standard Price: 1,300 + VATMembership Price: 1,040 + VAT
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Course Objectives
This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to:
Review the accounting and valuation of banks financial statements including the loan book, financial instruments and deriva-tives used for hedging purposes;
Further advance participants understanding of the latest Basel III developments including MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR);
Understanding the key metrics to value a bank, including performing all the steps of a Dividend Discount Model (DDM) and Multiples Analysis using Excel.
Course Overview
Day 1
Session 1
The aim of this session is to provide participants with an understanding of the financial statements of a bank. The focus is on the banking book and financial instruments. The reporting and valuation of derivatives is also discussed. Banks financial statements overview Accounting for loans
Non-performing loans Understanding impairments vs. write-off Incurred losses (IAS 39) has been re-
placed by expected losses (IFRS 9) Accounting for financial instruments
Lastest IFRS 9 implications: Amortised cost, FVTPL and FVTOCI
Level 1, 2 and 3 valuations Impairments of financial instruments
Accounting for derivatives Hedge accounting: fair value, cash flow
and net investment Netting derivative assets and liabilities
Case study: Barclays Financial Statements
Session 2 Fundamentals of Regulatory Capital Throughout this module, participants review the current regulatory requirements, in particular Tier I and Tier II capital ratios and understand detailed computations. Overview of regulatory framework Overview of Basel I, II and III and latest
Basel IV updates Overview of calculating available and re-
quired capital Common Equity Tier 1 (CET1), Tier 1,
Tier 2 and Total capital
Key reconciliation items from IFRS Book Equity to CET1: minority interests, deferred tax, changes to investment portfolio, etc.
Overview of calculating risk weighted assets (RWAs): credit risk RWA, counterparty risk, market risk and operating risk with the latest Basel IV requirements
- Standardised floor of 72.5% based on standardized approach - Simultaneous reduction in standardised risk weights for low risk mortgage loans Overview of key capital, liquidity and funding
ratios Tier 1 and total capital ratios Leverage ratios Liquidity coverage ratios (LCR) and Net
stable funding ratios (NSFR)
Case study: Barclays Regulatory Ratios Review
Day Two Session 3 Forecasting and Modelling Banks Based on the financial statements and publicly available regulatory information of Barclays, participants forecast its financial performance based on its historical statements. Modelling and forecasting the balance sheet:
deposit or loan-driven? The loan and trading book Funing requirements and mix: deposit vs.
wholesale funding Growth in funds under management Modelling and forecasting the income state-
ment
This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to: Review the accounting and valuation of banks financial statements including the loan book,
financial instruments and derivatives used for hedging purposes; Further advance participants understanding of the latest Basel III developments including
MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR); Understanding the key metrics to value a bank, including performing all the steps of a Dividend
Discount Model (DDM) and Multiples Analysis using Excel.
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Bank ValuationContinued
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Course Content
Understanding the income statement drivers Net interest income and margin Non-interest income Forecasting loan impairment through the
credit cycle Operating costs Tax Modelling and forecasting regulatory capital Risk weighted assets Required and available capital under Basel I,
II or III Liquidity requirements and stable funding
requirements Forecasting dividends (payout ratio and/or
minimum capital requirement) Ratio analysis and key performance ratios
Case study: Financial Modelling of Barclays on Excel
Session 4 Bank Valuation Following the forecasting of the banks performance, this session focuses on the Dividend Discount Model (DDM) and key multiples of Barclays. Free cash flow to equity mode Present value of future dividends Cost of equity for banks Terminal value: review of potential ap-
proaches (key parameters or RoE) Sensitivity analysis Banking trading multiple
P/BV and adjustment to BV explained P/E, dividend yield
Case study: DDM and Multiples of Barclays on Excel
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Course Content
Real Estate ModellingDate: 13-15 Mar 2018, 28-30 Nov 2018
Location: London Standard Price: 1,700 + VATMembership Price: 1,360 + VAT
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Course Overview
Course Methodology
This course will teach you all the available techniques and how to practically apply them through the use of Excel, Estatemaster and Argus. An extensive use of case studies will be adopted to illustrate the principles covered. Ultimately delegates will get practical tips on layout and style in building and analysing user-friendly models which are available as additional benefits of the course.
Who Should Attend
This course is designed for delegates who are seeking to improve their technical real estate modelling skills in Excel.
Bankers and financiers involved in real estate Directors and business development executives from corporates, equity sponsors and consultan-
cies
Day 1: Building Blocks of Real Estate Modelling
Using Excel for modelling Worksheet organization Data input, management and verification Use of colour/add-ins Naming of cells Location of input variables Review of Excel functions and their use Macros and their use Goal seeking Optimisation Circularity and how to resolve it Working with range names Graphs and charts What is needed from Excel and what is
superfluous Principles of spreadsheets and workbooks
Case Study: Evaluating good and bad Excel financial models
Equity valuation Equity NPV/ IRR and project IRR XNPV, XIRR, MIRR Modelling cash flow and ratios: Allowing for accountancy in real estate
models: Depreciation Tax SPV accounting Capital allowances
Case Study: Valuation and Cash Flow models
Fundamentals of Real Estate Models Objectives of real estate models Structure of real estate model design Dealing with escalation/inflation Monthly, quarterly and annual modelling Design, testing and feedback Model sensitivity and auditing Revenue and cost modelling Cash adequacy, recourse, standby and li-
quidity Financial coverage ratios and the bank per-
spective What are the software choices for real estate
development? Estatemaster vs Argus vs Excel
Demonstrations: Argus and Estatemaster
Real Estate development modelling issues Architects, planners and real estate develop-
ment Concept and objectives of Construct and
Sell (CS) models Assumptions required for CS models Development cashflow corkscrews Sales prices and taxes Valuation and risk analysis of real estate
development modelsCase Study: Examples of real estate development models
Real Estate investment modelling issues Limited recourse and loan terms and cove-
nants in real estate lending Structuring and financing solutions
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Real Estate ModellingContinued
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Course Overview
Real estate investment finance experience worldwide
Objectives of real estate investment models Buy and Let (BL) discounted cash flow
modelling issues Risk analysis for real estate investment
models
Case Study: Review of several real estate investment models and their decision-making input
Day 2: Building a Construct and Sell (CS) Model
Building a real estate model. Based on a real example, provided by an equity investor in a real estate transaction, delegates will construct and use a model for the transaction. The exercise will include:
Project Review Analysing the inputs Costing construction Dealing with input priorities Data plausibility Modelling loan drawdown Sales price projections and cap rates Establishing value from a construct and sale
transaction
Day 3: Building a Discounted Cash Flow Model (DCF) model
Delegates will continue with the real example from Day 2 to construct a model based on the assumptions of construction, with revised assumptions, and leasing out. Revising construction inputs Loan assessment criteria PGI, EGI and NOI in the model Forecasting NOI and operating expenses Modelling loan amortization IRR NPV and other valuation analysis
Monte Carlo and real estate modelling Methods of handling risk What is Monte Carlo analysis? Worked examples of Monte Carlo analysis Applying Crystal Ball to CS and CL Models Analysing the results Presentation of Monte Carlo results to senior
management
Course Conclusion
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Course Content
Advanced LBO Modelling - A Practical WorkshopDate: 08-09 Feb 2018, 28-29 Jun 2018, 15-16 Nov 2018
Location: London Standard Price: 1,300 +VATMembership Price: 1,040 + VAT
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Course Overview
This course covers the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model. The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.
