Get Adobe Flash player

Our courses blend theory will practice gained from personal experience. They  have been developed and delivered globally to a range of client organisations involved in commerce, industry and financial services. In addition to having extensive experience of running in-company programmes, we have had considerable involvement with leading open training programmes for major training organisations, like Euromoney, FT Knowledge/New York Institute of Finance, IIR and the International Faculty of Finance.


The courses link both theory and practice via a number of different delivery methods, involving:


1. Case studies developed from personal experience


2. Current topical and real-life examples


3. Computer aided exercises and role plays


4. Group working


5. Practical sessions to consolidate the learning experience


The courses can be delivered as follows:


  • Tailored training – upon demand as per client needs; tailored according to agenda, duration and level

  • Graduate training – tailored upon demand of each institution including gap and training needs analysis. This option is suitable for institutions with large graduate trainee intakes.

  • Public courses  as per the course outline or with modification, if sponsored by a local partner


The following are  courses that are available and that have been delivered as open training programmes and adapted for private clients, and if you click on any of them you will see a detailed breakdown of the contents:




Senior Manager Risk Workshop

Senior Manager Risk Workshop  


Intended Audience


Strategic decision takers - chief executives, chief financial officers,

senior operations management, internal auditors, treasurers,

main board directors, and risk professionals.




Course Introduction


Organisations of all types are being exposed to risk management. For example, banks have long been subject to regulatory exposure from the Basle Accord and a revision to this has recently been published that will have profound implications for senior banking management. Furthermore in the UK the Turnbull Report requires all listed plcs to assess their risk management capabilities. Shareholders and other stakeholders, such as employees and customers, are becoming increasingly critical. The way that companies deal with risk is emerging as a differentiating factor. Successful companies will be those that are not afraid to embrace risk because they understand it and can manage it. However, a major obstacle is that risk is very often seen as someone else's problem whereas in reality it is everybody's problem. In short, if you don't manage your risks, they will manage you.


It is being increasingly recognised that there are important interrelationships between different types of risk and that a more comprehensive, integrated and disciplined approach to its management and mitigation is required than has often been the case in the past. Risk needs to be viewed more broadly than by the traditional classifications adopted in terms of country, counterparty and market, although these categories are still important. There are different levels of risk, like strategic and tactical. Strategic risk, for example, acknowledges the business as being an integrated entity. A simple illustration is a bank, which packages and trades financial risks in order to deliver higher returns. Strategic risk decision-making is based on the fact that risk (and its resulting expected returns) is not a by-product of the business, but is the product of the business. It is decision-making based on the view that detailed risk intelligence provides a competitive advantage-an edge in delivering both better products to customers and better returns to shareholders. In contrast, tactical risk management is decision-making based on the view that the business is a collection of semi-autonomous agencies each of which manages its book or risk management task separately. In the case of a bank, it assumes that risk can be managed one security or one desk at a time. Analysing risks tactically can be important to anticipate and identify possible courses of action for the purposes of mitigation, but an integrated perspective is indispensable.


Last, but not least, risk measurement, management and mitigation is often associated with the banking world and is perceived as being of limited relevance to non-financial institutions. Nothing could be further from the truth! International guidelines from bodies such as the OECD, coupled with national initiatives like the UK Combined Code and Turnbull corporate governance guidelines, require companies to identify, assess, manage and report on all risks that could affect their stakeholders. As a result, risk in its broadest sense has become a boardroom issue. It encompasses not merely those uncertainties that can be transferred to the insurance and financial markets, but also strategic, environmental and ethical issues in both those and other markets. It is, therefore, vital that both the Board and senior management know the top 10 risks they face and also set the tone for developing a more risk mature organisation.


The key focus of the course is upon the risk management process. This is the process by which organizations proactively try to ensure that the risks to which they are exposed are the risks to which they think they are and want/need to be exposed to operate their primary businesses. However risk is classified, a central challenge is in deciding what risks the firm is in the business to bear, or in what risks the firm has a perceived comparative informational advantage.


Day 1

Risk in Context, Funding/ Value Risk, Strategic Risk and Reputation Risk


Introduction


   * Definition of risk

   * Why and how risk management has developed

   * Impact of regulation, e.g. Basle Accords - Basle 2

   * Proactive versus reactive risk management

   * Importance of integrated risk management

   * Risk identification and classification

   * Review of the many faces of risk


Understanding the Importance of Capital


   * Investment capital: funds investment expenditures

   * Risk capital: provides a buffer against unexpected losses arising from market, credit, and operational risks

   * Regulatory capital: some firms required to hold against market and credit and operational risks (e.g., BIS and banks, insurers, etc.)

   * Funding capital: funds short-term operating cash flows, costs, and non-capital-intensive investment expenditures

   * Liquidity capital: covers cash balance obligations on debt servicing, derivatives, contract performance, etc.

   * Signalling capital: excess capital held to enhance reputation and attract new customer business


Funding and Value Risk


   * Definition

   * Funding risk measurement

   * Cash flow risk - scenario analyses of cash balances

   * Value risk


Strategic Risk


   * Sources of pressure to manage strategic risks

   * Definition and scope

   * Relationship with shareholder value

   * Strategic versus tactical risk

   * Scanning the external environment for risks


Assessing and Measuring Strategic Risks


   * Evaluating returns to shareholders, risk assessment and the cost of capital

   * Analytical frameworks

   * Modelling approaches

   * Scenario analysis


Managing and Mitigating Strategic Risk and Reputation Risk


   * Definition and scope

   * Relationship between corporate reputation and investor confidence

   * Influence of intermediate interest and pressure groups


Managing and Mitigating Reputation Risk


   * Codes of business conduct

   * Integrating the press and PR operation within the mainstream of the business

   * Quality control procedures


Day 2

Country and Counterparty Risk


Country Risk


   * Definition and scope

   * Weighing up external sources for risk identification

   * Identifying risks, strategic and operational

   * Evaluating probability and impact

   * Balancing risk and gain

   * Rating importance of risk

   * Tools for structuring analysis

   * Risk management in relation to risk assessment

   * Critical evaluation of risk management techniques


Case Study


Counterparty Risk


   * Definition and relevance to both financial and non-financial institutions

   * Delivery risk

   * Supply chain risk

   * Customer loss risk


Financial Tools for Assessment and Key Issues


   * Position audit/business appraisal

   * Interpretation and ratio analysis

   * Creative accounting

   * Z Scoring

   * PAS - Scoring

   * Cash flow analysis


Case study


Mitigating Counterparty Risk


   * Requirements of financial statements

   * The role of documentation

   * Covenants and guarantees

   * Consolidation exercise


Day 3

Operational and Agency Risk


Operational Risk in Context


   * Definition and overview of operational risk

   * Operational risk and agency theory

   * Operational risk and internal control

   * Operational risk framework

   * Operational risk measurement

   * Basic Indicator approach

   * Standardised approach

   * Internal measurement approach

   * Integrated operational risk management - what it means and how to achieve it

   * Categorising operational risk as a basis for developing the risk awareness of business managers

   * In depth review of a selection of the operational risk categories


Cases and Exercises


Operational Risk Incidents


   * The use of operational risk incident databases

   * How to develop an operational risk database


Exercise


Day 4

Risk Mitigation and Regulation


   * The 4 'ts' and when to use them

   * Take the risk - the impact is low and the probability is low (i.e. Do nothing)

   * Treat the risk - reduce the probability (e.g. Improve internal controls)

   * Terminate the risk - reduce the probability to near zero (e.g. Don't follow the course of action)

   * Transfer the risk - reduce the impact (e.g. use insurance)

   * Barriers to mitigating risk


Exercise on Risk Mitigation - Applying the Risk Framework to Specific Cases


Pulling it all Together


   * The integrated nature of risk management and mitigation

   * Roles and responsibilities for risk, management and mitigation



Financial Modelling for Corporate Finance

Financial Modelling for Corporate Finance    


The benefits of using spreadsheet modelling for financial management and corporate valuation are undisputed. This training program is intended to provide practical financial modelling techniques and valuation tools for valuing a company and its securities.

Topics Covered Include:

  • Financing and capital structure
  • Mergers and Acquisitions
  • Initial Public Offerings (IPOs)
  • Building financial models (pro-forma models)
  • Discounted cash-flow analysis
  • Estimated cost of capital (cost of equity, cost of debt and weighted average cost of capital)
  • EVA
  • Market multiples
  • Free-cash flow
  • Value driver analysis


The seminar takes a "hands-on" approach to learning corporate finance rather than focusing on the theory.

  • Financial Analysts, Planners and Decision Makers in corporations
  • Management Executives
  • Corporate and Commercial Bankers
  • Accountants
  • Members of Corporate Finance and M & A teams
  • Strategic Planning Executives
  • Corporate Treasury Executives
  • Management Consultants
  • Lawyers or Legal Advisors
  • Financial and Investment Analysts
  • Investment Managers

KEY BENEFITS OF ATTENDING

  • Learn or update fundamental corporate finance skills.
  • Acquire Excel skills to develop consistent financial forecasting and valuation models.
  • Learn financial statement modelling concepts and applications.
  • Understand key financing techniques.
  • Identify types of models to assist for M&A and restructuring analysis.
  • Build on your existing knowledge of various security valuation techniques.
  • Master methods to accurately calculate the cost of capital.
  • Be able to identify appropriate equity valuation techniques.

Day 1

CORPORATE FINANCE AND FINANCIAL ANALYSIS


Using Excel we will build a pro-forma model that establishes the relationships between the balance sheet, income statement and free cash flows of a company. We will illustrate how the value drivers for the company can be derived and we will show how to value a company using the free cash flow (FCF) method. Finally, using the model we will analyse and value a company using value driver/free cash flow information.


a. Basic Valuation Techniques:

  • Valuation by multiples
  • DCF valuation method
  • Residual income, economic profit and Economic Value Added (EVA©)

b. Financial Statement and Value Driver Analysis:

  • Dupont framework
  • Valuation versus performance measurement
  • Concepts of free cash flow and economic profit
  • Estimating and projecting value drivers
  • Linking value driver analysis and valuation

c. Terminal Value:

  • NOPAT perpetuity
  • Gordon's growth model
  • Multiples (P/E, M/B)

d. Principles in Building a Financial Model:

  • Analysing historical performance
  • Ensuring robust projections
  • Key decisions about whole firm valuation or equity valuation

e. CASE: Build Financial Model for Evode:

  • Estimating value drivers
  • Developing a free cash flow profile
  • Valuing the free cash flow profile
  • Valuing the terminal value
  • Estimating the marketable securities and the value of the debt
  • Whole firm valuation and equity valuation

Day 2

MERGERS & ACQUISITIONS (M&A) AND COST OF CAPITAL


We will use the DCF model we have developed to assess the operating synergies from an acquisition. We will apply empirical methods to estimate a firmМs cost of capital. We will then refine the model to include the measurement of the cost of capital and we will use the model to determine one perspective of the optimal capital structure of the acquisition.


a. Mergers and Acquisition (M&A) Analysis:

  • Review of key issues in M & A analysis
  • Understanding the strategic and competitive context
  • Undertaking a stand alone valuation
  • Undertaking a valuation from different perspectives
  • Overview of modelling issues re Mergers and Acquisitions (M&A)
  • Drawing upon the key experience of M&A research
  • Synergy estimation, control premium and acquisition pricing

b. CASE: Laporte Acquisition of Evode:

  • Assessing the value from different perspectives
  • Using value driver analysis to understand the deal dynamics
  • Understanding the issues in pricing and negotiating the deal

c. Determination of Cost of Capital:

  • Determining the cost of equity using the dividend history
  • Determine the weighted average cost of capital
  • Models to estimate the cost of debt

d. Capital Asset Pricing Model (CAPM):

  • Using equity and asset betas
  • Market risk premium
  • Unlevering and relevering the cost of equity

e. CASE: Estimating the Cost of Capital of Evode:

  • Estimating the cost of equity
  • Challenging the relationship between the cost of equity and other forms of financing
  • Determining the equity and debt weightings
  • Understanding the circularity issues involved in assessing the cost of capital and valuing the entity
  • 4 methods for estimating the debt equity relationship

Day 3

MULTI BUSINESS ANALYSIS & VALUING BUSINESS OPERATIONS    


We will build a DCF model to value debt capacity and perform the analysis of a leveraged acquisition. Using the model we will determine the optimal financing for the acquisition. Finally, we will apply empirical methods to estimate the cost of capital of the different business units.


a. The Principles

  • Understanding the strategic and competitive context
  • Undertaking a stand alone valuation
  • Undertaking a valuation from different perspectives
  • Overview of modelling issues re Mergers and Acquisitions (M&A)
  • Synergy estimation
  • Cost of capital issues
  • Sum of the parts valuations

b. MAJOR CASE: Estimating the Cost of Capital and Value of TWC:

  • Estimating the cost of capital for business units
  • Estimating the business unit cost of capital
  • Peer group analysis and benchmarking
  • Applying peer group analysis
  • Valuing the business units
  • Estimating a target capital structure

Day 4

APPLICATIONS LINKING THE MARKET APPROACH AND ACCRUAL ACCOUNTING VALUATION


We will use Excel to analyse and value IPOs and to determine an equilibrium price for the IPO. We will compare the results will valuations derived from assessing multiples. We will discuss the advantages and disadvantages of applying market multiples to valuing stocks.


a. Valuation by Multiples:

  • Alternative multiples P/E, EV/EBITDA, P/B
  • Issues in choosing multiples for valuation

b. Transaction Multiples:

  • Control premiums and minority discounts
  • Acquisition transactions
  • Discounts for lack of marketability.

c. Initial Public Offering (IPOs):

  • Introduction
  • Modelling challenges in valuing IPOs

d. CASE: Valuing a Telecoms IPO Orange PLC:

  • Key issues in determining the value
  • Identifying comparable companies
  • Extracting information from comparable companies to estimate value
  • Estimating value using free cash flows and multiples

e. CASE: Valuing an Emerging Market Telecoms IPO Jordan Telecom:

  • Determining the cost of capital in emerging markets
  • Identifying comparable companies
  • Extracting information from comparable companies to estimate value
  • Estimating value using free cash flows and using MICAP
  • 3-stage valuation modelling
  • Issues in calculating premiums, discounts and the intrinsic price


Investment Banking

Investment Banking    


Day 1

Overview and Core Skills - Valuation.


