Featuring:

• Building a comprehensive financial model.
• Complexities in using comparative valuation measures.
• Absolute valuation methodologies: DCF, EVA.
• Developing an appropriate cost of capital.
• Decomposing sources of return.
• Building a fade model.
• Capitalising Intangibles.
• Introduction to real options.
• Merger and acquisition issues.
• Valuing distressed assets.

Who should attend

This course is aimed at those with a solid financial background who wish to explore the more advanced aspects of financial modelling and valuation methodologies, including:

• Investment Bankers.
• Equity Analysts.
• M&A Professionals.
• Fund Managers.
• Treasurers and Finance Directors.
• Commercial Bankers.
• Private Equity & Venture Capital Specialists.
• Business Analysts.

Course Overview

Company valuation is used for the purposes of investment, M&A or as part of internal measures of financial control. It is extensively applied when companies issue new shares, divest operations or acquire other companies. The rapidly growing private equity industry is also dependent on solid analysis. There are many different approaches to the analysis and valuation of companies and it is paramount to know when and how to apply what method. It is also essential to understand that company analysis is not an absolute science but also based on interpretation and judgment.

This highly practical course will lead you quickly from the basics through to the more advanced valuation methodologies and modelling techniques.

Methodology

This practical, hands on programme is taught using formal lectures combined with practical and interactive case studies and exercises to reinforce the concepts covered in each teaching session. Emphasis is placed on delegates gaining practical, hands-on experience of the various valuation techniques. Case studies from recent deals are included, as are practical exercises involving problem area in valuation.

The seminar also includes critiques of the conventional techniques and considers suitable alternatives to be deployed in differing circumstances as well as an update on the latest valuation reporting guidelines and their interpretation.

Course Objectives

The course is aimed at participants with solid accounting knowledge who wish to explore the more advanced aspects of financial modelling and explore alternative valuation methodologies.

The format will be interactive throughout and participant will create their own excel-based valuation models, which will be used to value a real life company.

Day 1

Advanced modelling

• Overview.
• Why create a model.
• Review of good modelling practices.
• The main structure.
• Historic P&L information.
• Restating historic information.
• Non-recurring items.
• Historic B/S information.
• Non-core assets.
  Review of initial model for target company.
• Forecasting the income statement.
• Detailed revenue forecasts.
• Fixed vs. variable costs: operating leverage.
• Hedging policies.
• Taxation issues.
• Current vs. deferred tax.
• Estimating the effective tax rate.
• Operating losses: carry-back and carry forward.
• Fixed assets.
• Understanding capital intensity.
• Maintenance vs. expansion Capex.
• Understanding asset lives.
• Forecasting disposals.
• Impairment of assets.
• Dealing with intangible assets.
• Working capital.
• Components of cash and non-cash working capital.
• Working capital ratios and their interpretation.
• The relationship between working capital and margins.
• Provisions.
• The different types of provisions and their accounting.
• Impact of provisions on valuation.
• Associates and investments.
• Accounting for associates and investments.
• Forecasting associates and investment income.
• Equity financing.
• Minority interest - impact on equity financing.
• Common shareholders - forecasting dividends and retained earnings.
• Share buy-backs and rights issues.
• Debt financing.
• Linking cash flow and debt requirements.
• Different types of debt financing.
• Scenario analysis.
• What are scenarios?
• Developing flexible scenarios with excel.
  Review of completed model for target company.

Day 2

Multiples based valuation and cost of capital Advanced ratio analysis

• Equity vs. enterprise value multiples.
• Definitions.
• Calculating EV: core vs. non-core.
• Assessing liabilities.
• Dealing with different kinds of provisions.
• Dealing with pension liabilities.
• Hybrid financial instruments.
• Options.
• Off balance-sheet liabilities.
• Equity multiples.
• What do equity ratios tell us?
• Decomposing P/Es: linking growth, cost of equity and RoE.
• Free cashflow yield.
• EV multiples.
• What do EV multiples tell us?
• Choosing the most relevant multiples.
• Theoretical EV ratios.
• Interpreting ratios.
• Which ratios for which companies?
• Different ratios different answers?
• Implied valuation.
• Valuing a one business company.
• Valuing a conglomerate: sum of the parts valuation.
• Valuing cyclical and fast growing companies.
  Interpreting results and deriving an implied valuation for the target company.
• Cost of capital.
• What the theory says.
• The elusive equity risk premium.
• Is Beta a reliable measure of risk?
• Which cost of capital?
• Whose cost of capital?
• WACC in emerging markets.
• Valuing negative cash flows.
• Time Varying Cost of Capital.

Day 3

DCF

• Forecasting FCF.
• Pitfalls in FCF calculation.
• Estimating normalised FCF.
  Forecasting of FCF for target company.
• Terminal value.
• TV using the perpetuity method: volatility.
• Uses and misuses of the exit multiples’ approach.
• Liquidation value.
• Why the value drivers method gives more stable and meaningful results.
• Running sensitivities.
  Review of final DCF model.
• Understanding returns.
• Understanding ROCE.
• Components of Capital Employed.
• Decomposing ROCE.
• The ROCE “frontier”: trade-off between higher margins and higher asset turnover.
  The link between ROCE and ROE.
• Distortions in calculating ROCE.
• The impact of changing asset lives.
• The invisible assets: valuing intangibles.
• Historic capitalisation.
• Estimating the current value of intangibles.

Day 4

Absolute valuations: Advanced issues

• EVA as an alternative to DCF.
• Definition.
• Why use EVA and not DCF.
• The mathematical equivalence of EVA and DCF.
• Using EVA to better understand value creation.
• The potential pitfall of EVA.
  Building an EVA model.
• Valuing the tax shield: APV.
• What is adjusted present value.
• Why value the tax shield separately.
• Appropriate discount rates.
• CFROI.
• What is cash flow return on investment?
• Why use IRR to measure return.
• IRR compared to accounting ROCE.
• Using IRR to value a project.
• Valuing fast growing companies.
• The concept of fades.
• Fading ROCE and growth.
• Choosing an appropriate fade period.
  Impact of fades on DCF valuation.

Day 5

Alternative methods and M&A issues

• Scenarios and real options.
• Normal distributions and DCF.
• When the world is not normally distributed.
• Valuing companies using binomial distribution.
• Real options: myth or reality- the valuation.
  Building a binomial model for a biotech company.
• Valuing distressed assets.
• Why DCF is not appropriate.
• Estimating default risks.
• Distressed assets as options.

Mergers and Acquisitions

• The drivers of M&A.
• Horizontal and vertical integration.
• Price.
• Strategy.
• Valuing the target.
• As a standalone.
• Valuing synergies.
• Estimating the price premium.
• Financing the acquisition.
• Using shares or cash.
• EPS accretion and dilution: does it reflect value added?
• Modelling acquisitions.
• Accounting issues.
• New developments.
• Calculating goodwill.
• Proforma balance-sheet.
• Merging income statements.

 

• Prior to becoming an independant consultant, the course director was the Global Head of Equity Research at Morley Fund Management, the third largest UK asset manager and one of the largest property fund managers in Europe. 
  
  After graduating with highest honours from L'Institut d’Etudes Politiques de Paris, her career highlights have included roles such as Senior Analyst for the European Investment product division at Citibank N.A., as well as positions within Credit Lyonnais Securities, Credit Suisse First Boston and Lehman Brothers.
  
  In addition, the course director has studied Economics and Finance specialising on Financial Tax Systems, Accounting and Financial Mathematics, and is a retained speaker for the CFA institute.

  Courses run by this instructor

  • Advanced Company Valuation & Financial Modelling

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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