The participants will then cover more complex LBO instruments such as warrants and PIKs, how they can be incorporated into an LBO structure and how to calculate returns to each of the equity and debt providers. Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.
The participants will then undertake an adjusted present value (APV) analysis to determine where value has been created in the LBO transaction using an APV model and finally look at a recovery analysis for a failed LBO transaction.
Case Study: The participants will use a variety of case studies and exercises during the two days, based on publically quoted and generic companies.
Leverage Overview Background to the LBO market Introductory theory - The effect of leverage
on firm value
Valuing the Target Sourcing information Historic and forecast
data Analysing equity research
Key attributes of broker analysis Pluses and minuses of equity research
Building a DCF valuation using equity re-search
Modelling the stand alone valuation DCF valuation Use of multiples in valuation (EV/EBIT, EV/
EBITDA)
Case Study I: Participants model the stand alone valuation of the target using historic data and equity research
LBO Modelling Overview Key elements of an LBO model
Comparing and contrasting DCF and LBO models
Sources and uses of funds
From stand alone valuation to LBO analy-sis
Case Study II: Participants use the stand alone valuation of the target to complete an LBO model
Assessing debt capacity for LBO financing Financial interdependencies Financing growth Sustainable debt Target debt capacity assumed in a WACC
calculation, debt capacity and interest cover
Debt capacity in LBOs Debt capacity multiples in practice and
credit analysis
Case Study III: Modelling the debt capacity of the target using multiple and credit analysis
Capital providers and their typical characteristics Institutional and management equity Traditional/new lenders Senior tranche profiles
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Advanced LBO Modelling - A Practical WorkshopContinued
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Course Content
A, B, C, RCF Subordinated tranche profiles
Second lien Mezzanine (with/without warrants) PIK High yield bonds
More complex issues warrants and options Typical LBO transaction sensitivity analysis,
management, base and payout cases
Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR for each of the capital providers
Assessing value creation in LBO transactions APV analysis
Key components of an APV valuation Unlevered value Value of the tax shield Direct and indirect cost of leverage
APV valuation and DCF valuation APV valuation in a steady state Calculating AP in a steady growth environ-
ment Incorporating APV analysis in an LBO trans-
action analysis
Case Study V: Where has value been created, modelling APV analysis for an LBO transaction
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Corporate Finance Modelling MasterclassDate: 5-9 Feb 2018, 25-29 Jun 2018, 12-16 Nov 2018
Location: London Standard Price: 3,000 + VATMembership Price: 2,400 + VAT
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Course Overview
On days one, two and three the course covers the key elements of an acquisition or merger, from the initial stand-alone valuation of the target to the more complex accounting and modelling issues to be considered and finally analysing and assessing the value created by synergy benefits and leverage This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.
The approach has been designed to equip participants to put key concepts into practical use immediately.
Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in transaction analysis.
As part of their work on this course participants model transactions based on real-life companies and scenarios.
On the last two days participants will cover the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model. The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.
The participants will then cover more complex LBO instruments such as warrants and PIKs, how they can be incorporated into an LBO structure and how to calculate returns to each of the equity and debt providers. Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.
The participants will then undertake an adjusted present value (APV) analysis to determine where value has been created in the LBO transaction using an APV model and finally look at a recovery analysis for a failed LBO transaction.
Course Content
Days 1, 2 & 3M&A model build up: the starting point Modelling integrated financial statements Model structure Key forecast ratios Sourcing and cleaning historic data What makes a good model?
Modelling integrating financial statements: participants complete a partially-developed financial model for a public quoted company which integrates P&L, balance sheet and cash flow. This company will be the target company used in the merger analysis
Modelling stand-alone valuation Overview of valuation methodologies What do investment banks do?
What methodologies could we use? How should we define firm value? Equity vs.
enterprise value Calculating free cash flow before financing Understanding and calculating WACC Discussion calculating WACC Key issues with a two stage DCF valuation
WACC and terminal value assumptions Modelling - valuation: participants calculate the cost of capital and complete a DCF valuation for the target company, producing a stand-alone valuation as a cross check to the acquisition price
Day Two Accounting for corporate transactions Different types of transaction and how they
are modelled in practice
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Consolidation accounting under the current IFRS 3 an IAS 27
Change of control triggers Accounting for non-controlling interests
(NCI) Accounting for disposals Partial disposals creating a NCI Partial disposal loss of control Recent changes to acquisition accounting
under IFRS Definition of control Calculation of goodwill
Modelling: delegates complete a variety of transaction models incorporating all types of corporate transaction and calculate the effect of a transaction on a set of consolidated accounts in preparation to perform a merger analysis with the target business and an acquirer
Acquisition finance Types of transactions and synergies Availability of synergies and problems in
achieving them Methods available for valuing synergies Key differences between public vs. private
deals, recommended vs. hostile bids Choices for growth: acquisition vs. organic
vs. joint venture Defence strategies for target companies
resisting a hostile bidCase study: Participants calculate synergies for a case company
Day Three
Structuring acquisition finance Once price has been agreed, how is it paid?