Introduction

Structure of the Course


Valuation in Context

  • Review of traditional measures with contemporary approaches:
  • Price-Earnings (PE) multiples and other earnings approaches
  • Market to Book (MB) multiples
  • Comparative company analysis
  • Asset based valuations
  • Accounting issues and international accounting standards
  • DCF methods - free cash flow
  • Economic Value Added (EVA?) and Market Value Added
  • Importance of value driver analysis
  • Key issues in valuation - estimating cash flow, assessing risk, competitive advantage analysis and terminal value estimation
  • Developments in valuation - commercially available valuation models and databases
  • Valuation applications: Initial Public Offerings (IPOs), Mergers and Acquisitions (M&A), Buyouts, Restructuring, Asset Management

Case Study: Valuing a Real-life Company


Day 2

Core Skills.  Capital Raising and the Cost of Capital and Negotiation Techniques


Equity

  • Characteristics and types
  • Pricing equity and key valuation methods (link with day 1)
  • Estimating the cost of equity - alternative approaches including the Capital Asset Pricing Model (CAPM)
  • Key issues in estimating the cost of equity for alternative applications - M&As, IPOs and emerging markets

Debt

  • Debt instruments
  • Debt markets
  • Evaluating credit quality
  • Credit ratings
  • Importance of gearing/leverage
  • Capital structure and debt capacity
  • Valuing debt instruments and estimating the cost of debt

Developments in the Debt Markets


Cost of Capital

  • Estimating the Weighted Average Cost of Capital (WACC)
  • Estimating WACC for an IPO, private company or business unit
  • Peer group analysis for calculating the cost of equity
  • Adjustments for financial risk - unlevered and relevered betas
  • Assessing capital structure
  • Estimating WACC in emerging markets
  • Understanding the limitations of conventional analysis
  • Assessing country and equity risk
  • Different approaches

Case Study: Estimating WACC in an Emerging Market


Soft Skills - Negotiating Techniques

  • The importance of negotiating skills for the investment banker
  • Understanding the negotiation process
  • Rules and principles
  • Negotiation strategy and tactics
  • Managing the negotiation environment
  • Team selection issues


Day 3

Applications - IPOs and M&A Analysis


IPOs

  • Overview
  • Key requirements of IPO candidates
  • Pros and cons of going public
  • Understanding the process from start to finish
  • Selecting the underwriter
  • Selecting the market
  • Determining the amount of capital to be raised
  • The IPO prospectus

M&As

  • Definition and overview
  • The process
  • Key success factors
  • Estimating synergies - valuing existing businesses on a stand-alone basis and comparing them with the value of the combined businesses
  • Importance of understanding different perspectives - control premium, valuation of synergies and perspective
  • Valuing the acquisition target with synergies

Case Study: Estimating the Value of Synergies from an Acquisition

  • Potential acquisition defences - actions that a target can use to defend against a potential acquisition

Due Diligence

  • Review of due diligence
  • Types of due diligence
  • Linking due diligence with value driver analysis

Making Mergers and Acquisitions Work

  • Why mergers and acquisitions fail
  • Characteristics of successful mergers and acquisitions

Day 4

Applications  - Restructuring, Buyouts, Private Equity and Venture Capital


Restructuring

  • Forms of restructuring
  • Portfolio
  • Management
  • Financial
  • Pressures to restructure
  • Business turbulence
  • Debt problems
  • Assessing vulnerability - financial ratios, Z scoring and A scoring
  • Types of restructuring
  • Liquidations
  • Divestitures
  • Asset sales
  • Spin-offs
  • Multi-business restructuring
  • Understanding the value of a portfolio
  • Understanding conglomerate discount
  • Assessing the value of the parts
  • Applying peer group analysis
  • Debt capacity and restructuring

Buyouts, Venture Capital and Private Equity

  • Review of types of buyouts
  • Management buyouts (MBOs)
  • Management buy-ins (MBIs)
  • Leveraged buyouts (LBOs)
  • Evaluating a buyout candidate
  • Financing a buyout candidate
  • Key practical issues

Case Study: Evaluating a Buyout

  • Venture capital and private equity

Developments in Venture Capital/Private Equity

Investment Banking Challenges in Emerging Markets

  • How investment banking activities differ
  • Assessing the relative risks and returns - dealing with country related risks
  • Problems of data availability and robustness

Structured Finance Course

Structured Finance Course    


A program with comprehensive case studies designed for investment professionals

  • Understand common financing & legal structures used in the structured markets.
  • Identify the roles of key transaction participants and follow the flow of funds through various structures.
  • Recognise potential opportunities for their institution to participate in the asset backed market.
  • Know the resources available to them for analysing and evaluating a particular structure.
  • Anticipate & identify the risks within various structures.

Delegates will learn the conceptual framework for understanding and evaluating Structured Financing.


WHY STRUCTURED FINANCE?


Structured finance is therefore becoming increasingly important both to the corporate and the financial community. Worldwide private sector investment in project finance deals alone currently exceeds $100 billion, and is expected to continue to grow rapidly over the next few years.


WHO SHOULD ATTEND?

  • Finance Directors, CFOs and other senior strategists in corporate
  • Members of M&A teams in investment banks, corporations and legal firms
  • Accountants and tax advisors
  • Management and strategy consultants
  • Government agencies involved in privatization or private finance initiatives
  • Strategic planners & Market regulators
  • Investment directors, managers and analysts
  • Credit analysts, investment-banking professionals, corporate lenders, fixed income specialists, relationship managers, bond research specialists (buy and sell side) and those who wish to develop an understanding of the structured finance market.

COURSE LEVEL


Delegates should be familiar with the principle of applied corporate finance, although core areas, like valuation, will be reviewed during the course.


COURSE DIRECTOR


Dr Roger Mills has unparalleled experience in the theory and practice of corporate/equity valuation, corporate financial strategy and M&A. He consults internationally to corporates and financial institutions on the application of valuation and shareholder value methodologies, and was Consultant Professor to PriceWaterhouseCoopers on Shareholder Value Analysis. Recent consulting activities include work on IPOs, M&A, joint ventures, privatisation, value-based management, valuation of intangibles, principal finance and investment analysis. He has experience of many business sectors including telecoms, banking, infrastructure, property, power and engineering. In addition to his consulting activities, Dr Mills delivers training in the UK, Europe, US, Latin America and Asia Pacific, including the Euromoney training courses Structured Finance, Mergers and Acquisitions, Valuation Techniques, Risk Management and Investment Banking. He is author of two highly respected texts, Dynamics of Shareholder Value and Strategic Value Analysis. Dr Mills is Professor of Accounting and Finance at Henley Management College, a UK business school, where in particular he supervises PhD and Doctor of Business Administration research on finance and accounting. He is a Fellow of Chartered Institute of Management Accountants and of the Association of Corporate Treasurers.


Day 1

Introduction to Structured Finance

  • What is Structured Finance - definitions
  • Key features of Structured Financial deals
  • Traditional versus Structured Finance
  • Illustration - Asset Backed Securitisation
  • Disadvantages of Structured Finance

Importance of Understanding Valuation Techniques


Conventional Accounting-Based Valuation Techniques

  • Conventional accounting methods - review and key issues in application
  • Price/Earnings and Enterprise Value/EBITDA
  • Market-to-Book
  • Dividend Discount
  • Asset Valuation
  • Discounted Cash Flow (DCF) - Net Present Value (NPV) and Internal Rate of Return (IRR)
  • Comparable Deals

Case Study - Applying Conventional Valuation Methods


Key Issues Associated with Conventional Valuation Methods

  • Valuation of intangible assets, e.g. goodwill and brands
  • Conventional accounting methods and creative accounting
  • National variations in financial reporting practices - US GAAP versus International Accounting Standards

Contemporary Valuation Approaches - Review

  • Free Cash Flow Analysis
  • Economic Profit/Economic Value Added and Market Value Added

Case Study

Key Issues in Using Contemporary Valuation Approaches

  • Understanding the business model and the strategic perspective
  • Relationship between return on capital and the cost of capital
  • Key definitions and relationships - planning period, competitive advantage and growth duration
  • Methods for estimating the Competitive Advantage Period (CAP)
  • Estimating terminal value - review of approaches
  • Market multiple
  • Asset-based
  • Discounted cash flow

Day 2

Importance of Understanding the Principles of Applied Corporate Finance

  • Estimating the Weighted Average Cost of Capital (WACC) - key requirements:
  • Cost of different types of capital
  • Cost of equity:
  • Accounting estimates - earnings approaches
  • Dividend Valuation Model (DVM) and the importance of dividends
  • Capital Asset Pricing Model (CAPM) - risk free rate, betas and equity risk premium
  • Cost of debt
  • Yield to redemption and credit sprea
  • Corporate taxation
  • Understanding gearing/leverage and capital structure

Case Study


Leveraged Buyouts (LBOs), Management Buyouts (MBOs) and Management Buyins (MBIs)

  • Introduction to Buy Outs
  • Management Buy Outs (MBOs)
  • Management Buy Ins (MBIs)
  • Leveraged Buy Outs (LBOs)
  • Definition
  • Differences from MBOs and MBIs

Sources of Buyout Candidates

  • Businesses undergoing a major restructuring movement, i.e. disposal of non-core, non-strategically aligned divisions/subsidiaries of public companies.
  • Public companies wishing to shed themselves of low-performing businesses.
  • Family owned businesses with succession problems.
  • Receiverships, rescues and turnarounds.
  • Public sector businesses entering private ownership.

Buyout Screening Selection Criteria

  • Cash generative
  • Stable operating cash flows
  • Consistent growth
  • Low growth
  • High break-up value
  • Solid market, niche products
  • Good asset backing
  • Low technology
  • Low capital expenditure
  • Hands-on team

Critical Issues

  • Target selection
  • Research
  • Managers' qualifications
  • Managers' commitment
  • Relationship with existing management
  • Equity backing

Key Variables to Consider

  • Vendor - price
  • Financiers - gearing, IRR, exit arrangements
  • Buyers - % equity
  • Funding arrangements
  • Management - "hurt money", high return
  • Institutional equity - equity/preference
  • Mezzanine loan - equity kicker/warrants
  • Senior debt - secured/normal banking returns

Financial Evaluation

  • Estimating purchase price and set up cost:
  • Capital expenditure and working capital needs
  • Review of business plans
  • Estimating how much can be raised by
  • Rationalising fixed assets and deferring capital expenditure
  • Squeezing working capital
  • Overhead reduction
  • Reducing lifestyle/headcount
  • Estimating funding requirements and alternative sources of funds:
  • Vendors' debt (deferred consideration
  • Secured debt (covenants and risk tolerance)
  • Equity requirement estimates -management equity and outside equity (venture capital)
  • Estimating potential value to be created

Exit Routes

  • Sale to some other corporate body
  • Public listing

Illustration


Day 3

Methods of Financing

  • Sources and criteria for selection
  • Ordinary shares
  • Preferred ordinary shares
  • Preference shares
  • Loan stock
  • Convertibles
  • Deferred payment
  • Cash

MBOs Versus MBIs


MBO Case Study


Major LBO Case Study


Critical Success Factors

  • Focus on cash flow
  • Elimination of any cash flow discount
  • Timely sale of undervalued assets
  • Greater management incentives

Day 4

The Alchemy of LBOs and Restructuring

  • Restructuring techniques
  • Position audit techniques
  • Financial analysis and Z scoring
  • Economic profit and incentivisation

Considerations for Lenders

  • Financial profile
  • Security
  • Risk/return profile
  • Covenants
  • Warranties
  • Management investment
  • Key risks and issues

Considerations for Investors

  • Investment rationale - strategic and business rationale
  • Business profile
  • Management and employee profile
  • Business plan assessment
  • Exit options assessment
  • Entry and exit valuation assessment and prospects
  • Key risks and issues
  • Track record
  • Market issues
  • Performance shortfall potential and 'kickers'
  • Managerial performance incentivisation

Review of Securitisation

  • Basic meaning
  • Key jargon
  • Main features

Venture Capital

  • Success criteria and expectations
  • Perspective on deal structure

Corporate Finance Techniques

Corporate Finance Techniques    



Day 1

Overview and Core Skills

Introduction

Structure of the course:

  • 1 day core skill requirements
  • 3 days key applications (basic and advanced)
  • Review of key applications
  • Mergers and Acquisitions (M&A)
  • Initial Public Offerings (IPOs)
  • Restructuring, turnarounds and workouts
  • Leveraged Buy Outs (LBOs), Management Buy Outs (MBOs), Private Equity and Venture Capital
  • Emerging markets

Financial Analysis:

  • Creative accounting - capitalisation of interest, research and development and intangibles; brand accounting; lengthening asset lives etc...
  • Models for predicting bankruptcy - Z scoring

Project Appraisal:

  • Capital budgeting and project appraisal
  • Tools of project appraisal - payback period, return on investment (ROI), net present value (NPV), internal rate of return (IRR)
  • Dealing with inflation, taxation, risk and uncertainty- relevance of the principles of finance - Fisher Effect
  • Tools and techniques for analysing and assessing risk and uncertainty
  • Capital project proposals - analysis, interpretation and evaluation

Case Study: Evaluating a Project Proposal

Valuation

  • Review of traditional measures with contemporary approaches:
  • Accounting issues and international accounting standards
  • Importance of value driver analysis
  • Key issues in valuation†- estimating cash flow, assessing risk, competitive advantage analysis and terminal value estimation
  • Developments in valuation†- commercially available valuation models and databases
  • Valuation applications: Initial Public Offerings (IPOs), Mergers and Acquisitions (M&A), Buyouts, Restructuring, Asset Management

