Course Objectives
The aim of this course is to provide participants who already have some transaction experience with further exposure to M&A, company valuation and deal structuring and financing. Delegates will also be introduced to international practice in executing mergers and acquisitions, including an appreciation of today's market practices and procedures including due diligence, accounting issues and valuation techniques.
During this 4-day practical training course delegates will:
- Learn the techniques to enhance shareholder value through better capital structuring decisions for acquisitions.
- Deepen your knowledge of the methods of valuing companies.
- Obtain a greater awareness of how to structure and finance mergers and acquisitions.
- Examine the principles involved in structuring highly leveraged transactions.
- Develop an understanding of the due diligence process and learn how risk can be managed and mitigated.
- Develop negotiating skills in the M&A process.
Who should attend
The course is highly recommended to the following groups of professionals:
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Lending bankers
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Members of M&A execution and origination teams in investment banks, corporations and law firms
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M&A lawyers and accountants
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Credit analysts
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Security analysts
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Strategic planners
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Investors
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Private equity investors
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Finance directors, heads of legal departments, CFOs
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Management and strategy consultants
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Government agencies involved in privatisation or private finance initiatives
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Market regulators
Day 1
Prerequisites to a successful deal
Key steps in the M&A process
- Strategic decision making: do companies need to grow?
- Acquisition versus organic growth.
- Strategic considerations.
- Types of transaction: strategic or financial.
- Developing a strategic approach to acquisitions.
- Screening potential targets.
- Deals from hell.
- What is success?
Case study: Delegates identify causes of failures from some spectacular M&A disasters.
Growth by acquisition, by joint venture or organically
- Types of synergies: operating or financial.
- Revenue enhancement or cost cutting.
- Cut the fat not the muscle.
- Advantages of each expansion route.
- What can go wrong?
Case study: An acquisition in the airline industry.
Due diligence: friendly/hostile deals
- Legal risks in acquisitions.
- Mitigating risk via due diligence.
- Legal protections.
- Credit risk in the event of a problem.
- Impact of the nature of the transaction (friendly/hostile) on due diligence.
Case study: Issues arising in due diligence for a carve-out.
M&A valuation: cash flow approach
- How value is driven by cash flows rather than profits.
- Calculating free cash flow.
- The value drivers and the basis of cash flow valuation.
- Cost of equity: dividend models.
- Capital structure concepts.
- Cost of debt: coupon v. yield, market v. book value.
- The cost of equity.
Case study: Delegates estimate WACC acting as buyer or seller.
Day 2
Valuation and structuring
Using WACC to value an acquisition target
- Developing a model of cash flows.
- Estimating the terminal value.
- The steady state scenario.
- Sensitivity analysis of the terminal value.
- Checking assumption integrity.
Case study: Valuation of an acquisition prospect using WACC.
Multiples-based valuation techniques
- Asset valuations: forced sale v. going concern.
- Price / Earnings multiples.
- Earnings related multiples: EV/EBIT(DA).
- Other multiples: sales, book value, per subscriber.
- Selection of comparable companies.
Case study: A break-up analysis for a global brand.
Valuation triangulation
- Using comparable deals as valuation benchmarks.
- When are comparable deals not relevant.
- Measuring the value indicators.
- Measuring the premium for control.
Case study: Delegates undertake a competitive negotiation to price an acquisition.
The impact on the financials of the bidder
- Financial analysis: producing pro forma projections.
- Valuing synergies and assessing the reality of achieving them.
- Analysing the effect of synergies on financials including earnings.
- The breakeven price earnings ratio for debt.
- Establishing the amount of debt that can be used.
- Using bridge finance pending equity or debt issues.
Case study: Pro forma analysis of an acquisition prospect.
Day 3
Financing the acquisition
Financing the acquisition and deal structuring
- Assessing the impact on the value of the acquirer's shares.
- Paying with shares or cash or a combination? Pros and cons of each.
- Event risk and capital structure objectives.
- Underwriting a share issue.
- Bridging the valuation gap: earn-outs
Case study: Equity bridge by international acquirer.
Negotiation: bridging the valuation gap.
- Developing a range of values.
- Establishing maxima and minima.
- Earn outs as a tool.
- Disadvantages for purchaser and vendor.
Case study: Structuring an earn-out formula for an acquisition.
Public M&A transactions
- Takeover codes, practices.
- Documentation.
- Impact of friendly v. hostile on price, due diligence, financing.
- Strategies and tactics – implications for defence.
- Regulatory issues.
Case study: delegates role play as shareholders in a hostile takeover.
Financial acquisitions: leveraged buy-outs
- Types of leveraged transaction: LBO, MBO, MBI, BIMBO, SBO, P2P.
- Acquisitions suitable for leveraged finance.
- LBO analysis as a valuation metric.
- LBO deal structuring: equity and debt.
- The leveraged buy-out process.
Case study: Estimating returns in a recent buy-out of a buy-out (BOBO)
Day 4
Financial acquisitions: public to private (P2P)
Capital structure in LBOs
- Senior debt multiples.
- Mezzanine: cost and use of warrants.
- Second lien financing.
- Providers of capital.
- Remuneration of equity capital providers.
- Bridges to second stage financings.
Case study: Highly leveraged LBO financing for a P2P.
Exit routes for private equity investors
- Comparative analysis of the alternatives.
- IPO as a first step, advantages.
- Leveraged recapitalisation as an exit.
- Leveraged recapitalisation as a bid defence.
Case study: Secondary and tertiary buy-out analysis.
Disposals: the process
- When to announce.
- The data room.
- Timetable.
- Presentations to potential purchasers.
- The short list.
- Vendor due diligence.
- Closing the deal.
Case study: Accelerated IPO as a disposal option.
M&A arbitrage trading
- Hedge fund strategies in M&A situations.
- Liquidity costs.
- Outcome analysis.
- Risk-return trade-off.
Case study: Delegates compete to run arb trading positions in a takeover.
Course summary and close.
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Paul Richards
Paul Richards graduated from Cambridge University in mathematics and has a Masters degree in business administration from London Business School. He is also a CFA charter holder, an Associate of the Chartered Institute of Bankers, a Member of the Association of Corporate Treasurers and a Fellow of UKSIP.
Paul has more than 20 years investment banking experience specialising in domestic and international corporate finance at UBS (Warburg), HSBC and Map Securities (part of Skandia Insurance and Mapfre, Spain). He was also the chief executive of the London merchant banking operation of Credit Industriel et Commercial, a major French banking group.
As a result of this experience, Paul has extensive first hand experience of: Mergers and acquisitions; IPOs; bond issues; secondary market issues; privatisation; debt syndications; corporate treasury; equity valuation; investment analysis; security and derivative valuation; private equity; modelling; corporate governance; and compliance.
Paul won the 2004 Wincott Foundation Prize for his article "Lessons in shareholder value" on the boom and bust in new economy stocks, published in Professional Investor (the journal of the UK Society of Investment Professionals - the UK member society of the CFA Institute). He has taught MBAs and Masters to Finance students at Cass and Cranfield Business Schools for more than 12 years in a range of financial disciplines; and has trained staff at major City houses and in banks on different continents.
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