Cash vs. Shares Financing choices for raising cash for an
acquisition: Debt vs. Equity Calculating the success of a deal, accretion
vs value creation The nature of equity instruments The different risks and rewards accruing to
different parties The impact of loan stock, convertibles and
preference shares on WACC Calculating returns to key participants
Case study: Calculating accretion/dilution and the effect of hybrids on cost of capital
Merger modelling case study Completing a merger model Getting to DCF valuation for the combined
business Combined WACC Valuing operating synergies Valuing financing synergies Accretion/dilution analysis vs wealth creation Sense-checking the output and adjusting the
capital structureModelling bringing it all together: participants complete a complex merger model for an acquisition of the target business incorporating synergy analysis and varying capital structure. The transaction is analysed on an accretion/dilution analysis and a wealth creation/return on capital analysis
At the end of this session participants will have a working acquisition model incorporating a variety of different forms of transaction analysis
Course conclusion: best practice in transaction analysis Participants will have improved their un-
derstanding of and have had experience of modelling mergers and acquisitions from first principles
Simple and clear reference Excel models - providing participants with a platform for future internal modelling efforts and aiding decision making
Participants who, at the end of the course, understand the drivers on transactions and how transactions can be modified to suit the various parties
Days 4 & 5Leverage Overview Background to the LBO market Introductory theory - The effect of leverage
on firm value Valuing the target Sourcing information Historic and forecast
data Analysing equity research
Key attributes of broker analysis Pluses and minuses of equity research
Building a DCF valuation using equity re-search
Modelling the stand alone valuation
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Course Content
DCF valuation Use of multiples in valuation (EV/EBIT,
EV/EBITDA)Case Study I: Participants model the stand alone valuation of the target using historic data and equity research
LBO Modelling Overview Key elements of an LBO model
Comparing and contrasting DCF and LBO models
Sources and uses of funds Key drivers in an LBO model
From stand alone valuation to LBO analy-sis
Case Study II: Participants use the stand alone valuation of the target to complete an LBO model
Assessing debt capacity for LBO financing Financial interdependencies Financing growth Sustainable debt Target debt capacity assumed in a WACC
calculation, debt capacity and interest cover
Debt capacity in LBOs Debt capacity multiples in practice and
credit analysisCase Study III: Modelling the debt capacity of the target using multiple and credit analysis
Capital providers and their typical characteristics Institutional and management equity Traditional/new lenders Senior tranche profiles
A, B, C, RCF Subordinated tranche profiles
Second lien Mezzanine (with/without warrants) PIK High yield bonds
More complex issues warrants and op-tions
Typical LBO transaction sensitivity analy-sis, management, base and payout cases
Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR
for each of the capital providers
Assessing value creation in LBO transactions APV analysis Key components of an APV valuation
Unlevered value Value of the tax shield Direct and indirect cost of leverage
APV valuation and DCF valuation APV valuation in a steady state Calculating AP in a steady growth environ-
ment Incorporating APV analysis in an LBO trans-
action analysisCase Study V: Where has value been created, modelling APV analysis for an LBO transaction
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Course Content
Mergers & Acquisitions (M&A) CourseDate: 15-18 May 2018, 22-25 Oct 2018
Location: London Standard Price: 2,400 + VATMembership Price: 1,920 + VAT
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Course Overview
This four day M&A course covers all aspects of buying, selling, valuing private companies and management buy-outs.
The first day of this mergers & acquisitions course covers creating shareholder value through the pursuit of a successful M + A strategy has been shown to be a far from risk-free activity. Buyers overpaying or using inappropriate financing methods can lead to destruction of value and in some cases financial distress.
The second day of this mergers & acquisitions course covers the topics of the financial ratios used in comparable company valuation, creative accounting, the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.
The third day of this mergers & acquisitions course covers the practical steps that are required to plan, negotiate, and close a successful sale. Valuing the business to be sold and the effective presentation of the commercial attractions of the business are key elements, as are choosing the appropriate advisers and running a competitive auction.
The fourth day of this mergers & acquisitions course covers the principles and practicalities involved in arranging and negotiating a management buyout. In addition to the legal issues to be addressed, the use of bank debt and other financial instruments is examined in the context of developing a
Day 1: The Drivers of Growth
The Drivers of Growth Shareholder value The company life cycle
The importance of directors recognising the value curve
Risk and return Relating risk to the life cycle phase of the
company / target Product market growth and decline
Evaluating niches, substitutes, value in innovation
REVIEW: Comparison and contrast of the lifecycle of three different companies, highlighting how success or failure with acquisitions has determined their fate
ICI Debenhams GKN
Growth through Acquisition Assessing the alternatives
Investment JV Acquisition
DISCUSION: Advantages and disadvantages of each
approach Determining the acquisition
Market objectives Consolidating a fragmented market Building the value proposition
Management issues Assessing cultural fit
Price parameters Knowledge of comparative deals
Opportunity cost Is it a now or never deal
REVIEW: The Ansoff Matrix, a handy way to categorise potential risks in acquisition strategies
Pitfalls to avoid Realism of synergies
Risks of prediction, cost and achievement Accounting standards
Who is the auditor, what principles are followed
Judging forecasts Scepticism rules
Commercial factors Targets history Recurring revenue Intellectual property
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Mergers & Acquisitions (M&A) CourseContinued
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Course Content
Customer list
CASE STUDY: Reviewing company information to arrive at a value, taking into account qualitative and strategic factors
The Acquisition Process Establishing acquisition criteria
Target size and affordability Potential synergies Market / competitor impact Regulatory factors Shareholder impact
Due Diligence Investigation prior to offer
Public sources Private sources
Verification Contracts Accounts Pensions Employee disputes Litigation
CASE STUDY: Reviewing summary information on a company to determine which areas need investigation and who should have responsibility for the task
Structuring the deal Earn-out / deferred consideration Non-compete undertakings Warranties and indemnities Disclosure letters
Acquisition Integration Success / failure factors The importance of the integration team Earn outs and accounting issues Incentivising key managers Establishing clear reporting lines
tax considerations
Day 2:Overview of the Process Motives and objectives of the vendor Which outcome is preferred
Cash only sale with honour Management buyout IPO
Timescale
Preparing the Company for sale
optimising the operations removing skeletons, resolving related par-
ty conflicts resolving accounting / audit issues
tightening up provisions, write offs, stock obsolescence
clearing legal points employee issues customer / supplier disputes
choosing advisers tax considerations
the vendors position company PAYE, corporation tax
Quiz: What are the top ten objective of a vendor Assessing the value of the business Other factors
IPR Market share Customer base Niche products Strategic value to a buyer
Exercise: Calculating the value of a business using different metrics
Initiating the Process Choosing advisers
Investment bank Merger brokers Accountants Other
Agreeing the mandate Fees
Retainer, success, no go Exclusions
Companies and territories Time limits Indemnities
Preparing key documents Information memorandum Support material
Confidentiality undertakings, product information
Due diligence pack Reasons for, use of vital data rooms
Management preparation Confidentiality Conflicts of interest The sale team Presentation material
The Sale Process
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Course Content
The cost / risk / timescale issues in A trade sale Buyout IPO
Trade sale approaches Public auction Private auction Bilateral negotiation
Organising an auction Identifying the purchasers
Tiering prospects into probables, possi-bles, maybe
Defining the deadlines The importance of realism
Contact and confidentiality Dealing with large company buyers
Judging the offers Will a no price offer work?