Case Study: Valuing a Real-life Company

Equity

  • Characteristics and types
  • Pricing equity and key valuation methods
  • Key issues in estimating the cost of equity for alternative applications†- M&As, IPOs and emerging markets

Debt

  • Importance of gearing/leverage
  • Capital structure and debt capacity
  • Valuing debt instruments and estimating the cost of debt

Cost of Capital

  • Estimating WACC in emerging markets
  • Understanding the limitations of conventional analysis
  • Assessing country and equity risk
  • Different approaches

Case Study: Estimating WACC in an Emerging Market


Day 2

Applications (1) - IPOs and M&A Analysis IPOs

  • Overview
  • Key requirements of IPO candidates
  • Pros and cons of going public
  • Understanding the process from start to finish
  • Selecting the underwriter
  • Selecting the market
  • Determining the amount of capital to be raised
  • The IPO prospectus

M&As

  • Definition and overview
  • The process
  • Key success factors
  • Estimating synergies - valuing existing businesses on a stand-alone basis and comparing them with the value of the combined businesses
  • Importance of understanding different perspectives - control premium, valuation of synergies and perspective
  • Valuing the acquisition target with synergies

Case Study: Estimating the Value of Synergies from an Acquisition

  • Potential acquisition defences - actions that a target can use to defend against a potential acquisition

Due Diligence

  • Review of due diligence
  • Types of due diligence
  • Linking due diligence with value driver analysis

Making Mergers and Acquisitions Work

  • Why mergers and acquisitions fail
  • Characteristics of successful mergers and acquisitions

Day 3

Applications (2) -Restructuring, Buyouts, Private Equity and Venture Capital Restructuring

  • Forms of restructuring
  • Portfolio
  • Management
  • Financial
  • Pressures to restructure
  • Business turbulence
  • Debt problems
  • Assessing vulnerability†- financial ratios, Z scoring and A scoring
  • Types of restructuring
  • Liquidations
  • Divestitures
  • Asset sales
  • Spin-offs
  • Multi-business restructuring
  • Understanding the value of a portfolio
  • Understanding conglomerate discount
  • Assessing the value of the parts
  • Applying peer group analysis
  • Debt capacity and restructuring

Major Restructuring Case Study


Day 4

Applications (3) -Structured Finance, Buyouts, Private Equity and Venture Capital

Structured Finance, Buyouts, Venture Capital and Private Equity

  • Introduction to and review of structured finance
  • Review of types of buyouts
  • Management buyouts (MBOs)
  • Management buy-ins (MBIs)
  • Leveraged buyouts (LBOs)
  • Evaluating a buyout candidate
  • Financing a buyout candidate
  • Key practical issues

Case Study: Evaluating a Buyout

Major Buyout Case Study

Challenges in Emerging Markets

  • Assessing the relative risks and returns - dealing with country related risks
  • Problems of data availability and robustness

Financial Modelling for Valuation

Financial Modelling for Valuation    


The benefits of using spreadsheet modelling for financial management and corporate valuation are undisputed. This training program is intended to provide practical financial modelling techniques and valuation tools for valuing a company.

Topics Covered Include:

  • Mergers and Acquisitions
  • Initial Public Offerings (IPOs)
  • Value Based Management
  • Restructuring

  • Capital structure analysis
  • Building financial models (pro-forma models)
  • Discounted cash-flow analysis
  • Estimated cost of capital (cost of equity, cost of debt and weighted average cost of capital)
  • EVA
  • Market multiples
  • Value driver analysis
  • Free-cash flow

The benefits of using spreadsheet modelling for financial management and corporate valuation are undisputed. This training program is intended to provide practical financial modelling techniques and valuation tools for valuing a company.

Topics Covered Include:

  • Mergers and Acquisitions
  • Initial Public Offerings (IPOs)
  • Value Based Management
  • Restructuring
  • Capital structure analysis
  • Building financial models (pro-forma models)
  • Discounted cash-flow analysis
  • Estimated cost of capital (cost of equity, cost of debt and weighted average cost of capital)
  • EVA
  • Market multiples
  • Value driver analysis
  • Free-cash flow

The seminar takes a "hands-on" approach to learning corporate finance rather than focusing on the theory.

  • Financial Analysts, Planners and Decision Makers in corporations
  • Management Executives
  • Corporate and Commercial Bankers
  • Accountants
  • Members of Corporate Finance and M & A teams
  • Strategic Planning Executives
  • Corporate Treasury Executives
  • Management Consultants
  • Lawyers or Legal Advisors
  • Financial and Investment Analysts
  • Investment Managers

KEY BENEFITS OF ATTENDING

  • Learn or update fundamental valuation skills.
  • Acquire Excel skills to develop consistent financial forecasting and valuation models.
  • Get behind key valuation issues, like the determination of the time horizon to use and growth in perpetuity.
  • Understand how to analyse synergies from internal or external restructuring.
  • Understand how to apply valuation modelling to M&A analysis, IPOs and value-based management.
  • Build on existing knowledge of various security valuation techniques.
  • Master methods to calculate the cost of capital.
  • Identify appropriate valuation techniques to use for different situations.

Day 1

OVERVIEW OF VALUATION AND THE CHALLENGES IN MODELLING


We will review the alternative models that can be used to value a company, including both traditional and more contemporary modelling approaches. Using Excel we will build a pro-forma model that establishes the relationships between the balance sheet, income statement and free cash flows of a company. We will illustrate how the value drivers for the company can be derived and we will show how to value a company using the free cash flow (FCF) method. Finally, using the model we will analyse and value a company using value driver/free cash flow information.

a. Review of the Alternative Valuation Approaches

b. Review of Traditional Methods using Multiples and How to Model them in Excel for Fundamental Analysis, i.e.

  • Price/Earnings
  • Enterprise Value/EBITDA
  • Price/Book
  • Problems of modelling using traditional methods and the underlying principles of financial economics

c. Free Cash Flow (FCF) Modelling in Perspective

  • Overview of FCF modelling, including identification of key issues:
  • Different approaches - entity and equity valuations
  • Value drivers and value driver estimation

d. How to Build a High Level 2-Stage FCF Model in Excel

  • Valuing the free cash flow profile
  • Terminal value estimation
  • Cost of capital estimation
  • Estimating the marketable securities and the value of the debt
  • Whole firm valuation and equity valuation

CASE: Building a 2-Stage FCF Model in Excel for Evode

e. Review of Commercially Available Software for Modelling FCF


Day 2

ADVANCED FCF VALUATION MODELLING

We will look at key issues associated with developing the FCF profile, time horizon estimation, terminal value estimation and cost of capital that have a material impact upon the results obtained from FCF modelling. We will develop our Excel model from day 1 to incorporate cost of capital assumptions, different terminal value approaches and the iteration of capital structure. We will review the different approached that can be used to estimate the explicit time horizon used for purposes of forecasting and the application of a 3-stage valuation model.

a. Estimating the Weighted Average Cost of Capital (WACC) - Key Requirements:

  • Cost of different types of capital
  • Cost of equity:
  • Accounting estimates - earnings approaches
  • Dividend Valuation Model (DVM) and the importance of dividends
  • Capital Asset Pricing Model (CAPM) - risk free rate, betas and equity risk premium
  • Cost of debt
  • Yield to redemption and credit spread
  • Corporate taxation
  • Understanding gearing/leverage and capital structure

CASE: Developing the Model to Calculate the Cost of Capital for Evode


b. Understanding the Business Model and the Strategic Perspective

  • Relationship between return on capital and the cost of capital
  • Key definitions and relationships - planning period, competitive advantage and growth duration

c. Methods for Estimating the Competitive Advantage Period (CAP)

  • Estimating terminal value - review of approaches
  • Market multiple
  • Asset-based
  • Discounted cash flow

CASE: Valuing a Telecoms IPO Jordan Telecom:

  • Determining the cost of capital
  • Identifying comparable companies
  • Extracting information from comparable companies to estimate value
  • Estimating value using free cash flows and using MICAP
  • 3-stage valuation modelling
  • Issues in calculating premiums, discounts and the intrinsic price

Day 3

MERGERS & ACQUISITIONS (M&A), MULTI BUSINESS ANALYSIS & VALUING BUSINESS OPERATIONS


We will use the DCF model we have developed to assess the operating synergies from an acquisition. We will apply empirical methods to estimate a firmМs cost of capital. We will then refine the model to include the measurement of the cost of capital and we will use the model to determine one perspective of the optimal capital structure of the acquisition. We will develop our DCF model to value debt capacity and perform the analysis of a leveraged acquisition. Using the model we will determine the optimal financing for the acquisition. Finally, we will apply empirical methods to estimate the cost of capital of the different business units.

a. Mergers and Acquisition (M&A) Analysis:

  • Review of key issues in M & A analysis
  • Understanding the strategic and competitive context
  • Undertaking a stand-alone valuation
  • Undertaking a valuation from different perspectives
  • Overview of modelling issues re Mergers and Acquisitions (M&A)
  • Drawing upon the key experience of M&A research
  • Synergy estimation, control premium and acquisition pricing

CASE: Laporte Acquisition of Evode:

  • Assessing the value from different perspectives
  • Using value driver analysis to understand the deal dynamics
  • Understanding the issues in pricing and negotiating the deal

CASE: Estimating the Cost of Capital and Value of TWC:

  • Estimating the cost of capital for business units
  • Estimating the business unit cost of capital
  • Peer group analysis and benchmarking
  • Applying peer group analysis
  • Valuing the business units
  • Estimating a target capital structure

Day 4

MODELLING FOR INTERNAL ANALYSIS - MANAGING FOR VALUE AND VALUE BASED MANAGEMENT (VBM)


We will review the link between valuation and performance measurement with particular reference to the link between Free Cash Flow, Economic Value Added and Market Value Added. We will develop our Excel model to incorporate EVA? and MVA analysis and we will show the impact of financial economic adjustments upon the results and their interpretation. We will review modelling within a VBM setting and review a 10-step approach for implementing VBM


a. What is meant by VBM and Link Between Value and Performance Measurement


b. Performance Measurement and Economic Value Added (EVA?)

  • EVA? and Market Value Added (MVA)
  • Calculating and interpreting EVA?
  • Calculating and interpreting MVA
  • Linking EVA? and MVA to other valuation approaches
  • Assessing the effect of value based adjustments

CASES: Calculating and Interpreting EVA? and Market Value Added (MVA)


c. Modelling within a Value Based Management Setting


d. Review of a 10-Step Approach for Implementing Value Based Management:

  • What is the managerial interpretation of your current value in the market?
  • What is influencing it, i.e. what are the key value drivers?
  • What are the apparent managerial actions for improvement and what are their impacts?
  • In light of 3., what should be the new vision?
  • What is the value of the new vision?
  • How does the vision translate into customer, shareholder and other relevant perspectives for the organisation?
  • How does the organisational vision look in terms of divisions/business units?
  • What is the divisional value?
  • What are the key divisional value drivers?
  • What do these divisional value drivers look like in terms of the micro drivers and key performance indicators (KPIs)?

Financial Restructuring

Financial Restructuring    


Plan, evaluate and monitor all financial aspects of the restructuring process.

  • Develop a detailed understanding of portfolio, management and financial restructuring
  • Identify, assess and manage the risks associated with restructuring
  • Acquire an understanding of buy outs, leveraged recapitalisations and debt: equity swaps
  • Assess the debt capacity and potential for refinancing
  • Use strategic value analysis (SVA) to value a company
  • Understand the importance of the cost of capital and peer group analysis


FINANCIAL TECHNIQUES FOR RESTRUCTURING


Course Objectives


The recent economic volatility in Asia has forced many companies to undertake restructuring as a strategic option in order to remain operational. However, with the region presently enjoying renewed optimism, new opportunities are once again presenting themselves. In order to be effectively positioned to take advantage of these opportunities, organisations will have to once again undergo change. With this in mind and drawing on extensive experience with restructuring processes, Roger Mills and Euromoney have composed this comprehensive training program. The course will lead you through the different phases of the restructuring process: situation audit, planning, evaluation and monitoring. The financial techniques and concepts for each of these phases will be explained, discussed and applied through case studies, exercises and computer simulations.

On completion of this course attendees will:

  • Master all financial techniques for planning, evaluating and monitoring restructuring processes
  • Have an in-depth knowledge of portfolio, management and financial restructuring
  • Be able to identify, assess and manage the risks associated with restructuring
  • Have a detailed understanding of buy outs, leveraged recapitalisations and debt: equity swaps
  • Be able to assess the debt capacity and potential for refinancing
  • Know how to apply strategic value analysis (SVA)
  • Understand the significance of cost of capital and peer group analysis in the restructuring process

Course Methodology


The teaching method will emphasise practical applications of financial techniques. The focus is on blending theory and practice to provide participants with a sound grounding in the full range of financial techniques that may be applied when involved in a restructuring situation.

Teaching methods will include:

  • Lectures
  • Examples and practical exercises
  • Case studies
  • Computer simulations
  • A guest presentation

The last day of the course will focus on a major real-life restructuring case study. Using their newly acquired techniques, delegates will be asked to identify potential sources of benefit from restructuring a multi-business operation by assessing the financial health of the business portfolio. This conglomerate is an acquisition target with a value gap between the bid price and the current share price. Delegates will make extensive use of customised computer based spreadsheets.

Who will benefit from this course?

This course has been designed for all business and finance professionals (potentially) involved in restructuring processes, either directly or indirectly.

  • CFOs and financial directors
  • MDs and CEOs
  • Corporate finance managers and treasurers
  • Advisors including bankers, lawyers, accountants, tax specialists
  • Management consultants in the areas of restructuring and corporate finance
  • Members of M&A teams and other investment bankers
  • Analysts
  • Auditors
  • Market regulators and government agencies involved in privatizations
  • Corporate bankers and lenders

Course Director Dr. Roger Mills

Roger Mills is Professor of Accounting and Finance at Henley Management College in England where he is Head of the Accounting and Finance Faculty. He has a First Degree in Psychology, Sociology and Economics, a Masters Degree in Management Studies and a Ph.D. in Finance. He trained as an accountant in industry and is a Fellow of the Chartered Institute of Management Accountants (FCMA), a Fellow of the Chartered Institute of Secretaries and Administrators (FCIS), and a Fellow of the Association of Corporate Treasurers (FCT). He is the co-author of a number of books on accounting and finance, and is the author of numerous articles in practitioner-oriented journals like Management Accounting, the Treasurer, the Journal of General Management.

