Corporate Valuations - Techniques and Modelling
The valuation of companies is fundamental to the peration of the capital markets. It forms the basis of share trading and corporate finance activity, including capital raising, mergers, acquisitions, demergers and disposals. The ability of market participants to identify under or overvalued companies drives portfolio outperformance and the creation of shareholder value.
Course dates
Course overview
'Corporate Valuations - Techniques and Modelling' is to analyse and practice a range of valuation techniques, including their appropriate application, their advantages and disadvantages. The
course considers a wide range of quantitative and qualitative factors that determine valuations. A number
of case studies across a range of industries is used to help course participants practice valuation
techniques and also to illustrate that corporate valuation can involve a high degree of subjectivity.
This course does not extend to the analysis of banks, insurance companies or structured vehicles.
Summary of course content
- Different corporate valuation techniques and their application using Excel
- Qualitative factors affecting valuation
- The impact of capital structure on valuation
- The impact of corporate finance transactions on valuation, incl LBOs
- Specific valuations eg. high growth, cyclical and distressed companies
Methodology
The course combines formal theoretical instruction with frequent reference to market data, use of exercises and case studies. Case studies are based on real situations and are designed to help delegates implement new valuation techniques and to learn from empirical experience. Delegates are expected to know how to use Excel at a basic level and should bring a laptop with them. The course is practical and interactive,
with delegates encouraged to ask questions. The techniques taught to delegates are intended to
be of immediate practical use in the workplace.
Who should attend this training course?
- Investment bankers
- Fund managers
- Equity analysts
- Equity traders
- Equity sales people
- Corporate finance lawyers
- Credit analysts
- Strategists
- Treasurers
- Compliance officers
Supporting publications
DAY ONE
Introduction to corporate valuations
Valuation fundamentals
- Drivers of valuation - ROIC, WACC, growth, size
- The FCF perpetuity valuation formula; single and double period
- The key value driver valuation formula
- Economic profit/EVA
- ROIC vs. WACC – computation and drawbacks
Case studies: valuing companies using the above formulae
Valuations based on multiples
- Revenues, EBITDA, Net income/EPS, NAV
- Overview of following ratios: PE, PEG, EV/EBIT(DA), PB/NAV
- Dividend yield valuations
- Cleaning up the reported results to derive underlying performance
- Reconciliation of multiple valuations to the key value driver formula
- Earnings vs. cashflow
- Choosing comparable companies
- EPS dilution/enhancement
Case studies: valuing companies using multiple analysis
DAY TWO
DCF valuations and financial modelling with Excel
- The CAPM; unlevered and levered betas, risk premia, tax shields and WACC
- Explicit forecast period vs. continuing value period
- Assessing the terminal value (multiple or perpetuity method)
- Importance of final year forecasts
- Calculating NPV and IRRs
- Comparing valuations using multiples vs. DCF
- Advantages and drawbacks of each valuation method
Case studies: modelling in Excel to produce DCF valuations; reconciling to multiple valuations
Advanced DCF methods
- Changing annual WACC
- 3 stage DCF
- Adjusted Present Value (APV)
- Compressed APV and recursive WACC
- Calculating debt and equity values directly
DAY THREE
Impact of corporate finance transactions on valuations
- Friendly/hostile takeover
- Merger
- Demerger/spinoff/break-up
- IPO/new equity offering calculations
The premium payable
- Market conditions/sentiment/liquidity
- Operational and financial synergies; cost savings
- Shareholder concerns
The impact of capital structure on valuation
- Increasing equity value through use of debt
- Focus on shareholder value
- Companies suited to leverage
- Debt markets and credit ratings
- Analysing debt capacity
Leveraged Buyouts (LBOs)
- Structuring LBOs
- Short-cut method to see if an LBO may be financially viable
- Typical covenants and financial forecasting
DAY FOUR
Specific valuations
- High growth firms
- Cyclical firms
- Distressed firms; predicting default rates
Reversing into the terminal growth rate
Accounting factors and financial statements
GAAP revenues/earnings vs. cash revenues/earnings
Accounting standards (IFRS, US GAAP)
Accounting tricks to enhance profitability
Analysis of historic results including ratio analysis
Off balance sheet liabilities
Qualitative factors
- SWOT analysis
- Sovereign risk analysis
- Economy, currency, credit rating, political risks
Case study: assessing emerging market risks
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Industry risk analysis
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Good vs. difficult industry
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Porter's 5 forces
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Industry life cycle (growth)
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Industry cyclicality (earnings quality)
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Leading indicators
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Competition (ROIC)
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Pricing dynamics; demand vs. supply (ROIC)
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Changing business environments
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Regulation (ROIC)
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Product characteristics (earnings quality)
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Capital intensity and cost base (ROIC)
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Event risk
Case study: assessing companies in a changing industry environment
Company specific factors
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Management
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Operating, capital and corporate finance strategies
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Competitive advantages and cost position
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Product/service offering/differentiation/pricing power
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Scale
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Diversification
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Customer/supplier concentration
Hilton Hotel Singapore, Singapore, Singapore
This programme takes place on a non-residential basis at Hilton Hotel Singapore. Non-residential course fees include training facilities, documentation, lunches and refreshements for the duration of the programme. Delegates are responsible for arranging their own accomodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Sarah Martin
Sarah Martin has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new issue markets, the Asian convertible bond markets, of corporate restructurings of distressed credits and was the lead analyst on the largest LBO in Europe in 2000 (Tecnost/Telecom Italia). She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings.
She was latterly an Executive Director at Lehman Brothers in Fixed Income Research in London, having also worked for CS First Boston and Kleinwort Benson. She now works on an independent basis advising the legal profession and companies on credit analysis and company valuation. She has a degree in economics from the London School of Economics and stock exchange qualifications from London and New York.
Courses run by this instructor
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