Conducting the second stage discussions Company and management visits
Preferred bidder and exclusivity How long for exclusivity?
CASE STUDY: Reviewing an information memorandum on a company sale to assess: the value of the business, the most likely buyers
Sealing the deal Earn-outs
Bridging the valuation gap Warranties, disclosure letter
Buyer / vendor conflict Time limits, caps Completion accounts Comfort letters
Alternative outcomes IPO, timescale MBO, management conflicts Post exit lock-in Ongoing relationship
Day 3: Valuation Principles Value to whom? Price and intrinsic value The risk / return trade off Strategic risk
The Accounting Approach Accounting measures of performance and
value Problems of the accounting approach Are profits relevant? GAAP vs IFRS Creative accounting
How to find it Recent examples
Review: Was the near collapse of Quindell inevitable?
Accounting Valuation Metrics Asset and net asset valuations Dividend-based models
Dividend yield Dividend discounting
Application and drawbacks of dividend mod-els
Earnings-based Price / earnings ratios P/E strengths and weaknesses PEG ratios Enterprise value
Exercise: Valuation of a business using different metrics
Comparable Company Valuation Issues Is the comparability achievable?
Accounting principles Averages, medians, outlines Listed vs private
Sustainability of earnings Business model flexibility
Exercise: Project Oxford, using comparable company techniques to value a company for acquisition
Calculating the Cost of Capital Assessing the cost of debt Calculating the cost of equity
The risk free rate Equity premium Beta
The weighted average cost of capital The flaws in the capital asset pricing model Alternative approaches
Exercise: Calculating the cost of equity and the weighted average cost of capital
The Cash Flow Approach to Valuation The time value of money Calculating the discount rate Forecasting free cash flow
Calculating FCF Identifying value drivers
Terminal value
Exercise: Discounting free cash flow to arrive at a value per share
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Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target.
Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target
Day 4: The Growth of Private Equity and Leveraged Buyouts Academic rationale for the use of leverage
Modigliani/Miller theory Michael Milkens research Growth of shareholder activism
Reviving under performers Changes in company law The development of the European high
yield bond and securitisation markets
The Principles of Leveraged Finance The use of debt to drive equity values
Cash flow management Reducing debt to drive equity value
Operational improvements Building need to have
Incentivisation of management Getting rich together
Cash-capture clauses
Exercise: Good or Bad LBO?
Discussion of recent transactions to see which ones the attendees would do, and what lessons can be learned about elements of success or failure
Structuring the transaction Target IRR
Assessing the return appropriate to the risk
Assessing debt capacity Forecasting future cash generation
Senior / mezzanine debt mix Judging asset values
Forecasting exit values Consideration of non-bank finance
High-yield bonds Terms and size of issue
Second lien debt > Too much debt?
PIK finance
Saint or sinner? Vendor loan notes
Making the deal look good
Case Study: Based on information provided attendees are tasked with structuring the finance for an MBO. Answers are discussed to identify the critical elements in the financing
Legal elements Warranties and indemnities
Investor protection New Memo & Arts
Incorporating P.E. control elements Tag along and drag along
Control of the exit Veto rights for private equity
Control of management Management
Jensen and Meckling agency theory Why buyouts work
The envy ratio Management incentivisation
Agreeing the ratchet Carrot and stick
Good leaver / bad leaver provisions Covering under performance
Exercise: Agreeing the terms of the envy ratio
Identifying and Closing a Good Transaction Ideal company characteristics
The three golden rules MBO / MBI
Assessing management strength Meeting vendors expectations
Structuring the deal Avoiding conflicts of interest
Recognising the risks of multi-layered financing
Due diligence Investigation and verification
Tie-in with contract terms Structuring the debt appropriate to the busi-
ness
Discussion: How to finance the acquisition of Manchester United. The Man U accounts are reviewed with the object of deciding how to finance its acquisition. Answers are compared to the actual result.
Exit Control by P.E. house
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The Modelling For Mergers & AcquisitionsA Practical 3-Day Workshop
Date: 05-07 Feb 2018, 25-27 Jun 2018, 12-14 Nov 2018Location: London Standard Price: 1,800 +VAT
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Course Overview
This course covers the key elements of an acquisition or merger, from the initial stand-alone valuation of the target to the more complex accounting and modelling issues to be considered and finally analysing and assessing the value created by synergy benefits and leverage.
This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.
The approach has been designed to equip participants to put key concepts into practical use immediately.Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in transaction analysis.
As part of their work on this course participants model transactions based on real-life companies and scenarios.
By the end of this course participants will understand: Drivers on M&A How to model integrated financial statements How to use financial statements to value a business How to model the balance sheet impact of transactions How to incorporate synergies into modelling work How to differentiate between financing and operating synergies How acquisitions can be structured
Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse leveraged acquisitions: Building up from partially-complete models Working with integrated financial statements Developing the acquisition structure and modelling instruments Running scenarios, iterating and optimising
Each participant should bring a laptop with USB port to the course to facilitate modelling work.
Day 1
M&A model build up: the starting point
Modelling integrated financial statements Model structure Key forecast ratios Sourcing and cleaning historic data What makes a good model?