Professor Mills has undertaken numerous consultancy assignments within the computer, financial services and banking industries. His particular areas of specialisation are strategic financial and value analysis, corporate finance, business valuation, merger and acquisition analysis and corporate restructuring. He has delivered programs on these and other finance related subjects in Hong Kong, Singapore, Malaysia, Brazil, Russia, United States of America, Norway, Switzerland, France, Denmark, Estonia, Hungary, Nigeria, South Africa, Spain, Germany and New Zealand.


The Euromoney Certificate

Delegates who successfully complete this course will receive the prestigious Euromoney Training Certificate, a statement of excellence recognised worldwide.


Course Times

Registration is at 8.30am on day one. The course begins at 9.00am & concludes at approximately 5.00pm daily.


COURSE AGENDA


Day 1

Restructuring in Perspective

Introduction

  • What is restructuring?
  • Forms of restructuring
  • Portfolio
  • Management
  • Financial
  • Pressures to restructure
  • Business turbulence
  • Debt problems
  • The imperative to manage risk and the risk-return relationship
  • Restructuring within an Asian context - central role of M&A

Framework for Restructuring

  • Plan
  • Taking stock today - position audit
  • Identifying, assessing and managing risk
  • Establishing strategic direction
  • Determine the restructuring mix
  • Evaluate
  • Monitor

Taking Stock Today- Position Audit

  • Assessing financial statements and financial statement analysis
  • Assessing vulnerability - financial ratios, Z scoring and A scoring

Case Study

  • Cash flow analysis
  • Evaluating returns to shareholders and assessing the cost of capital
  • Valuing the business and its parts value metrics and value drivers

Exercise


Identifying, Assessing and Managing Risk

  • Risk and uncertainty
  • Types of risk and risk classifications

Exercise

  • Risk management framework - identification, measurement; management/monitoring, assigning accountability
  • Approaches for the treatment of risk in the appraisal process

Risk Assessment Exercise


Day 2

Strategic Assessment, Portfolio Valuation and Organisational Restructuring

Strategic Assessment and Direction

  • Frameworks for strategic assessment
  • Understanding distinctive capabilities
  • Applying strategic assessment frameworks
  • Understanding value perspectives

Case Study

Types of Portfolio Restructuring

  • Liquidations
  • Divestitures
  • Asset sales
  • Spin-offs

Measuring the Value of the Portfolio

  • Understanding the value of a portfolio
  • Understanding conglomerate discount
  • Assessing the value of the parts
  • Portfolio restructuring and the application of M&A analysis

Case Study - Computer-Based Group Work

Evidence on the Benefits of Portfolio Restructuring

Forms of Organisational Restructuring

  • Redrawing divisional boundaries
  • Flattening hierarchies
  • Reducing product diversification
  • Revising compensation
  • Streamlining processes
  • Changing business unit structures
  • Downsizing the business

Exercise

Evidence on the Benefits of Organisational Restructuring



Day 3

Financial Restructuring


Introduction to Forms of Financial Restructuring

  • Buy Outs
  • Leveraged recapitalizations
  • Debt: equity swaps
  • Contemporary developments

Buy Outs

  • Introduction to Buy Outs
  • Management Buy Outs (MBOs)
  • Management Buy Ins (MBIs)
  • Leveraged Buy Outs (LBOs)
  • Evaluating a Buy Out - key variables
  • Evaluating a Buy Out candidate - profile characteristics
  • Structuring a Buy Out

Leveraged Recapitalisations

  • Basic principles
  • Advantages/disadvantages

Debt: Equity Swaps

  • Basic principles
  • Advantages/disadvantages

Contemporary Developments: Principal Finance

  • Basic principles
  • Experiences to date

Opportunities in Asia

Understanding the Cost of Capital for the Business and its Parts

  • Measuring the cost of capital - review of general principles
  • Cost of equity - Capital Asset Pricing Model (CAPM) and beta analysis
  • Cost of debt
  • Capital structure - understanding the debt: equity mix and estimating the mix in practice
  • Estimating business unit costs of capital

Case Study - Computer-Based Group Work

Evidence on Financial Restructuring

Guest Presentation


Day 4

Determining the Restructuring Mix


Issues in Determining the Restructuring Mix

Major Restructuring Case Study - Computer-Based Group Work

A real-life case involving the bid for a multi-business operation for which there is a value gap between the bid price and the current share price.

In general, the case involves the assessment of the financial health and the value of the business portfolio using a computer-based spreadsheet to identify the potential sources of benefit from restructuring.

Specifically, it involves:

  • Estimating the business unit cost of capital - peer group analysis and benchmarking
  • Portfolio assessment and applying peer group analysis
  • Identifying the value of the various parts of the business
  • Assessing debt capacity and the estimating the potential for refinancing
  • Estimating potential debt using a bottom-up approach.

Pulling it all together:

  • Plan
  • Evaluate
  • Monitor

Course Review

Please note: Delegates should bring a good financial calculator to the course. The Hewlett Packard HP-B series are recommended.


CFO's Workshop

CFOs Workshop    


A Unique Course Tailored to meet the Specific Needs of Top Finance Professionals, Finance Directors, Financial Controllers, Financial Analysts & Management Accountants.

  • Examine recent trends in performance measurement and cost management
  • Understand how to link value and performance using Economic Value Added (EVA) analysis
  • Apply the latest techniques for estimating the real cost of capital
  • Understand the importance of shareholder value in managing organisations of all types to create value
  • Review the Balanced Scorecard and quality modeling for linking the demands of the customer with those of other stakeholders
  • Analyse the latest principles in Value Based Management and Strategic Value Analysis

Financial Controllers & Finance Directors Course




Course Background


Increasing global competition, new business opportunities, technological advancements, better-cost control, shorter product and market cycles, together with the recent economic turbulence, are all putting added pressure and responsibility on Financial Managers in the Asia Pacific.

As well as effectively meeting these challenges, Financial Managers must also increasingly shoulder the pressure of measuring and controlling the Cost of Capital and creating Shareholder Value, which, to be completed successfully, require a comprehensive understanding of new and innovative techniques. EuromoneyМs Financial Controllers & CFOs Workshop will examine in detail these and other important aspects of the Financial Manager's duties, including strategic cost management, performance measurement and advanced budgeting.

An effective finance function must work alongside management as business partners and become a core advisor in key corporate strategies and decision-making. This comprehensive 4-day course will show you exactly how this can be done.


Teaching Methods


This is an intensive and interactive training workshop that combines formal lecture sessions with practical case study exercises wherever possible, ensuring that delegates leave with a comprehensive understanding of the topics discussed.

Increase Your Understanding of the Following Important Areas

  • Value Based Management
  • Performance Measurement
  • Balanced Scorecard
  • Process Focused Management
  • Target and Strategic Cost Management
  • Shareholder and Strategic Value Analysis
  • Cost of Capital Analysis

Who Should Attend?

  • Financial Controllers
  • Finance Directors/CFOs
  • Accountants
  • Financial Analysts
  • Financial / Strategic Planners
  • Chief Financial Officers
  • Treasurers
  • Internal and External Auditors
  • Management Consultants
  • Corporate Bankers
  • Tax Specialists

Day 1

Measuring the Value of Your Business


The future of the Finance Function and the Role/ Responsibilities of the Finance Specialist

Why Valuation is Important to the Finance Specialist

Alternative Valuation Approaches

Shareholder Value and its Relevance to all Businesses

Review of Alternative Shareholder Value Methods

  • SVA (Strategic Value Added)
  • Economic profit/EVA (Economic Value Added)

Issues in choosing the right value metric for your business.

Importance of understanding value drivers and key performance indicators (KPIs) and their importance.

Applying strategic frameworks to determine the planning period.

The importance of residual value and issues in estimating residual value.

Applying Strategic Value Analysis (SVA)

  • Project appraisal
  • Mergers & acquisitions
  • Joint ventures
  • Business valuation

How to Develop a Valuation Model for your Business

Making the most Effective use of Valuation Modelling

Valuation Modelling in Practice - Review of Company Practices


Day 2

Managing for Value and Introduction to Value Based Management (VBM)


What is meant by VBM?

Key VBM Concerns of the Finance Specialist:

  • Estimating relevant planning horizons and understanding the measurement of competitive advantage
  • Strategic frameworks and Porter's 5 forces model
  • Market implied analysis
  • Estimating terminal values and understanding the link with competitive advantage assessment
  • Terminal value estimation methods
  • Understanding growth in perpetuity
  • Use of multi stage valuation models
  • Estimating shareholder requirements and the importance of the cost of capital
  • Estimating the cost of capital
  • Key components
  • Cost of equity
  • Cost of debt
  • Proportion of debt and equity
  • Estimating the corporate cost of equity
  • Dividend valuation
  • Risk return approaches
  • The Capital Asset Pricing Model (CAPM)
  • Issues in estimating the cost of equity
  • Emerging markets
  • Asian perspective
  • Estimating the cost of equity for business units
  • Use of peer group analysis
  • Estimating the cost of debt and debt/equity weightings

Day 3

Performance Measurement


Conventional Methods of Performance Measurement

  • Return on Assets (ROA) and the Dupont ratio pyramid
  • Cost management and asset utilization
  • Activity Based Costing and Activity Based Management

Performance Measurement and Economic Value Added

  • Importance of performance measurement
  • Review of Economic Value Added (EVA) and Market Value Added (MVA)
  • Linking EVA and MVA to other valuation approaches
  • Effect of value based adjustments

Case study - Using Strategic Value Analysis, EVA and MVA Discounted Cash Flow

Pulling it all together:

Case Study Linking Performance Measurement and Valuation


Day 4

Performance Measurement and VBM Implementation


The Balanced Scorecard and Performance Measurement:

  • Introduction to the Balanced Scorecard:
  • Customer perspective
  • Internal perspective
  • Feedback/learning perspective
  • Financial perspective
  • Understanding the relationship between customer needs, internal processes, learning and financial performance

Exercise: Developing a Balanced Scorecard

Market Focused Costing and Target Cost Management

  • Introduction to and review of market focused cost management approaches
  • Importance of target cost management thinking
  • Applying target cost management
  • Cost considerations in an internationally competitive environment

Beyond Budgeting

  • Link with valuation and performance measurement
  • Link with strategic direction - activity and resource plans are derived coherently from business strategies

Implementing Value Based Management

  • Importance of value based management
  • Review of the 10-Step Approach for implementing value based management:

  • What is the managerial interpretation of your current value in the market?
  • What is influencing it, i.e. what are the key value drivers?
  • What are the apparent managerial actions for improvement and what are their impacts?
  • In light of 3., what should be the new vision?
  • What is the value of the new vision?
  • How does the vision translate into customer, shareholder and other relevant perspectives for the organisation?
  • How does the organisational vision look in terms of divisions/business units?
  • What is the divisional value?
  • What are the key divisional value drivers?
  • What do these divisional value drivers look like in terms of the micro drivers and key performance indicators (KPIs)?

Examples of implementation


Expert Techniques for Merger and Acquisitions

Expert Techniques for Merger and Acquisitions  



Day 1

Valuation: Strategic Issues & Techniques

Introduction to Mergers and Acquisitions

  • Merger and acquisition update
  • Applications of merger and acquisition techniques, i.e. for joint ventures, demergers, restructuring opportunities and unbundling, buy-outs, and privatisation

Motives for Acquiring

  • Strategic issues
  • Framework for estimating synergies

Valuing Acquisition Targets using Traditional Methods

  • Review of traditional valuation methods

  • Price/Earnings
  • Enterprise Value/EBITDA
  • Price/Sales
  • Market-to-Book
  • Asset Valuation
  • Comparable Transactions
  • Discounted Cash Flow - Net Present Value and Internal Rate of Return
  • Importance of understanding the impact of creative accounting and differences in national accounting practices
  • Limitations of traditional approaches

Case study - Applying Traditional Valuation Techniques to a Real-Life Acquisition Target

Valuing Acquisition Targets using Modern Valuation Methods

  • Discounted cash flow and Strategic Value Analysis
  • Understanding and calculating free cash flow
  • Value driver analysis and applying free cash flow analysis to business valuation
  • Importance of residual value
  • Linking traditional and modern approaches
  • Developing and using a financial model to evaluate prospective targets

Case study - Valuing an Acquisition Target using Strategic Value Analysis


Day 2

Key Valuation Issues, Defending a Bid, Due Diligence, and Negotiating the Deal


Key Valuation Issues

  • Assessing the explicit forecast period and competitive advantage
  • Residual (terminal) value estimation

Analysing and Defending a Bid

  • Potential defences to a bid
  • Defences used in practice - a review

Due Diligence

  • Review of due diligence - legal, accounting, management and environmental issues
  • Linking commercial due diligence with value driver analysis

Negotiating the Deal - the Negotiation Process

  • Understanding the negotiation process
  • Negotiation tactics for closing the gap
  • Managing the negotiation environment
  • Team selection issues

Assessing Synergies

  • The strategic context
  • Importance of understanding different perspectives - control premium, valuation of synergies, and perspective
  • The synergies framework - operating, financing and tax
  • Valuing the acquisition target with operating synergies

Case Study - Applying the Synergies Framework


Day 3

Financing Issues, the Cost of Capital, Assessing Financing Synergies and the Optimal Capital Structure Issues in Financing Mergers and Acquisitions

  • Financing internally
  • Raising external finance - issues associated with debt and equity

The Cost of Capital

  • Importance of the cost of capital
  • Determining the Equity cost of capital and the price of risk

  • Capital Asset Pricing Model (CAPM)
  • Beta analysis, interpretation and adjustment
  • Issues associated with the risk free rate and the equity risk premium
  • Effect of debt and taxes on the cost of capital
  • Weighted Average Cost of Capital (WACC)

Case study - Estimating the Corporate Cost of Capital for a Real-Life Company

Estimating the Cost of Capital for Business Units/Private Companies

  • Issues in estimating the business unit cost of capital
  • Peer group analysis and benchmarking
  • Using the principles of corporate finance

Case study - Estimating the Business Unit Cost of Capital

Valuing a Multi-Business Unit Target - Major Computer Based Case Study that Involves:

  • Identifying the value of the various parts of the business
  • Applying peer group analysis
  • Debt capacity, financing synergies, and estimating the potential for refinancing
  • Target's perspective and potential defences
  • Negotiating the deal

Day 4

Emerging Market Considerations, Performance Measurement and Acquisition Integration


Estimating the Cost of Capital in Emerging Markets

  • Alternative approaches
  • Practical considerations

Case study - Estimating the Cost of Capital in an Emerging Market

Performance Measurement and Economic Value Added

  • Importance of performance measurement
  • Review of Economic Value Added (EVA?) and Market Value Added (MVA)
  • Linking EVA? and MVA to other valuation approaches
  • Use of EVA? and MVA in acquisition analysis and integration

Case study - Using Strategic Value Analysis, EVA? and MVA

M&A Integration

  • Key issues
  • The evidence

Essentials of Valuation Analysis

Essentials of Valuation Analysis    


Following the resounding success of Dr Roger Mills globally, we are pleased to announce that he is now offering programmes directly to the financial Community. The following programme on Essentials of Equity Analysis is a must for the financial practitioner. Dr Roger Mills specialises in programmes designed to get you to carry out as well as understand key issues that your corporation is facing.

