Euromoney Audit Training

A 5-day case study based workshop exploring more advanced issues in company valuation and financial modeling

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
·         Capitalizing Intangibles
·         Introduction to real options
·         Merger and acquisition issues
·         Understanding LBOs

Day 1

Registration commences at 8:30

Program runs from 9:00 - 5:00 daily

Advanced modeling

Overview

· Why create a model

· Review of good modeling practices

The main structure

· Historic P&L information

· Restating historic information

· Non-recurring items

· Historic B/S information

· Non-core assets

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

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 cash flow 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 normalized FCF

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

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 capitalization

· Estimating the current value of intangibles

Day 4

Absolute valuations: advanced issues

EVA as an alternative to DCF

· Definition

· Why use DCF 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?

Modeling acquisitions

· Accounting issues

· New developments

· Calculating goodwill

· Proforma balance sheet

· Merging income statements

• Sophie Blanpain-Forder

  Sophie Blanpain-Forder 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. Prior to that she worked as Senior Analyst for the European Investment product division at Citibank N.A. where her main responsibilities included the design of new investment products and asset allocation. She also worked for Credit Lyonnais Securities, Credit Suisse First Boston and Lehman Brothers. Sophie graduated in 1990 from Institut d’Etudes Politiques de Paris with highest honours. She studied Economics and Finance specialising on Financial Tax Systems, Accounting and Financial Mathematics. She is also a retained speaker for the CFA institute.

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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