Modelling integrating financial statements: participants complete a partially-developed financial model for a public quoted company which integrates P&L, balance sheet and cash flow. This company will be the target company used in the merger analysis
Modelling stand-alone valuation Overview of valuation methodologies What do investment banks do? What methodologies could we use? How should we define firm value? Equity v.s. en-
terprise value Calculating free cash flow before financing Understanding and calculating WACC Discussion calculating WACC Key issues with a two stage DCF valuation WACC
and terminal value assumptions Modelling - valuation: participants calculate the cost of capital and complete a DCF valuation for the target company, producing a stand-alone valuation as a cross check to the acquisition price Day 2
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Accounting for corporate transactions Different types of transaction and how they
are modeled in practice Consolidation accounting under the current
IFRS 3 an IAS 27 Change of control triggers Accounting for non-controlling interests
(NCI) Accounting for disposals Partial disposals creating a NCI Partial disposal loss of control Recent changes to acquisition accounting
under IFRS Definition of control Calculation of goodwill
Modelling: delegates complete a variety of transaction models incorporating all types of corporate transaction and calculate the effect of a transaction on a set of consolidated accounts in preparation to perform a merger analysis with the target business and an acquirer
Acquisition finance Types of transactions and synergies Availability of synergies and problems in
achieving them Methods available for valuing synergies Key differences between public vs. private
deals, recommended vs. hostile bids Choices for growth: acquisition vs. organic
vs. joint venture Defence strategies for target companies
resisting a hostile bid Case study: Participants calculate synergies for a case company
Day 3Structuring acquisition finance Once price has been agreed, how is it
paid? Cash vs. Shares Financing choices for raising cash for an
acquisition: Debt vs. Equity Calculating the success of a deal, accretion
vs value creation The nature of equity instruments The different risks and rewards accruing to
different parties The impact of loan stock, convertibles and
preference shares on WACC Calculating returns to key participants
Case study: Calculating accretion/dilution and the effect of hybrids on cost of capita
Merger modelling case study Completing a merger model
Getting to DCF valuation for the combined busi-ness
Combined WACC Valuing operating synergies Valuing financing synergies Accretion/dilution analysis vs wealth creation Sense-checking the output and adjusting the
capital structure
Modelling bringing it all together: participants complete a complex merger model for an acquisition of the target business incorporating synergy analysis and varying capital structure. The transaction is analysed on an accretion/dilution analysis and a wealth creation/return on capital analysis
At the end of this session participants will have a working acquisition model incorporating a variety of different forms of transaction analysis
Course conclusion: best practice in transaction analysis Participants will have improved their understand-
ing of and have had experience of modelling mergers and acquisitions from first principles
Simple and clear reference Excel models - provid-ing participants with a platform for future internal modelling efforts and aiding decision making
Participants who, at the end of the course, under-stand the drivers on transactions and how trans-actions can be modified to suit the various parties
What our clients are saying about the course
Methodical and clear. Liked how it went through whole process of linking up
financial statements
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Valuing A BusinessDate: 17 May 2018, 24 Oct 2018
Location: London Standard Price: 625+VATMembership Price: 500 +VAT
Course Overview
Valuation of a business, whether in the context of investment or M&A, is central to the negotiation of a transaction. Methods of valuation vary and a fundamental difference exists between the accounting and cash-based approaches.
The course covers the topics of the financial ratios used in comparable company valuation, creative accounting, the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.
Valuation Principles Value to whom? Price and intrinsic value The risk / return trade off Strategic risk
The Accounting Approach Accounting measures of performance and
value Problems of the accounting approach Are profits relevant? GAAP vs IFRS Creative accounting How to find it Recent examples
Review: Was the near collapse of Quindell inevitable?
Accounting Valuation Metrics Asset and net asset valuations Dividend-based models Dividend yield Dividend discounting Application and drawbacks of dividend
models Earnings-based Price / earnings ratios P/E strengths and weaknesses PEG ratios Enterprise value
Exercise: Valuation of a business using different metrics Comparable Company Valuation Issues Is the comparability achievable? Accounting principles Averages, medians, outlines Listed vs private Sustainability of earnings Business model flexibility
Exercise: Project Oxford, using comparable company techniques to value a company for acquisition
Calculating the Cost of Capital Assessing the cost of debt Calculating the cost of equity The risk free rate Equity premium Beta The weighted average cost of capital The flaws in the capital asset pricing model Alternative approaches
Exercise: Calculating the cost of equity and the weighted average cost of capital
The Cash Flow Approach to Valuation The time value of money Calculating the discount rate Forecasting free cash flow Calculating FCF Identifying value drivers Terminal value
Exercise: Discounting free cash flow to arrive at a value per share
Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target
Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target
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Valuing Start Up And Pre IPO CompaniesDate: 22-23 Mar 2018, 7-8 Nov 2018
Location: London Standard Price: 1,350+ VAT Membership Price: 1,080 +VAT
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Course Overview
This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value companies which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the development stage at which the company operates.
The course covers companies at the early growth and start up stage, such as technology, biotechnology and any early funding stage business. The key challenges associated with such companies are discussed and the best valuation approach considered.
The course also covers pre IPO companies at the rapidly growing phase of development which, depending on the geographic location, may cover a wide variety of sectors. As well as discussing some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken. Examples are provided to illustrate each issue. Participants will be required to bring a laptop to the course.
Overview of valuation approaches Intrinsic valuation traditional cash flow
techniques Relative valuation multiple based analysis Probabilistic valuation scenario analysis,
decision trees and simulations Real options valuation additional value
created through optionality Other valuation issues Assessing risk the risky risk free rate and
other current valuation issues The economic cycle incorporating mac-
ro-economic factors into a valuation
Valuing early stage and start-up companies and sectors A life cycle view of start-up companies
Start-up companies in context Characteristics of young companies and
sectors The key challenges with start-up compa-
nies Visibility a key valuation challenge
Valuation issues intrinsic value How to value existing assets in a start-up Cash burn and the effect on existing as-
sets The future of the business high growth
& growth phases Assessing growth rates - the key compo-
nent of value Adjusting risk for small fast growing busi-
nesses Discount rates for pure equity financed
businesses When to calculate terminal value Reducing the dependence on terminal
value Value of equity claims
Assessing equity claims in a early stage business
Valuation issues relative valuation Problems with start-up multiple analysis Determining the starting point revenue
multiples vs profitability multiples Which year? Determining stability for
multiple calculation and techniques for normalising multiples vs the sector
Valuing a start-up or early stage business in practice Main errors made in valuing early stage busi-
nesses Macro vs micro analysis Product success and market share Bottom up approach to a valuation
Capacity capability Estimating and using different discount
rates The use of phased discount rates
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Discount rates as maturity approaches Ensuring consistency in a valuation Private and public multiples Option to expand valuation
How optionality affects valuation
Valuing pre IPO companies A life cycle view of pre IPO rapid growth
companies The rapid growth company in context
Characteristics of growth companies and sectors How are growth companies different?