This programme is relevant to:

  • Financial Analysts
  • Treasurers
  • Accountants

  • Project Financiers
  • CFOs
  • M&A Advisors
  • Corporate Analysts
  • Treasury Planners
  • Risk Managers
  • Finance Managers

Please bring your laptop.

Essentials of Valuation Analysis

The success of all corporate transactions whether internally as part of a managing for value (sometimes called value based management) programme, or externally for purposes of acquisition, merger, divestment, buy-out, depends upon putting an accurate value on the corporate entity involved. This course explains the underpinnings of the concepts, principles and techniques of corporate valuation and provides the foundations for the 2-Day Essentials of Valuation Analysis Programme.

This programme is being provided by Dr Roger Mills an expert in company valuation who has consulted to numerous global companies over the last few years.

The Course Outline

The number of valuation techniques available is more numerous and complex than ever before. How do you decide between? This training course will give you a solid understanding of:


  • The techniques available
  • Key issues in their application and common errors made in practice, and
  • How to apply them to:
  • IPOs
  • M&A, or restructuring
  • Banks for which regulatory constraints apply
  • New economy businesses, e.g. relating to the valuation of high technology companies will be considered, as well as conventional old economy businesses
  • Value Based Management and how valuation principles can be applied to managing the business for value
  • Cross-border situations
  • Emerging markets
  • Intangible assets

This course will develop your valuation skills, enable you to identify and implement appropriate techniques and enable you to understand common errors made by practitioners.


About This Course

This training course has been specifically designed to cater to delegate requests for an intermediate programme. It will provide a thorough look at valuation techniques and participants should have a solid understanding of basic valuation techniques such as Net Present Value (NPV) and Internal Rate of Return (IRR) prior to the course. The programme will use case study examples to build and explain in more detail the necessary models for business valuation. Many of the case studies used are computer-based, so please bring your laptop.


Day 1

Valuation Techniques and Valuation Modelling

Course Introduction and Overview

  • Developments in valuation techniques

Review of Valuation Techniques

  • Conventional accounting methods - review and key issues in application
  • Price/Earnings and Enterprise Value/ Earnings Before Interest Tax Depreciation and Amortisation (EBITDA)
  • Market-to-Book
  • IRR, pure and modified (MIRR) and NPV
  • FCF (Free Cash Flow)
  • Economic Value Added (EVA?) and Market Value Added (MVA)
  • Real Options

Case Studies - Applying Valuation Methods

Valuation Modelling

  • Commercially available models versus home grown
  • Key issues to consider when using valuation models

Day 2

Key Issues in Applying Valuation Techniques

  • Determination of the terminal/residual/continuing value
  • Review of approaches
  • Market multiple
  • Asset-based
  • Discounted cash flow
  • Determination of the time horizon to use, including the valuation of intangible assets
  • Understanding the business model and the strategic perspective
  • Relationship between return on capital and the cost of capital Key Issues in Applying Valuation Techniques
  • Key definitions and relationships - planning period, competitive advantage and growth duration
  • Methods for estimating the Competitive Advantage Period (CAP)
  • Estimation of the cost of capital in developed markets
  • Estimating the Weighted Average Cost of Capital (WACC) - key requirements:
  • Cost of different types of capital
  • Cost of equity:
  • Accounting estimates - earnings approaches
  • Dividend Valuation Model (DVM) and the importance of dividends
  • Capital Asset Pricing Model (CAPM) - risk free rate, betas and equity risk premium
  • Cost of debt
  • Yield to redemption and credit spread
  • Corporate taxation
  • Understanding gearing/leverage and capital structure
  • Estimation of the cost of capital in emerging markets
  • Estimating country risk
  • Estimating equity risk
  • Local versus stable currency methods

Case Studies

  • Review of common valuation errors, including:
  • Calculating weighted average cost of capital (WACC) using book values for equity and debt rather than market values.
  • Calculating free cash flow (FCF), using the taxes of the levered project.
  • Inconsistent/incorrect practices, e.g. using flows in constant currency and current rates, or vice-versa.
  • Disparity between expected inflation and discount rates.
  • Confusing cost of equity (Ke) with WACC.
  • Valuing divisions using the companyМs WACC with or without an additional arbitrary hurdle rate.
  • Valuing all businesses at the same rate and making no allowance for systematic differences in risk.
  • Assuming that the debtМs value always matches the nominal value.
  • Highly variable borrowing and constant WACC and Ke.
  • Calculating the beta only from historic data.
  • Using averages of multiples where there is a high degree of scatter.

Company and Equity Valuation Techniques

Company and Equity Valuation Techniques    


The success of all corporate transactions whether internally as part of a managing for value (sometimes called value based management) programme, or externally for purposes of acquisition, merger, divestment, buy-out, depends upon putting an accurate value on the corporate entity involved.


This course explains the concepts, principles and techniques of corporate valuation and shows participants how they can be applied in practice. To benefit fully from this course, some understanding of accounting concepts and applications is necessary; if you do not have this, we suggest that you attend ''The Essentials of Valuation Analysis'' course, which takes place immediately prior to this.




This briefing will also provide you with an understanding of circumstances when valuations are necessary, the concept of shareholder value, the crucial difference between cash and accrual accounting, the main valuation techniques and how they are used, the options for raising finance, how to structure financial packages, the practical aspects of public company takeovers, and the skills to value a private company for sale.


This programme is being provided by Dr Roger Mills an expert in company valuation, and has consulted to numerous global companies over the last few years.


The Course Outline

The number of valuation techniques available is more numerous and complex than ever before. How do you decide between? This training course will reinforce your understanding of:

  • The techniques available
  • Key issues in their application and common errors made in practice, and
  • How to apply them to:
  • IPOs
  • M&A, or restructuring
  • Banks for which regulatory constraints apply
  • New economy businesses, e.g. relating to the valuation of high technology companies will be considered, as well as conventional old economy businesses
  • Value Based Management and how valuation principles can be applied to managing the business for value
  • Cross-border situations
  • Emerging markets
  • Intangible assets

This course will develop your valuation skills, enable you to identify and implement appropriate techniques and enable you to understand common errors made by practitioners.

About This Course


This training course has been specifically designed to cater to delegate requests for an intermediate/advanced programme. It will provide a thorough look at valuation techniques and participants should have a solid understanding of basic valuation techniques prior to the course. The programme will use case study examples to build and explain in more detail the necessary models for business valuation, many of which are computer based so please bring your laptop.



Day 1

Valuation Technique Applications - IPO and Merger and Acquisition Analysis


Introduction and Key Valuation Issues Associated with:

  • IPOs
  • Mergers and Acquisitions (M&A) and restructuring

Case Study - IPO Analysis

  • Valuation techniques appropriate to IPO analysis
  • Developing a DCF model for analysis
  • Estimating cash flow growth
  • Challenges in estimating the cost of capital
  • Approaches for challenging IPO valuations

Case Study - M&A and Restructuring

  • Valuation techniques appropriate to M&A analysis
  • Meeting the challenges of sum of the parts valuation
  • Estimating the cost of capital for business units
  • Estimating the business unit cost of capital
  • Peer group analysis and benchmarking
  • Applying peer group analysis
  • Valuing the business units
  • Estimating a target capital structure

Day 2

Applications - Bank Valuation, Value Based Management (VBM) and Emerging Market Valuations


Bank Valuation

  • Why banks and financial institutions need to be viewed differently from other businesses
  • How valuing banks differs
  • Brief review of conventional valuation measures for bank valuation
  • Review of discounted cash flow approaches for undertaking the valuation of a bank

Case Study - Valuing a Bank

Understanding the strategic and competitive context

  • Undertaking a stand alone valuation
  • Undertaking a valuation from different perspectives

Managing for Value (MfV), Value Based Management (VBM) and Economic Value Added (EVA?)

  • What is meant by MfV and VBM
  • Link between value and performance measurement and why it is important
  • Conventional Methods of Performance Measurement
  • Performance Measurement and Economic Value Added (EVA?)
  • Reminder of EVA? and Market Value Added (MVA)
  • Linking EVA? and MVA to other valuation approaches
  • Effect of value based adjustments

Emerging Market (EM) Valuations

  • What is different about emerging market valuations
  • What are the key issues:
  • Obtaining relevant and meaningful data for emerging market valuations
  • Problems of availability/existence
  • Problems of robustness
  • Ability to apply some valuation methods
  • Problems with obtaining benchmarks in relation to:
  • Risk
  • Cost of capital
  • Cash flows

Case Studies - Involving Emerging Market Valuations


Cost of Capital

Cost of Capital    


Intended Audience


  •    publicly traded companies

  •    private companies

  •    family businesses

  •    banking

  •    strategic and financial advisory

  •    consulting

  •    private equity




Course Introduction


In everyday life, long-term financial decisions should be guided by asking the simple question, will the return to be obtained from making an investment exceed the opportunity cost (cost of alternatives foregone) of undertaking it. It is simple common sense that nobody would start up in business in the knowledge that it would never earn a return greater than the opportunity cost to be incurred.

This opportunity cost is the cost of capital and at a very basic level the principle of its application is simple to understand. Unfortunately, whilst simple in principle, establishing what this cost of capital is or should be in reality is fraught with problems, as recently revealed in a study published in the Harvard Business Review (Do You Know Your Cost of Capital? by Michael T. Jacobs and Anil Shivdasani / July-Aug. 2012). As the authors identify, "Although investment opportunities vary dramatically across companies and industries, one would expect the process of evaluating financial returns on investments to be fairly uniform". The authors of the study show this not to be so and comment that "respondents probably don’t know as much about their cost of capital as they think they do".


In the financial word the cost of capital plays a prominent role in many areas - for example: project appraisal, project finance, company valuation, initial public offering pricing, mergers and acquisitions, buy-outs, performance measurement, and value based management.


This workshop will take you through the major theories, how to use them and how to overcome the practical challenges in estimating the cost of capital. It will draw upon academic theory and its application as a result of the personal experience of the workshop leader that was obtained working on projects in more than 75 countries over the last 25 years.


The course is designed to help participants to:


  •    Understand the key theories used in practice for calculating the cost of capital and its core components, the cost of debt and cost of equity

  •    Illustrate how to apply the theories correctly in conventional markets

  •    Illustrate how to apply the theories in unconventional markets where challenges exist in finding key inputs like, the risk-free rate, the equity risk premium, and the beta

  •    Illustrate how to apply the cost of capital to foreign investment decisions in developed and emerging markets

  •    Understand and illustrate how to calculate the cost of capital for private companies and business units

  •    Understand the important link between the planning horizon, cost of capital and terminal value

  •    Understand the relationship between leverage and the cost of capital and how to make adjustments for it

  •    Illustrate key issues in specific applications like project appraisal, project finance, company valuation, initial public offering pricing, mergers and acquisitions, buy-outs, private equity, performance measurement, and value based management

  •    Illustrate the role of the cost of capital in capital allocation decisions and understanding capital structure


Day 1

Introduction


· Why the cost of capital is an important issue


· Purposes for which the costs of capital is used:


· project appraisal


· project finance


· company valuation


· initial public offering pricing


· mergers and acquisitions


· buy-outs


· private equity


· performance measurement


· value based management


· Issues in measuring and applying the cost of capital:


· data availability


· theoretical rigour versus practical reality


· perspective


· unit of analysis: e.g. entity versus equity perspective


Measuring the Cost of Debt


· Alternative approaches:


· Simple yield


· Yield to redemption - redeemable versus irredeemable instruments


· Credit spread


· Tax and the cost of debt


· Dealing with multiple sources of debt financing


Case study: Estimating the cost of debt


Measuring the Cost of Equity - Key Technical Considerations


· Alternative approaches:


· Dividend Valuation Model (DVM)


· Capital Asset Pricing Model (CAPM)


· Arbitrage Pricing Theory (APT)


· Issues in applying the approaches in practice:


· DVM - estimating growth potential


· CAPM:


· Estimating the risk free rate


· theory and practice


· challenges in developing markets - international Fisher Effect


· Issues in estimating beta:


· time horizon


· statistical benchmarking


· adjusting for financial risk


· adjusting to reflect the future perspective


· Estimating the equity risk premium


· historical measures


· forward looking approaches


· other approaches - e.g. user judgement


Case study: Estimating the cost of equity for a real-life company


Day 2

Measuring the Cost of Equity (continued)


· Estimating the cost of equity for private companies


· Iteration


· Peer group analysis


· Adjustments for size and liquidity


· Estimating the cost of equity for business units


· Why use peer analysis


· Selecting the right peer group


· Estimating and adjusting betas


Case studies: Estimating the cost of equity for a private company and a business unit


Debt Capacity and the Cost of Capital


· Basic principles - Modigliani and Miller


· Estimating debt capacity in practice

Major Case Study


· Estimating the cost of equity for business units


· Selecting the right peer group


· Estimating and adjusting betas


· Estimating the cost of debt


· Determining an appropriate capital structure



Estimating the Cost of Capital in M&A, Private Equity and Buy -Outs


· Estimating the cost of capital in M&A decisions


· Understanding the different perspectives


· M&A evaluatory framework


· Estimating the cost of capital in private equity and buy-out decisions


· Dealing with capital structure issues


· Understanding when to use the entity versus equity approach


· Dealing with complex capital structures - mezzanine


· Adjusted Present Value (APV) analysis


Day 3

Estimating the Cost of Equity in Emerging Markets


· Why and how is it different?


