Euromoney Audit Training

A 4-day comprehensive training course designed to provide delegates with an understanding of the following:

• Different corporate valuation techniques and their applications using Excel
• Qualitative factors affecting valuations
• The impact of capital structure on valuation
• The impact of corporate finance transactions on valuation, including LBO’s
• Specific valuations, e.g high growth, cyclical and distressed companies

Course objectives

The aim of the course is to provide delegates with an understanding of the following:

• Different corporate valuation techniques (DCF, multiples etc) and their application using Excel
• The impact of capital structure on valuation
• The impact of corporate finance transactions on valuation, incl LBOs
• Specific valuations e.g. high growth, cyclical and distressed companies
• Qualitative factors affecting valuation

Course background

The valuation of companies is fundamental to the operation 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 out-performance and the creation of shareholder value.

The purpose of the course is to analyse and practice a range of corporate valuation techniques, their appropriate application and 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 are considered 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.

Who should attend

• Investment bankers
• Fund managers
• Equity analysts
• Equity traders
• Equity sales people
• Credit analysts
• Strategists
• Treasurers and Finance directors
• Compliance officers

Teaching methods

The teaching methodology used on this 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 personal computer with them.

The course is intended to be practical and inter-active, with delegates encouraged to ask questions. The techniques taught to delegates are intended to be of immediate practical use in the workplace.

Day 1

Background, valuation fundamentals and multiple analysis

Introduction to corporate valuations

Valuation fundamentals

• Drivers of valuation – ROIC, WACC, growth, size
• The FCF perpetuity valuation formula; single & double period
• The key value driver valuation formula
• Economic profit/EVA
• ROIC vs. WACC – computation & 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 2

DCF valuations and financial modelling with Excel

• The CAPM; unlevered & 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
• Three stage DCF
• Adjusted present value (APV)
• Compressed APV & Recursive WACC
• Calculating debt & equity values directly

Day 3

Impact of corporate finance

Impact of corporate finance transactions on valuations

• Friendly/hostile takeover
• Merger
• Demerger/spinoff/break-up
• IPO/New equity offering calculations

The impact of capital structure on valuation

• Increasing equity value through use of debt
• Focus on shareholder value
• Companies suited to leverage
• Debt markets & credit ratings
• Analysing debt capacity

The impact of capital structure on valuation

• Increasing equity value through use of debt
• Focus on shareholder value
• Companies suited to leverage
• Debt markets & credit ratings
• Analysing debt capacity

Leveraged buyouts

• Structuring LBOs
• Short-cut method to see if an LBO may be financially viable
• Typical covenants and financial forecasting

Structural issues – shareholders, group, etc

• Shareholder structure
• Group structure
• Ownership and government support
• Structural & contractual subordination
• Dividend policies, share buybacks, share issues

Day 4

Specific valuations; qualitative factors and financial statements

Specific valuations

• High growth firms
• Cyclical firms
• Distressed firms; predicting default rates

Reversing into the terminal growth rate

Qualitative factors

• SWOT analysis
• Sovereign risk analysis
• Economy, currency, credit rating, political risks

Case study: Assessing emerging market risks

• Industry risk analysis
• Good vs. difficult industry
• Porter’s five forces
• Industry life cycle (growth)
• Industry cyclicality (earnings quality)
• Leading indicators
• Competition (ROIC)
• Pricing dynamics; demand vs. supply (ROIC)
• Changing business environments
• Regulation (ROIC)
• Product characteristics (earnings quality)
• Capital intensity & cost base (ROIC)
• Event risk

Case study: Assessing companies in a changing industry environment

Company specific factors

• Management
• Operating, capital and corporate finance strategies
• Competitive advantages & cost position
• Product/service offering/differentiation/pricing power
• Scale
• Diversification
• Customer/supplier concentration

Course summary and close

• Sarah Martin

  Former Executive Director of CSFB and Lehman Brothers

  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 and of corporate restructurings of distressed credits. She specialised in the telecoms sector and was closely involved in the structuring, raising and/or trading of bank and public debt for telecoms companies in many countries, including Europe, South Africa, Asia and Latin America. She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings. Until 2003, she was 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 and private equity professions 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

  • Credit School - Dubai

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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