Valuation issues intrinsic value How historic numbers are misleading How asset life may develop in the high
growth phase How existing assets differ in a rapid
growth business Where the bulk of value is created by
a rapid growth company the growth phase
Capital intensity and the rapid growth business
The development of risk during the growth phase
The stage at which a terminal value should be calculated for a rapid growth business the path to IPO
Value of equity claims The differing equity claims in a rapid
growth business Participation by different equity holders
Valuation issues relative valuationPeer groups private vs public companies Finding similar growth businesses differ-
ent sectors? Risk measures adapting a multiple analy-
sis for risk Valuing a growth business in practice
Main errors made in valuing growth busi-nesses
Dealing with immature markets Assessing product cycles Ability to execute the key driver
Valuing the operating assets through the growth phase How operating asset lives develop in the
high growth phase Ensuring consistency in a valuation Reinvestment and growth Assessing investment requirements the
returns and reinvestment equation Completing the valuation combining re-
turns and risk in a model
Valuing Start Up And Pre IPO Companies
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Valuing a Pharmaceutical CompanyDate: 27 Feb 2018, 13 Nov 2018
Location: London Standard Price: 695 +VAT Membership Price: 556 + VAT
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Course Overview
If the business model of the modern pharmaceutical industry did not already exist, management consultants and business schools would surely have invented it as a fictional basis for exploring the challenges posed by a perfect storm of every conceivable risk and uncertainty.
It is perhaps doubtful whether investors, managers and analysts would have believed that any business model embodying such a perfect storm would be sustainable and therefore worth studying at all were it not for the fact that in the pharmaceutical industry, real life really is stranger than fiction.
Nowhere are all the risks and uncertainties confronting the pharmaceutical industry more clearly or comprehensively exposed to view than in the process of valuation.
This one-day intensive workshop begins with an in-depth analysis of the pharma business model itself, and then explores in detail the theoretical and practical barriers to the application of the most widely employed valuation metrics and methods.
It locates common pitfalls, and shows how a judicious selection of horses for courses can help us to establish at least a conditional range for possible valuations in different contexts.
The course is intensive rather than advanced, in the sense that it is strongly interactive in tone and structure (Excel-based exercises figure prominently, especially in the second half), yet it assumes no more than a basic understanding of financial statements and of a few of the most widely used measures of financial performance and condition, such as return on capital and p/e ratio.
As the participants are being asked to unlearn much of their previously unchallenged conventional wisdom, those who come to the table with less inherited baggage might even have an advantage!
Review of the pharma business model, with copious illustrations Long, unpredictable and variable life-cycles of
individual products, from discovery, through pre-clinical and clinical development, to launch and eventual patent expiry
Low correlation in timing and amount of costs and revenues
Imperfect diversification of product portfolios (in terms of product numbers, sizes, types, and stag-es in life-cycle)
Exposure to a wide range of long-term uncon-trollable factors demographic, epidemiological, scientific (looking for needles in haystacks), political, geopolitical and economic
Uncomfortably close and unusually complex relationship with government (healthcare policy and priorities, regulation, pricing regime, overall demand)
High risk of unforeseen technical failure, and costly and protracted lawsuits
Little freedom to plan for long term, in face of constant threat from opportunistic predators
Overview of conventional models: their general strengths and weaknesses, when they work best and when they work least well Primary models
NPV based on Free Cash Flow (FCF) Comparables and benchmarking Book-based models Market multiples
Secondary refinements Sensitivity and scenario analysis Decision tree analysis and real options Monte Carlo analysis
How conventional valuation models are challenged by the pharma model, as for instance: Data samples and populations (e.g. on overall
amounts and timings of costs and revenues) too small, heterogeneous and idiosyncratically distrib-uted to be statistically useful
Conventional measures of mean and dispersion inoperable
Genuine comparability, between companies, be-tween deals, and between therapies, unduly elusive in practice
Conventional modelling techniques unable to ac-
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Valuing a Pharmaceutical Company
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commodate shifting levels of risk through the product life-cycle: inapplicability of standard CAPM and dividend-based model of expected returns
Lack of informed market consensus on criteria for analysis
Chronic tendency towards optimism in manage-ment commentary, e.g. on value of pipeline, stage of development, timing of launch and subsequent success in market
Shortcomings of the accounting regime in: capturing relevant costs and accommo-
dating mismatch in timing of costs and revenues
reaching consensus on intangible assets resolving problems of business combi-
nations Finding a way forward General principle: do as much work as possible
before confining ones brain in the fixed con-fines of an Excel spreadsheet!
Strategic analysis of the relative strengths and weaknesses of the business to be valued and of the sector(s) in which it operates, using a standard framework such as Porters Five Forc-es
Bottom-up approach: refining institutional FCF into product-specific FCFs, using Bottom-up estimates of revenue and costs
based on demographic, epidemiological and other factors:
Product-specific rNPVs (risk-adjusted NPVs), instead of entity-wide NPV, with individual discount factors calibrated according to (i) costs, (ii) revenues and (iii) risks appropri-ate to individual major product characteris-tics at each stage of its life-cycle
Top-down approach: sense-checking the dif-ference between (a) market EV and (b) sum of the product rNPVs from the bottom-up ap-proach, by seeking possible reasons for positive differences (e.g. pipeline, well-
struck balance between diversification and internal synergy, bargaining power in M&A market)
negative difference (e.g. accident-prone management, above-average vulnerability to competitors, predators and government)
Bringing it all together 1: Working with Excel
Basic tips and tricks for constructing an Excel-based valuation that is at once comprehensive, coherent, consistent and flexible
The template must be appropriate to the case, facilitating comparison with comparable cases and highlighting differences with contrasting cases
Line and column descriptions must indicate re-lationship between values: Go and look at the formulae is no way to treat grown-up readers
Assumptions (and variations of assumptions) must be highlighted
Sources and relative reliability of different data inputs must be highlighted
Top-level results must be summarised on front sheet, and indicate not only a point value but a range of values, as well as an indication of the principle parameters for the range
Bringing it all together 2: Constructing a pharma valuation
Participants will work in small groups on a comprehensive valuation exercise under the close supervision of the trainer, who will help resolve individual problems while acting as a channel for sharing each groups insights and experiences with the class as a whole.