· Dealing with country related risks


· Problems of data availability and robustness


· Approaches used in practice, including:


· hard currency denominated approach and CAPM adjustments


· local currency perspective


Case studies: Estimating the cost of equity in emerging markets


Terminal Value, Time Horizon and Growth Rates


· Critical link between terminal value, time horizon and growth rates


· Terminal value estimation and different approaches


· Estimating time horizons:


· strategic analysis


· Market Implied Competitive Advantage Period (MICAP)


· Estimating growth rates


Estimating the Cost of Equity in IPOs


· Iterative approach


· Peer group analysis


Case study: Estimating the cost of capital in a real IPO in an emerging market



Acquisition Finance Workshop

Acquisition Finance Workshop    


Intended Audience


  • Corporate and commercial bankers

  • Accountants

  • Members of corporate finance and M&A teams

  • Corporate treasury executives

  • Management consultants

  • Lawyers or legal advisors

  • Financial and investment analysts

  • Investment managers




Course Introduction


This 3-day workshop includes case studies of actual acquisition financings and how the target companies can be valued. It will show how a variety of techniques, including senior secured leveraged loans, vendor finance, second lien and mezzanine debt can serve as a catalyst to help an acquisition get accomplished. Lecture-discussions, spreadsheet analysis, deal memorandums and hands-on exercises will be used to give participants the opportunity to demonstrate their understanding of techniques that can be employed in funding acquisitions.


What is Acquisition Finance?


Acquisition Finance is the use of debt, equity and hybrid financing techniques to achieve an acquisition or leveraged buy-out in a cost effective manner. The focus of this course will be on identifying the financing solutions that match the company's cash-flow based value and are adapted to the client situation - and this may call for non-standard corporate finance techniques and funding sources.


Featuring:


  •    How a target company should be valued; how the method of valuation affects the availability of funds from banks, institutional investors and private equity investors.

  •    How to assess the potential gains from an acquisition; how dependable these projections are, from an investor's viewpoint.

  •    How much money is needed for the transaction, including fees and restructuring costs

  •    Understanding the key drivers of M&A finance and how they drive capital structures in today’s market

  •    Validation of the purchase price using multiples and DCF tools

  •    Use of corporate finance techniques to determine an appropriate debt quantum

  •    Quantification of the impact of target capital structures on shareholder value

  •    Structuring acquisition funding packages using the different funding instruments available by understanding their relative advantages and disadvantages

  •    Understanding the key terms and conditions of funding instruments used in M&A and their implication on other lenders, investors and shareholders

  •    What the key terms and conditions are; covenants and pricing, of different sources of acquisition finance, including subordinated notes and high yield bonds

  •    What one should look for in a cash flow analysis to model the acquisition finance, including the repayment of senior, mezzanine and equity investments

Day 1

Corporate Valuation, Acquisition Finance Debt Capacity Analysis – the Toolkit


  •    Introduction to acquisition finance
  • How a target company should be valued.
  • Review of valuation methods:
  • Asset-based valuation
  • Using comparables
  • Discounted cash flow analysis
  • Measuring the weighted-average cost of capital
  • How the method of valuation can affect the availability of funds from banks, institutional investors and private equity investors
  • Valuing a private company and raising private equity
  • How to assess the potential gains from an acquisition and the dependability of these projections, from an investor's viewpoint

Case study: Valuing a business pre and postacquisition and synergy assessment


Day 2

Divisionalised Businesses and Highly Leveraged Structures – LBOs and Private Equity


  •    Valuing a divisional company and allocating capital
  • Frameworks for determining capital structure and the debt equity mix
  • Major case study: Assessing capital structure and the debt equity mix
  • Valuation for M&A: financial versus strategic viewpoint
  • Buy out financing
  • Evaluating funding alternatives
  • Terms and pricing of the funding, particularly senior and mezzanine debt

Case study: financing an acquisition. The controlling owners of a technology company are seeking a means of realizing the company's corporate value. How could a buyout, or an acquisition, be financed?


Day 3

Acquisition Financing Instruments


  •     Structuring acquisition funding, the different funding instruments and their relative advantages and disadvantages
  • Overview of senior and subordinated financing techniques
  • Senior secured loans

Case study: How to price senior debt


  •     Asset-based finance
  • Sale-and-leaseback financing
  • Second lien versus senior-sub mezzanine

Case study: Second lien facility. How can a term sheet be adapted to meet client needs?


  •     Financing with a bond placement
  • Private versus public markets
  • Terms and pricing of high-yield bond financing
  • Mezzanine: Step-up rates, PIKs, participations, warrants, preferred
  • The structure and pricing of sub debt and warrants

Case study: What is the effective cost to the issuer of a mezzanine debt issue? Terms and conditions of a mezzanine term sheet


Case study: Examine a term sheet. Which features would an investor, insist on and what might the investor be willing to give way?

Understanding the key terms and conditions of funding instruments used in M&A and their implication on other lenders, investors and shareholders


Summary and close



Financial Controllers & CFOs Workshop

Financial Controllers & CFOs Workshop    


Course background:


Global competition, new business opportunities,technological advancements, the need for better cost control, shorter product and market cycles, together with the recent economic turbulence, are all putting added pressure and responsibility on busy financial specialists.


As well as being able to meet these challenges, financial specialists must rise to meet others, like the measurement and control of the cost of capital in their business(es) and the creation of value for shareholders. Responding to all of these demands upon their time and being successful requires a comprehensive understanding of emerging financial principles and techniques, some of which may new or at least less familiar to those who have undergone traditional financial training.


The Financial Controllers & CFOs Workshop will examine in detail these and other important aspects of the financial specialist's responsibilities. The objective is to show how the financial specialist can contribute fully to being a core advisor in key corporate strategies and decision-making.




The course is designed to help participants to:


  • Understand the importance of valuation in the direction and management of organizations of all types

  • Understand the key challenges in developing and effective financial strategy that drives business value
  • Understand the principles of managing for value
  • Place conventional business analysis in context and understand the important value added from adding a financial economic perspective
  • Understand how a company can be viewed from a stock market perspective and its implications and importance for analyzing a business
  • Understand and apply market signals analysis and value driver assessment to a business
  • Develop a value plan framework and link it to the strategy and key performance indicators (KPIs) in the budget
  • How to apply capital budgeting techniques in financial strategyan alysis
  • Understand the importance of economic profit analysis
  • Understand how to link value and performance using economic profit analysis
  • Understand the importance of non financial budgetary indicators and related frameworks, like the balanced scorecard
  • Analyse a business using the conventional tools of financial analysis and economic profit analysis
  • Understand the critical importance of the cost of capital
  • Undertake a cost of capital calculation for a publicly traded company
Day 1

The modern finance function and the evolving role/responsibilities of the finance specialist


  • Valuation and Strategic Value Analysis

– Why valuation is important to the finance specialist

– Alternative valuation approaches and their relative  advantages and disadvantages

– Strategic Value Analysis (SVA) and its relevance to all businesses - Market Signals Analysis

– Importance of understanding value drivers and key performance indicators (KPIs)

– Applying strategic frameworks to determine the planning period 

– The importance of understanding terminal value and issues in its estimation

– Applying Strategic Value Analysis (SVA) - 4 key applications will be reviewed in detail:

   – Project appraisal

   – Business valuation

   – Mergers & acquisitions

   – IPOs 


Case studies relating to all 4 SVA applications


  • Valuation modelling

– Issues in developing a valuation model

– Valuation modelling in practice - making the most effective use of valuation modelling and avoiding potential mistakes


Day 2
  • Managing for Value

– Understanding strategy and competitive advantage from a financial perspective

– Understanding cost of capital challenges

– Drilling down beneath the corporate level to understand the business unit perspective


  • Estimating relevant planning horizons and understanding the measurement of competitive advantage

– Strategic frameworks and analysis

– Market implied analysis


  • Estimating terminal values and understanding the link with competitive advantage assessment

– Alternative terminal value estimation methods

– Understanding growth in perpetuity

– Use of multi stage valuation models 


Case study - Dealing with challenges in assessing competitive advantage and time horizons for financial analysis


  • Estimating shareholder requirements and the importance of the cost of capital

– Estimating the cost of capital 

– Key components

– Cost of equity

– Cost of debt

– Proportion of debt and equity

– Estimating the corporate cost of equity

– Dividend valuation

– Risk return approaches -the Capital Asset Pricing Model (CAPM)

– Issues in estimating the cost of equity

– Challenges in developed markets

– Added challenges in emerging markets

– Estimating the cost of equity for business units -Use of peer group analysis

– Estimating the cost of debt

– Understanding debt/equity weightings and optimal capital structure challenges


Case studies: Challenges in estimating the cost of capital


Day 3
  • Conventional Methods of Performance Measurement

   – Issues in financial analysis and corporate reporting:

    – Concepts, conventions and accounting standards

    – Earnings management and creative accounting

   – Ratio and key performance indicator (KPI) analysis

    – DuPont framework for analysing business performance

    – Classification of ratios

       – Profitability ratios

       – Liquidity ratios

       – Working capital, including the importance of working capital management and the cash conversion cycle

       – Debt ratios

       – Market ratios

       – Capital structure and solvency

       – Cash flow analysis

       – Z-score analysis


Case Study - Applying the DuPont framework


  • Performance Measurement and Economic Profit

– Importance of performance measurement

– Review of Economic Profit, Economic Value Added (EVA) and Market Value Added (MVA), and Cash Flow Return On Investment (CFROI)

– Linking Economic Profit to other valuation approaches

– Effect of value based adjustments and implications for accounting practices


Day 4
  • The Balanced Scorecard and Performance Measurement

– Introduction to the Balanced Scorecard:

– Customer perspective

– Internal perspective

– Feedback/learning perspective

– Financial perspective

– Understanding the relationship between customer needs, internal processes, learning and financial performance


Exercise: Challenges in developing a Balanced Scorecard


  • Market Focused Costing and Target Cost Management

– Introduction to and review of market focused cost management approaches

– Importance of target cost management thinking

– Applying target cost management

– Cost considerations in an internationally competitive environment


  • Beyond Budgeting

– Link with valuation and performance measurement

– Link with strategic direction - activity and resource plans are derived coherently from business strategies


  • Implementing Managing for Value

– What is the managerial interpretation of your current value in the market?

– What is influencing it, i.e. what are the key value drivers?

– What are the apparent managerial actions for improvement and what are their impacts?

– In light of 3., what should be the new vision?

– What is the value of the new vision?

– How does the vision translate into customer, shareholder and other relevant perspectives for the organisation?

– How does the organisational vision look in terms of divisions/business units?

– What is the divisional value?

– What are the key divisional value drivers?

– 1What do these divisional value drivers look like in terms of the micro drivers and key performance indicators (KPIs)?


  • Examples of implementation

Group exercise: Pulling it all together – major case study


  • Wrap-up and summary



Applied Corporate Finance

Applied Corporate Finance    


Who should attend


The course will be of value to professionals in the following areas:


  • Corporate Financiers
  • Financial Analysts, Planners and Corporate Decision makers
  • Strategic Planning Executives
  • Corporate Treasury Executives
  • Accountants Management
  • Consultants
  • Lawyers Financial / Investment
  • Analysts
  • Investment Managers



This course will help you acquire a practical working knowledge of:


  • Core principals of corporate finance and their correct application
  • How to apply the principles of corporate finance to the specific challenges of developing markets
  • How to manage data limitations and the importance of commercial due diligence
  • How to challenge third part valuations using the principles of corporate finance
  • Valuation methodologies and techniques, their uses and abuses in corporate finance applications like M&A,IPO's, restructuring, managing for value, and LBO's
  • Importance of the principles of financial economics versus accounting
  • Cost of capital estimation in developed and developing markets
  • Optimal capital structure and its estimation in practice
  • Financing alternatives and different financing structures
  • The key characteristics of successful M&As
  • M&A: public company takeovers and private company acquisitions
  • How to analyse and incorporate synergies within M&A valuation
  • Restructuring and divestment as an important part of the corporate finance toolkit
  • When to divest and the alternative ways of divesting a business
  • Leveraged finance and management buy-outs
  • Essential features of leveraged buyouts and how are they structured
  • What is different about the strategic buyer and the private equity perspective

Course Summary


This course is practically oriented to show you how to apply the principles of corporate finance to the analysis of many important issues, including M&A, IPO's, restructuring, managing for value, and LBO's. A key feature is that the course demonstrates how the different applications draw upon a common core framework based upon the principles of financial economics that is reviewed on the first day. In addition, it draws upon the instructor’s extensive experience of working in developing markets, where the application the principles of corporate finance raises some specific challenges, not least because of the limited availability of data.


When putting together any corporate finance deal, the creation of value is vital. For example, the evidence suggests that the majority of M&A transactions fail to add value for the acquirer's shareholders and misplaced acquisition programmes often result in financial distress or  bankruptcy. All too often incorrect principles, perhaps drawn from the world of accounting may be applied to M&A and other corporate finance transactions. This course demonstrates the importance of applying the principles of corporate finance correctly to help avoid expensive mistakes.

Day 1

Corporate Finance in Context - the Toolkit


Introduction


Structure of the course


Financial statement analysis:


  • Ratio analysis and ratio models - the DuPont framework.
  • Creative accounting - capitalisation of interest, research and development and intangibles; brand accounting; lengthening asset lives etc...
  • Models for predicting bankruptcy - Z scoring.
  • Economic profit analysis.
  • Case study: Applying the tools of financial analysis.

Project appraisal


  • Capital budgeting and project appraisal.
  • Tools of project appraisal - payback period, return on investment (ROI), net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).
  • Dealing with inflation, taxation, risk and uncertainty -relevance of the principles of finance - Fisher Effect.
  • Tools and techniques for analysing and assessing risk and uncertainty.
  • Capital project proposals - analysis, interpretation and evaluation.

Debt


  • Senior secured bank financing.
  • Short term debt financing.
  • Lending bank perspective and lending/credit risk assessment criteria.
  • Pricing debt.
  • - Yield to redemption.
  • - Credit spread.
  • Overview of Islamic financing.
  • Mezzanine financing.
  • Overview of the optimal capital structure debt: debt versus equity.
  • - Importance of gearing/leverage.
  • - Capital structure and debt capacity.
  • - Valuing debt instruments and estimating the cost of debt.

Equity and valuation


  • Review of traditional measures with contemporary approaches:
  • Accounting issues and international accounting standards.
  • Importance of value driver analysis.
  • Key issues in valuation†- estimating cash flow, assessing risk, competitive advantage analysis and terminal value estimation.
  • Developments in valuation†- commercially available valuation models and databases.
  • Overview of valuation applications: Initial Public.
  • Offerings (IPOs), Mergers and Acquisitions (M&A), Buyouts, Restructuring, Asset Management.

Cost of equity


  • Supply and demand estimates - using dividends versus required investor returns.
  • Brief overview of:
  • Dividend Valuation Model (DVM).
  • Capital Asset Pricing Model (CAPM).
  • Risk free rate.
  • Betas.
  • Equity risk premium.
  • Case study: Valuing a real-life company.


Day 2

IPOs and M&A Analysis


Initial Public Offerings (IPOs)


  • Key requirements of IPO candidates.
  • Pros and cons of going public.
  • Understanding the process from start to finish.
  • Selecting the underwriter.
  • Selecting the market.
  • Determining the amount of capital to be raised.
  • Valuation challenges.
  • Case study: Valuing a telecoms IPO in an emerging market.

Mergers & Acquisitions (M&A):


  • Definition and overview.
  • The process.
  •  Key success factors.
  • Estimating synergies - valuing existing businesses on a stand-alone basis and comparing them with the value of the combined businesses.
  • Importance of understanding different perspectives – control premium, valuation of synergies and perspective.
  • Valuing the acquisition target with synergies.
  • Potential acquisition defences - actions that a target can use to defend against a potential acquisition.
  • Case study: Estimating the value of synergies from an acquisition.

Due diligence


  • Review of due diligence.
  • Types of due diligence.
  • Linking due diligence with value driver analysis.

Making mergers and acquisitions work


  • Why mergers and acquisitions fail.
  • Characteristics of successful mergers and acquisitions.


Day 3

Restructuring and value based management


Types of restructuring


  • Portfolio.
  • Management.
  • Financial.

Pressures to restructure


  • Business turbulence.
  • Debt problems.
  • Assessing vulnerability- financial ratios, Z scoring and A scoring.

How to restructure


  • Liquidations.
  • Divestitures.
  • Asset sales.
  • Spin-offs.

Multi-business restructuring


  • Understanding the value of a portfolio.
  • Understanding conglomerate discount.
  • Assessing the value of the parts.
  • Applying peer group analysis.
  • Debt capacity and restructuring.
  • Case study: Major restructuring case study.

Managing for value and value based management (VBM)


  • Introduction.
  • Linking VBM, restructuring, M&A analysis and economic profit analysis.


Day 4

Financing issues, privately financed deals, buyouts and private equity.


Understanding and determining the optimal capital structure: debt, equity and other alternatives, e.g. mezzanine


Different types of finance:


  • Senior secured debt.
  • Asset-based finance.
  • Bridge financing.
  • Mezzanine debt.
  • High-yield bonds.
  • Subordinated seller notes and earn-outs.

Understanding privately financed deals


  • Understanding the difference between the corporate (strategic) and deal (financial) perspectives.
  • What is the fundamental basis of the privately financed perspective?
  • Key issues and priorities in privately financed deals:
  • - Creating a funding structure.
  • - Valuation.
  • - Due diligence.
  • - Negotiation.
  • Legal issues and documentation.
  • Buyouts.
  • - Review of types of buyouts.
  • - Management buyouts (MBOs).
  • - Management buy-ins (MBIs).
  • - Leveraged buyouts (LBOs).
  • - Evaluating a buyout candidate.
  • - Financing a buyout candidate.
  • - Key practical issues.
  • - Private equity.

Case study: Evaluating a buyout.


Summary and close



Budgeting, Financial Strategy and Driving Business Value

Budgeting, Financial Strategy and Driving Business Value    


How much more could your company be worth and how can you help to achieve this?


Companies often have enormous potential to increase the intrinsic value of their businesses – and this may often be much greater than management believes or expects. Achieving consistently superior value growth is arguably what distinguishes great companies from all others.


Driving business value as a principle is not new and yet many businesses have failed to grasp that it is something that can be explicitly managed. The process of driving business value, or ‘Managing for Value’, shows how to link long-term goals expressed in the financial strategy with day-to-day management tools, like budgeting. As a process, it requires a fresh look at what each business and function can and should do to unlock new sources of value growth.




This comprehensive 3–day course is designed to help delegates to:


  • Understand the key challenges in financial strategy, budgeting and driving business value
  • Understand the critically important and often ignored linkages between financial strategy, budgeting and business value
  • Develop a value plan framework and link it to the strategy and key performance indicators (KPIs) in the budget
  • Develop a master budget and calculate financial KPIs relating to conventional profitability criteria and value creating economic profit criteria
  • Understand revenue budgeting and the importance of variance analysis
  • Understand capital budgeting and the techniques associated with it
  • How to apply capital budgeting techniques in financial strategy analysis
  • Apply the principles of economic profit analysis or alternative value-performance related measures
  • Understand the importance of non financial budgetary indicators and related frameworks, like the balanced scorecard
  • Understand value based management and the principles of managing for value

Day 1
  • Strategy, performance, planning and control in context - the big picture

– Corporate strategy versus business strategy and difference from operational annual plans and budgeting

– Link between corporate strategy, financial strategy, planning and budgeting

– Managing for value and value based management (VBM) – managing for both short-term profit and long-term value


  • Basics of budgeting and variance analysis

Introducing a framework for categorising industry risk across a range of key factors:


– Linking financial strategy, business unit analysis and budgeting

– Budgeting - link with financial statements

– Corporate strategy versus business strategy and difference from operational annual plans and budgeting

– Income and balance sheet analysis

 – Ratio and key performance indicator (KPI) analysis

   – DuPont framework for analysing business performance

   – Classification of ratios

     – Profitability ratios

     – Liquidity ratios

     – Working capital, including the importance of working capital management and the cash conversion cycle

     – Debt ratios

     – Market ratios

     – Capital structure and solvency

     – Cash flow analysis

     – Z-score analysis

 – Variance analysis

   – Basics of variance analysis

   – Flexible budgeting

 – Rolling forecasts

   – What are they and how to prepare

   – Re-forecasting when there are changes in the environment

   – Impact and likelihood analysis

   – Actions required to get back on track and achieve the goals

 – Behavioural aspects

   – Budgeting game

   – Need to link with performance measurement and reward systems


Case study: Developing and analysing a financial plan and applying the DuPont framework.


Economic profit analysis, performance measurement  and key performance indicators (KPIs)


– Performance measurement, income statement analysis and economic profit

– Understanding and applying economic profit analysis

– Introduction to alternative approaches - Cash Value Added (CVA), Cash Flow Return On Investment (CFROI), and Value Driver Trees (VDTs)


Day 2

Capital budgeting


  • Interest and time value of money concept and

application

– Compound interest, the time value of money and discounted

cash flow (DCF) methodology

– Interest rate and inflation relationship - the Fisher effect



  • Project appraisal/ capital budgeting techniques

– Payback period

– Return on investment

– NPV and (modified) IRR analysis

– Profitability index

– Impact of capital rationing

– Decision-making criteria

– Importance of sensitivity analysis

– Quantitative versus qualitative issues


Group work: Applying the capital budgeting techniques in practice.


Cost of capital and hurdle rates


– Why important

– Portfolio assessment

– Valuation – DCF analysis

– Performance measurement – economic profit

– Determination of the cost of capital

– Weighted average cost of capital

– Cost of equity

– Different methods, e.g. Capital asset pricing model (CAPM)

– Understanding components:

– Risk-free rate

– Beta

– Equity risk premium

– Derivation in developing markets

– Cost of debt

– Different methods -including yield to maturity and credit spread

– Debt:equity mix: book versus market values

– Hurdle rate: what are they and why used


Case study: Reviewing a cost of capital calculation for a publicly traded company.


Day 3

Using the tools of project appraisal to evaluate strategy in financial terms


– Using valuation principles to examine financial strategy

– Valuation components for strategy valuation focussing upon differences from project appraisal and project financing decisions

– Derivation of cash flows using value driver information and financial statements

– Time and competitive advantage period

– Key challenges, e.g. estimating terminal value

– Value drivers - definition and application

– Market signals analysis -triangulation and share price analysis


Case studies: Strategic value analysis of a publicly traded company.


Managing for value and value based management (VBM)


– Definition and principles

– Managing for both short-term profit and long-term value

– Link between managing for value and operational plans

– Value shifts and conglomerate discount

– Examples, including ‘parenting’ of strategic business units

– Consolidated versus business perspective - sum of the parts  analysis

– How to use the corporate valuation toolkit to value strategic business units

– Deriving the strategic business unit cost of capital and the use of competitive analysis to establish required information

– Managing business units to grow value

– Importance of value perspective

– Importance of relative valuation

– Link with merger and acquisition analysis


Case study: Excel based case study requiring:


– Calculation of the strategic business unit cost of capital

– Calculation of strategic business unit value

– Valuation of the whole company comprising 4 different business units

– Assessment of the issues in deriving an optimal capital structure


Wrap-up and summary


– Putting it all together:

– Interpreting financial strategy in financial terms

– Converting this to a business unit perspective

– Linking the strategic perspective to financial planning and budgeting


Group exercise: brainstorming the challenges in implementation.


Venture Capital

Venture Capital    


2 Day Programme




Learning Outcomes

Learning Outcomes


At the end of the course participants are expected to be able to:


1.        Understand the Venture Capital Cycle

2.        Identify the main factors that influence the fundraising of venture capital funds,  and partnerships.

3.        Identify the issues relating to how to make venture capital investments

4.        Understand the main issues associated with monitoring investments

5.        The methods to exit a venture capital investment.

6.        Identify the key factors that contribute to the success of an entrepreneurial venture

7.        Analyse and critique the management, personnel, marketing and sales plan, production plan and overall performance of an entrepreneurial venture.


Course Outline

Course Outline


This course covers the theory and practice of venture capital financing of entrepreneurial firms.


Topics to be discussed include, but are not limited to, the following areas:

1.        The venture capital industry and other sources of funds for financing new ventures (including angel investors, banks and other institutions).

2.        Venture fundraising and characteristics of venture capital firms:

(a)        Limited partnerships

(b)        Corporate venture capital

3.        Characteristics of entrepreneurial ventures at different stages of development:

(a)        Seed, Start-up,

(b)        Expansion, Mezzanine,

(c)        Buyout, Turnaround,

(d)        Privately owned firms,

(e)        Newly listed firms

4.        The structure of financial contracts:

(a)        Staging, Syndication,

(b)        Forms of finance (debt, convertible debt, preferred equity, convertible preferred equity, common equity, warrants, and combinations of these instruments),

(c)        Board representation,

(d)        Restrictive covenants and confidentiality agreements,

(e)        Legal and institutional barriers to efficient venture capital financial contracting,

5.        Exiting investments:

(a)        Initial Public Offerings (IPOs),

(b)        Mergers / Strategic Acquisitions,

(c)        Secondary Sales, Buybacks, Write-offs,

(d)        Partial exits,

(e)        Legal and institutional barriers to efficient exit strategies,

6.        Entrepreneurial firm valuation.  

(a)        Traditional valuation methods,

(b)        Valuation of private equity firms,

7.        Buyouts and Going-Private Transactions

(a)        (a)Special features of buyouts transactions,

(b)        Do buyouts add value?

8.        Venture Capital and Private Equity Investments in an International Context



Financial Analysis and Forecasting

Financial Analysis and Forecasting    


This intensive, 5-day course covers the fundamentals of financial analysis and forecasting.




The main areas covered are:


•        Contents of accounts

•        The profit and loss account and balance sheet

•        Ratio analysis

•        Cash flow analysis

•        IFRS, IAS and the IASB

•        Creative accounting and fraud

•        Economic profit analysis

•        Time value of money

•        Discounting cash flows

•        Introduction to company valuation

•        Overview of financial management

•        Introduction to spreadsheets

•        Developing forecasts

•        Presenting financial information

The course is ideal for those who seek a proper grounding in the fundamentals of financial analysis and forecasting.


Delegates are required to carry out a significant amount of financial manipulation and will involve the use of spreadsheet software in a number of cases. The case studies are designed to enable the delegate to take ownership of the knowledge offered by applying it to a case immediately after the relevant presentation. This is further reinforced by the completion of group cases towards the end of the course.


Delegates are encouraged to ask questions and develop their knowledge by enquiry. The presentation style is intensive, inclusive and informal. In the pre-course period delegates are expected to read from cover to cover a complete set of published statutory accounts.