The workshop concludes with presentations by one or more of the groups to the class as a whole, in an exercise designed not only to give them self-confidence in their technical skills but also to enhance their ability to communicate their findings to colleagues.
What our clients are saying about the course
Course material were interactive and independent
Interesting practical insight, discussions and examples
Case study very relevant
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Valuing A Technology CompanyDate: 26 Feb 2018, 12 Nov 2018
Location: London Standard Price: 695 + VATMembership Price: 556 + VAT
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Course Overview
This course is ideal for those who are dealing with technology companies and need to gain an appreciation of their worth.
It focuses on the different techniques that can be deployed in assessing these companies, especially the real options approach which has achieved a wide degree of popularity. The course is also useful to those who are involved in any type of corporate transaction for technology companies from an advisory perspective.
Participants should be familiar with discounted cashflow techniques and have at least a basic understanding of business valuations.
Participants will be required to bring a laptop with a CD-Rom or USB connection to the course.
Defining the Problems Differences between traditional corporate
valuation and technology valuation
Handling data problems that emerge with technology companies
Lifecycles and corporate cashflows Review of DCF valuation techniques and
applications to technology businesses
Valuing early stage development businesses
Applying the DCF Model to Technology Companies Estimating cashflows and expenditure pat-
terns Evaluating the expected growth rate Links to corporate strategic models Combining growth rate with investment
intensity and return on investment
Applying the appropriate discount rate and varying the rate over time
Evaluating the stable growth stage and cal-culating the terminal value
Inherent problems of using the DCF model to value technology companies
Using Multiples in Technology Valuation Importance of using EBITDA if possible, Us-
ing revenue multiples Examining the broad range of possible com-
parisons Using statistical analysis to improve the
multiple comparison Pitfalls in using multiple approach for technol-
ogy companies
Using the Real Options Approach The problems inherent in using the NPV/DCF
approach to valuation
Defining real options patent rights, expan-sion option, abandonment option
Why real options are more applicable to tech-nology companies
Basics of real option valuation using binomial trees and a lattice approach
Financial option pricing (Black Scholes) and the link to real options
Management options and the value of strategic flexibility
Using real options approach to improve the un-derstanding of technology valuations
What our clients are saying about the course
Covers price vs value
A proactive course - helped challenge traditional methods & point out common
errorsGood discussions regarding the implications
of difference techniques
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Advanced Business Valuation and Modelling
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Course Overview
This advanced valuation and modelling course builds on basic concepts by developing DCF techniques and taking a fundamental approach to multiple analysis.
Financial forecasting techniques are developed to incorporate more complex forecasting issues including provisions, off balance sheet finance, JV/associates, minorities, tax losses/deferred tax, and stock options.
More advanced analysis techniques are then used to develop a basic DCF approach including APV and EVA analysis, cost of capital for hybrid instruments and calculating a cost of capital for emerging market stocks. Each are explained in relation to the calculation of capital and return and the impact on modelling cash flows from a company.
Examples are provided to illustrate each issue.
Participants will be required to bring a laptop to the course.
The Value Driver Approach to DCF What return is implied by a two stage DCF
model? Developing DCF techniques to cope with
growth and fade Importance of ROCE and key drivers Three stage DCF models with fade, why this
will produce a more accurate valuation Fundamental Multiples Formulas for fundamental multiples Identifying key drivers of the following mul-
tiples: EV/EBITDA: ROCE is key EV/Sales: is margin important? PEG: misleading numbers? Price/Book: good or bad predictor of val-
ue? Price/sales: when is it useful? Valuation matrix
Developing the cost of capital WACC revisited Leveraged and re-leveraged betas Dealing with hybrids:
Calculating equity and debt components The approach to hybrid betas Calculating the cost of a hybrid
Dealing with cost of capital in emerging mar-kets Calculating the equity risk premium What is the cost of debt? Default rate and relative standard devia-
tion approach
Further DCF analysis APV analysis how much value is created by
leverage? EVA analysis how much value is created in
the future? Comparison with DCF and conditions for equiva-
lence with DCF
Modelling Course Content:
Modelling more complex DCF analysis Explicit forecast period issues Terminal value issues How adjustments affect valuation Adjusting the cost of capital for hybrids Adjusting the cost of capital in emerging mar-
kets
Modelling APV and EVA APV under static and constant growth APV and DCF equivalence required conditions Modelling EVA valuation EVA and DCF equivalence required conditions
Modelling extras dealing with Tax losses and deferred tax Stock options - expenses & dilution JV/Associates: cost or valuation? Dividends Minorities forthcoming changes to Non-Con-
trolling Interest Provisions
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Course Content
Advanced M&A ModellingIn-House
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Course Overview
This course follows on from the M&A modelling course and develops some of the principles previously covered but moves beyond simple synergy analysis to analyse other options available to an acquirer to extract maximum value post acquisition.
The course looks at more complex M&A transactions post acquisition including different types of disposals, asset sales, carve outs or trade sale/IPO and the process used to determine whether a disposal will enhance the value of an acquired business. Sometimes these disposals will be voluntary and sometimes forced through competition issues.
In each case the participants model the impact of the various types of transaction on a case company and assess the most appropriate transaction for the business. The course then examines the various issues associated with restructuring a business post acquisition as a means to extract value, including when restructuring is the best option and the forms of restructuring that can be considered. Each form of restructuring after an acquisition is again modelled using a case company. This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.
The approach has been designed to equip participants to put key concepts into practical use immediately.
Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in financial modelling.