The main areas covered are:


•        Contents of accounts

•        The profit and loss account and balance sheet

•        Ratio analysis

•        Cash flow analysis

•        IFRS, IAS and the IASB

•        Creative accounting and fraud

•        Economic profit analysis

•        Time value of money

•        Discounting cash flows

•        Introduction to company valuation

•        Overview of financial management

•        Introduction to spreadsheets

•        Developing forecasts

•        Presenting financial information

The course is ideal for those who seek a proper grounding in the fundamentals of financial analysis and forecasting.


Delegates are required to carry out a significant amount of financial manipulation and will involve the use of spreadsheet software in a number of cases. The case studies are designed to enable the delegate to take ownership of the knowledge offered by applying it to a case immediately after the relevant presentation. This is further reinforced by the completion of group cases towards the end of the course.


Delegates are encouraged to ask questions and develop their knowledge by enquiry. The presentation style is intensive, inclusive and informal. In the pre-course period delegates are expected to read from cover to cover a complete set of published statutory accounts.


Who should attend?


The course is ideal for those persons seeking a proper grounding in the fundamentals of financial analysis and forecasting, including:


•        Managers

•        Consultants

•        Entrepreneurs

•        Financial Trainees

•        Business Analysts

•        Equity Analysts

•        Commercial Bankers

•        Others interested in finance


Day 1

Dealing with the fundamentals


Introduction to financial analysis


·         Differences in UK/US accounting terminology

·         Identifying the relationship between cash flow and profit

·         Recognising it’s all about cash

·         Understanding the relationships between the three main accounting statements

·         Exercises


Fundamentals of accounting statements-the profit and loss account


·         Detailed review of the profit and loss account including explanation of all significant accounting terminology

·         Profit types - trading, asset and business

·          Inventory, depreciation, capitalised interest

·         Minority interests and consolidation

·         Exceptional and material items


Fundamentals of accounting statements-the balance sheet


·         Detailed review of the balance sheet including explanation of all significant accounting terminology

·         Understanding notes to the accounts

·         Understanding intangible assets, like goodwill

·         Understanding types of assets and liabilities

·         Debt and other liabilities like debt


Creative accounting, fraud and accounting standards


·         Understanding the difference between creative accounting, earnings management, and fraud

·         Different types of financial statement fraud

·         Accounting standards – International Accounting Standards and US GAAP


Financial analysis techniques-ratio analysis


Objectives of ratio analysis

  • Developing ratio analysis skills
  • Different types of ratios
  • DuPont framework
  • A structured approach to ratio analysis

Case study: Use of ratios

Comparing ratios with own and competitor performance to diagnose suitable courses of action to take for improvement


Day 2

Accounting issues and financial economics


Understanding cash flows


·         Detailed review of the cash flow statement

·         Analysing and interpreting cash flows

·         Summarising cash flows for analysis

·         Different types of cash flow – operating versus free cash flow


Case study: Applying free cash flow analysis


Financial economics versus accounting


·         Understanding financial economics

·         Understanding economic profit versus accounting profit

·         Calculating economic profit

·         How to use economic profit analysis


Case study: Applying economic profit analysis


Day 3

Financial mathematics and project analysis


The time value of money

  • Present and future values
  • Defining the discount factor
  • Exercises: Discounting calculations

Net present value -developing the concept

  • NPV’s and varying future cash flows
  • Perpetuities and annuities
  • Exercises: Annuities and perpetuities

Project analysis

  • Introduction to project analysis
  • Developing a forecast of the project cash flows
  • Identifying the key risk areas

Evaluating capital investment projects

  • Discounted cash flow techniques
  • Calculating net present value and the internal rate of return
  • Understanding the disadvantages of internal rate of return analysis – the modified internal rate of return
  • Applying capital investment project analysis techniques  

Case study:

Delegates perform investment appraisals to decide whether to proceed with a capital investment


Linking the accounting, financial economic and project appraisal perspectives

  •  An introduction to company valuation – linking valuation with capital project appraisal
  • Applying free cash flow analysis and economic  profit analysis
  • Linking valuation with profitability – extending ratio analysis

Case study: DCF company valuation

Delegates review a DCF valuation using Excel

Costing and break-even analysis

  • Fixed and variable costs
  • Marginal, absorption and standard costing

Case study: Variance analysis

Delegates review a variance report and consider the possible causes for variances


Day 4

Spreadsheet analysis skills


Introduction to spreadsheets

  • Using spreadsheet programmes for business analysis and forecasting
  • The issue of spreadsheet risk  

Introduction to  forecasting

  • Overview of the forecasting process
  • Creating useful models
  • Sales, growth and margins
  • Cost identification
  • Driving the cash flow

Case study:

Delegates analyse a business and prepare forecasts of future performance


Funding structures


  • The relationship between business risk and financial risk
  • The four phases of the corporate life-cycle
  • Identifying appropriate funding structures
  • Recognising the drivers of funding strategies


Day 5

Case studies and presentation skills


Case study: Business analysis


Delegates analyse a business using the methods presented earlier in the course


Case study: Business forecasting


Delegates value a business using the methods presented earlier in the course


Case study: Financial presentation


In small groups delegates prepare and present a slide based presentation of the salient features gained from the analysis case in session one using spreadsheets and graphical techniques


Private Equity

Private Equity    


This 3 day course provides a comprehensive insight into Private Equity (PE). It is a practical "how to" programme where what delegates will learn includes:


  • Core principles and major applications of private equity
  • What is different about the strategic buyer and the private equity perspective?
  • Private equity investment strategies, such as:

        o        Leveraged buyouts

        o        Venture capital (early vs. late stage)

        o        Special situations (i.e. distressed)

        o        Mezzanine

        o        Secondary purchases

        o        Fund of funds


  • How are PE funds structured
  • How to originate transactions
  • What are the essential features of leveraged buyouts and how are they structured
  • The critical importance of due diligence in private equity deals and how to structure/manage the process
  • Key issues associated with transaction structuring and documentation
  • Issues in selecting alternative private equity exit strategies




It will be of value to professionals in the following areas:


•        Venture Capitalists

•        Newcomers to Private Equity

•        Corporate Financiers

•        Financial Analysts

•        Corporate Treasury Executives

•        Management Consultants

•        Lawyers Financial / Investment Analysts

•        Investment Managers


Day 1

Day 1: Private Equity – the Context, Value Creation and the Importance of Understanding Buy-Out Structures


  • What is private equity?
  • Private equity investment strategies
    • Leveraged buyouts
    • Venture capital (early vs. Late stage)
    • Special situations (i.e. Distressed)
    • Mezzanine
    • Secondary purchases
    • Fund of funds
  • How are PE funds structured?
    • Private limited partners and general partners
    • Partnership structuring issues
    • General partner’s key activities
      • Selecting investments
      • Structuring investments
      • Monitoring investments
      • Exiting investments
    • Private equity partnerships and fundraising
    • Private equity market - investors
    • Private equity market - intermediaries
    • Private equity market - issuers
    • Partnership covenants
    • Evaluating general partners
  • Transaction origination
    • Deal flow
    • Origination
    • Screening of deals
    • Non-binding indications of interest
  • Value creation
    • Key issues:
      • Strategy
      • Operations
      • Organisation
      • Finance
      • Advantages of being private
      • Assessing value creation:
        • Valuation measurement
        • Value drivers
        • Separating logic and data
        • Sensitivity analysis, valuation modeling and “traffic lighting”
        • Importance of understanding Incremental Value Effect (IVE)

    

  Case study: developing relative valuation models to assess IVE

  • How do PE firms create value?
    • Minimise purchase price
    • Maximise leverage
    • Minimise liabilities purchased
    • Manage transaction costs
    • Improve business operations
    • Maximise tax efficiency
    • Optimise exit
  • Leveraged buyouts
    • What is an LBO?
    • Typical LBO structure

o   Sources of financing

o   Review of types of buyouts

§  Management buyouts

§  Management buy-ins

§  Leveraged buyouts

o   Evaluating a buyout candidate

o   Financing a buyout candidate

o   Key practical issues


Case study: evaluating a buyout


  • Sources of funds
    • Equity
    • Debt
      • Bank debt
        • Revolving credit facilities
        • Term loans
        • Bridge financing
      • High yield bond debt
    • Mezzanine financing instruments


Day 2

Day 2: Due Diligence – the Essence of Good Private Equity Deals

  • Due diligence

·         Objective

o   Validate business concept

o   Verify market

o   Appraise management

o   Validate forecasts

·         Valuation

o   Diligence establishes basis for valuation, price and negotiation

o   Diligence is expensive and time consuming

·         Due diligence strategy

o   Preliminary evaluation to identify “deal-breakers” before spending time and money on detailed due diligence

·         Key topics for due diligence

    • Business concept, opportunity
    • Market
    • Competition
    • Customers
    • Products
    • Management
    • Financials
    • Returns

·         Business concept, opportunity

    • What is the concept/opportunity?
    • Is the opportunity sustainable?
    • Potential size of the opportunity?
    • How can the target company capitalise on the opportunity?
    • Is the proposed plan/strategy realistic?
    • How does the target business fit to its markets and region?
    • Why are we so smart or lucky?
    • Market
    • Market characteristics, segments, size, growth, cyclicality, key metrics, demographics?
    • Projected market share and sales volume?
    • Low barriers to entry into the market?
    • Is target’s business model sustainable?
    • How will the business be perceived by customers?
    • Regulatory issues?

·         Competition

    • Who are the direct competitors?
    • Relative size, scope, cost basis, brands and market share?
    • What are the key factors/levers of competition in the industry?
    • How is target’s business strategy different than competitors’?
    • What are target’s competitive advantages?
    • What are the target’s competitive disadvantages?
    • Threat from potential new entrants?

·         Customers

    • Who are the customers?
    • Current and future customer base?
    • What specific market and customer needs does the target business serve?
    • How do customers make their purchase decisions? Key criteria?
    • Customer satisfaction and retention?
    • Does the projected number of customers or sales make sense? Realistic?
    • How will the target acquire new customers?

·         Products

    • Product life cycle, penetration trends?
    • Product pricing?
    • Product profitability?
    • Productivity versus competition?
    • Maintain or “jettison” certain products?
    • Plant consolidation?
    • Inventory optimisation?
    • CAPEX requirements?
    • Development plans?

·         Management

    • Competence?
    • Experience?
    • Cohesion?
    • Strategic?
    • Flexible?
    • Incentivised?
    • Proactive?
    • Realistic?
  • Financials
    • What is the optimal capital structure?
    • Are revenue and cost projections comprehensive, realistic, reasonable?
    • What are the underlying business assumptions of the projections?
    • Impact of various business case scenarios?
    • How does cash flow in this business?
    • How much capital investment needed? When?
    • Correct accounting treatment?
    • What are the key sensitivities?
  • Confirming Value
    • Financial and accounting diligence is primarily focused on drilling into the basic components of valuation
    • Recurring EBITDA (adjust for extraordinary items)
    • CAPEX
    • Working capital
    • Cash flow
    • Multiple
  • Recurring EBITDA
    • General issues – exclusions, accounting changes, pro forma adjustments
    • Revenue – components, method of recognition,  customers, customer arrangements, pricing/volume
    • Margins – components of cost of sales, gross margin trends
    • Reserves – under/over statement of profits
    • Compensation – benefits, headcount needs, transition issues, bonus
    • SG&A – components, trends, discretionary costs, fixed vs. variable, cost savings
    • Other – restructurings, acquisitions, contingencies
  • CAPEX
    • Determine normalised annual CAPEX
      • Maintenance or mandatory CAPEX
    • Determine expansion CAPEX
      • Discretionary CAPEX
    • CAPEX between signing and closing of transaction reduce net cash position
    • Important to have correct CAPEX assumptions in calculating exit value
  • Working Capital
    • Analyse working capital cycle
    • Components of B/S accounts
    • Needs and trends
    • Savings opportunities
    • Potential closing balance sheet issues
    • Important to have correct working capital assumptions in calculating exit value

Case study – linking valuation modelling with due diligence

  • Legal Due Diligence
    • Conducted in tandem with business, financial and accounting due diligence
    • Structure the transaction in the most tax efficient manner
    • Understand the legal aspects of target’s business and assets being acquired
    • Identify and evaluate liabilities
    • Materials are typically made available for review in a data room
  • Understanding what is a bad deal?


Day 3

Day 3: Transaction Structuring, Documentation and Exit Strategies


·         Transaction structuring and documentation

·         Term sheets  and purchase agreement

·         Key sections of term sheets and purchase agreements

·         Representations and warranties

·         Covenants

·         Closing conditions

  • Deal Process Inside the PE Firm
    • Initial screening of deals
    • “Heads up” memorandum
    • Non-binding indications / term sheets
    • Detailed due diligence and evaluation
    • Formal and detailed presentation to the investment committee
    • Final approval and funding
  • Portfolio company monitoring
    • Portfolio company life time mapping
    • Portfolio monitoring
    • Portfolio company assistance
  • Mechanisms of control
    • Board representation
    • Allocation of voting rights
    • Control of access to additional financing
    • Best practices
  • Exit
    • Review of Issues and Methods
      • Sale
      • IPO
      • Recapitalisation
    • Exit planning
    • M&A Exit
      • Advantages
      • Disadvantages

o   The process

o   Key success factors

o   Estimating synergies - valuing existing businesses on a stand-alone basis and comparing them with the value of the combined businesses

o   Importance of understanding different perspectives – control premium, valuation of synergies and perspective

o   Valuing the acquisition target with synergies

Case study: Estimating the value of synergies from an acquisition

      • M&A sell-side process
    • IPO Exit
      • Advantages
      • Disadvantages
      • IPO process
        • Syndication
        • Roadshow and bookbuilding
        • Valuation challenges
        • Pricing and allocation
        • Aftermarket
    • Recapitalisation
  • Other topics
    • Business plan
    • Concept/opportunity
    • Raising money
    • Presenting to private equity firms
    • Priorities for private equity
    • Entrepreneurial environment
    • Long-term capital sources
    • Rules for private equity investing Review