By the end of this course participants will understand: The decision making process for various types of value extraction post acquisition How to model different types of value maximisation by way of disposal The restructuring process for the capital structure of an acquired business and in which circum-
stances to apply it How to model and assess different restructuring options
Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse corporate transactions: Building up from partially-complete models Working with integrated financial statements Running scenarios, iterating and optimising
Each participant should bring a laptop with USB port to the course to facilitate modelling work
Refresher: Accounting for corporate transactions Different types of transaction and how they
are modelled in practice Consolidation accounting under the current
IFRS 3 and IAS 27 Accounting for disposals Partial disposals creating a NCI Partial disposal loss of control Recent changes to acquisition accounting
under IFRS
Case study The participants will model
the initial acquisition transaction that will form the basis for the post acquisition analysis and value the combined business to arrive at a staring valuation Overview of post-acquisition corporate transactions Historic trends in corporate disposals Involuntary disposals vs voluntary disposals Reasons for voluntary disposals Accounting for different types of disposal
Asset sales Partial disposal of equity Full disposal of equity
Disposals, spin offs, carve outs and other
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Course Content
disposal options Restructuring and recapitalisation
Disposal and spin off process Disposal or spin off decision
Completing the financial analysis Formulation of the restructuring plan
Relationship between the parent and subsidiary
Determining the assets and liabilities of the disposal
Dealing with shareholders Completing the deal
Financial evaluation of a disposal Estimation of after tax cash flows Determination of the disposal units risk
adjusted discount rate Present value of the disposal related cash
flows Assessing the market value of liabilities Calculating disposal proceeds and value
creation
Modelling asset disposal post- acquisition Asset restructuring and value creation Removing a diversification discount, addi-
tivity in practice Using equity to restructure, share repur-
chases Asset disposals the decision process and
modelling a transaction
Case study The participants will model the first approach to value creation post-acquisition transaction by reviewing an operating unit of the acquired business to determine whether to dispose of any of the assets of the unit by way of asset sale to enhance the value of the acquired business. The participants will then analyse the resulting business
Modelling a spin off post- acquisition Trends in spin offs, involuntary spin offs
and defensive spin offs Potential tax issues with spin offs Treatments of warrants and convertible
securities Seller financial assistance Allocation of debt and bond obligations Wealth effect of spins offs in capital mar-
kets
Case study The participants will review the various subsidiaries of the acquired
business to determine whether to dispose of any of the units by way of spin off to enhance the value of the acquired business. The participants will then model the spin off transaction and analyse the resulting business.
Modelling equity carve outs post- acquisition Background to equity carve out in capital
markets Characteristics of carve out firms Use of carve out proceeds Carve outs vs IPOs Carve outs vs spin offs
Equity carve out or IPO the decision pro-cess and modelling a transaction
Case study The participants will review the various subsidiaries of the acquired business to determine whether to dispose of any of the units by way of carve out to enhance the value of the acquired business. The participants will then model the carve out transaction and analyse the resulting business.
Assessing asset restructuring Sum of the parts valuation Assessing restructuring costs and benefits Undertaking a restructuring analysis for a
business Sum of the parts valuation multiples Sum of the parts valuation free cash
flows Valuing the effect of cost reduction Monetising real estate Share repurchases
Other options voluntary liquidation or bust ups
Developing a restructuring plan for disposals
Case study The participants will complete a series of case studies on various aspects of an asset restructuring. The participants will also analyse and assess the various restructuring options to determine which will create the most value.
Restructuring companies post acquisition Overview of companies that may require re-
structuring post acquisition Types of business failure Causes of business failure and options for
dealing with them Bankruptcy trends Dealing with financial distress Framework for recapitalisations
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Advanced M&A ModellingContinued...
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Course Content
Case study The participants are introduced to a new transaction between a healthy and distressed company. The participants model the transaction and value the combined business.
Restructuring options post acquisition Out of court workouts and bankruptcy
Out of court workouts In court reorganisation Pre-packaged bankruptcy Liquidation
Reorganisation vs liquidation Reorganisation process corporate control
and default Accounting treatment
Troubled debt restructuring Asset impairment Fresh start accounting
Valuing recapitalisations Valuing new debt Valuing equity Recovery value Recapitalisation rights and options
Case study The participants model the various types of distressed company restructuring options and determine which option is preferable. The participants also value different elements of the post- acquisition transactions to assess various recapitalisation options.
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Course Content
Valuing Rapid Growth Companies and SectorsIn House
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Course Overview
This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value sectors which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the sector in which the company operates.
The course covers companies at the rapidly growing phase of development which, depending on the geographic location, may cover media, telecoms and pharmaceutical sectors. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.
Examples are provided to illustrate each issue.
Participants will be required to bring a laptop to the course.
Overview of valuation approaches Intrinsic valuation traditional cash flow
techniques Relative valuation multiple based analysis Adapting risk time varying WACC Adjusting for survival
Other valuation issues Assessing risk the risky risk free rate and
other current valuation issues The economic cycle incorporating mac-
ro-economic factors into a valuation
Valuing rapid growth companies and sectors A life cycle view of rapid growth companies
The rapid growth company in context Characteristics of growth companies and
sectors How are growth companies different?
Valuation issues intrinsic value How historic numbers are misleading How asset life may develop in the high
growth phase How existing assets differ in a rapid
growth business Where the bulk of value is created by
a rapid growth company the growth phase
Capital intensity and the rapid growth business
The development of risk during the growth phase
The stage at which a terminal value should be calculated for a rapid growth
business Value of equity claims
The differing equity claims in a rapid growth business
Participation by different equity holders Valuation issues relative valuation
Peer groups Finding similar growth businesses differ-
ent sectors? Risk measures adapting a multiple analy-
sis for risk
Valuing a growth business in practice Main errors made in valuing growth busi-
nesses Dealing with immature markets Assessing product cycles Ability to execute the key driver
Valuing the operating assets through the growth phase How operating asset lives develop in the
high growth phase Ensuring consistency in a valuation Reinvestment and growth Assessing investment requirements the
returns and reinvestment equation Completing the valuation combining re-
turns and risk in a model
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Course Content
Advanced Negotiation Issues in M&ADate:
Location: London Price: .....+VAT
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Course Overview
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Applied Financial Mathematics in Excel Training
In-House
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Course Overview
This workshop focusses on the underlying mathematics techniques which underpin project finance, energy, leasing and other analysis models. Rather than using a financial calculator such as an HP12C, the workshop demonstrates how to apply financial mathematics to Excel effectively.
Starting with a review of model design, the workshop introduces present and future values and shows how these basic concepts can be used to solve a range of financial mathematics problems. The workshop ranges over complex cash flows, depreciation, structured amortisation, fixed income, derivatives and data analysis.
Workshop ObjectivesThis one-day workshop explores:
Financial concepts underpinning a range of models Model design standards Cash flow methods Fixed income models Derivative concepts Basic statistics
The workshop is highly practical and each session begins with a discussion of each technique followed by practical exercises. At the end of the workshop, delegates will understand how to apply financial mathematics to Excel spreadsheets.
Workshop Teaching MethodThe programme is taught using formal lectures combined with practical and interactive case studies and exercises to reinforce the concepts covered in each teaching session. Emp