Course dates
3-day training course dedicated to the valuation, structuring, financing and negotiating of Merger and Acquisition (M&A) transactions. You will learn:
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The key characteristics of successful M&As
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How M&A thinking needs to be adjusted in downturn and bear market situations
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M&A valuation techniques, their uses and abuses
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How to analyse and incorporate synergies within M&A valuation
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What are the key features of due diligence and the importance of commercial due diligence
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Key issues in M&A negotiations
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Divestment as an important part of the M&A toolkit, specifically when to divest and the alternative ways of divesting a business
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What are the key issues in successful M&A implementation?
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What are the distinguishing features of different sources of acquisition finance?
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What are the essential features of leveraged buyouts and how are they structured?
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What is different about the strategic buyer and the private equity perspective?
Course Materials
Participants will be provided with a package of materials useful to the structuring and analysis of M&A and LBO transactions, including articles and sample documentation from transactions concluded. The workshop will include case studies of actual financings, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding through group work and plenary discussions.
Course background
The credit crisis has had a significant impact on M&A, for example, activity declined sharply in the fourth quarter of 2008. Since 1980s, recessions have led to steep declines in the value of global M&A activity – typically, of around 50 percent during the first year in the US. Such decline arose from factors observable in the current downturn as well, including lower deal values in rapidly falling equity markets; difficulties with financing, particularly for very large transactions; and a general fear about the economic outlook, which has forced acquirers to put plans on hold.
The current environment is bleak, and nobody knows how the M&A market will develop in the short term. There is still considerable uncertainty about the ability of capital markets to provide enough financing to support deals. However, over the longer term there is good reason to believe that the trends that emerged over the past cycle will remain important. As a result, the pattern of M&A activity in the current downturn will be quite different from that of previous cycles. The next few years will present considerable opportunities for ambitious and disciplined acquirers who are not necessarily in short supply. Asian acquirers, less affected by the credit crisis than their counterparts in Europe and the United States, will have a stronger incentive to look for overseas acquisitions.
While there may be little change in the forces driving the M&A market, the way companies need think about the execution of deals in the current market environment must alter. M&A in a rising market with easy access to capital is very different from acquisitions in a downturn, when opportunities arise and decisions must be made very quickly. This 3-day course will focus upon both how to drive M&A longer term as well as key issues to consider in the current downturn. Real-world case studies and hands on applications are used to introduce the key principles and techniques of successful mergers, acquisitions, and divestitures.
Day 1
Strategic value analysis of M&A: the interplay of corporate finance, strategy and financial economics
• Rationale for M&A and the influence of the market for corporate control on the form of the deal
• M&A activities
• M&A toolkit
• Why acquire
• M&A differences – bull and bear markets
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How to create shareholder value and the importance of M&A
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Understanding the core components of value creation and the risk-return trade-off
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Tensions in creating shareholder value with other stakeholder perspectives, and potential differences vis-à-vis management and lenders – the agency issue
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Characteristics of successful versus unsuccessful M&A deals
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Research evidence on what drives M&A success
Case study: Delegates review key M&A issues relating to ‘The most important transaction since the bail-out of Bear Stearns by J P Morgan’.
• Develop a strategy and select M&A route
• Screen candidates
• Value short list
• Evaluate synergies
• Negotiate the deal
• Conduct due diligence
• Manage post-merger integration
• Defining M&A objectives consistent with corporate strategy
• Understanding the source(s) of success
• Estimating funding potential and requirements
• Identifying success criteria and avoiding the ‘winner’s curse’
• What can be established form publicly available information?
• What is required from the due diligence process
• How to form a realistic view of the acquisition opportunity
• Due diligence, why is it important and the key issues
• Legal, accounting, management and environmental issues
• Critical importance of commercial due diligence
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Is specialist advice required and what are the key issues in selecting advisors?
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How will success be measured internally and by the market?
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What is required post acquisition?
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Value short list
• Understanding value drivers
• Estimating strategic value
• Estimating sources of value from value driver assessment
Valuation
What are the different methods that can be used to value mergers and acquisitions and when should they be used?
• Price/Earnings
• Enterprise Value/EBITDA
• Price/Sales
• Market-to-Book
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Asset Valuation
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Fundamental analysis and different approaches
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Discounted cash flow to the firm and equity
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Cost of capital estimation and terminal value issues
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Value driver analysis and applying free cash flow analysis to business valuation
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Developing and using a financial model to evaluate prospective targets
Case study: Delegates learn how to apply all valuation methods in M&A analysis.
Day 2
Evaluating synergies using valuation analysis
What are synergies, how are they measured and how can they be analysed within a transaction?
• Operating
• Financing
• Tax
Case study: Delegates value the synergies resulting from a potential acquisition, adjusting for risk and cost-of-capital effects and incorporating the results of potential synergies.
Evaluating financial synergies
• Identifying the value of the various parts of the business
• Applying peer group analysis
Negotiation strategy
- What are the key issues in developing a negotiating strategy?
• Understanding the negotiation process
• Negotiation tactics for closing the gap
• Managing the negotiation environment
• Team selection issues
• Role of investment bankers and other advisors
• Developing a negotiating stance
Defending a bid
Case study: Delegates evaluate the financing and operating synergies resulting from the potential acquisition of a multibusiness operation, adjusting leverage, risk and cost-of-capital effects and incorporating the results of potential synergies.
Day 3
Financing acquisitions
- Different types of finance:
• Senior secured debt
• Asset-based finance
• Bridge financing
• Mezzanine debt
• Hybrid bonds
• Payment In Kind (PIK)
• Subordinated seller notes and earn-outs
Understanding privately financed deals
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Understanding the difference between the corporate (strategic) and deal (financial) perspectives
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What is the fundamental basis of the privately financed perspective?
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Key issues and priorities in privately financed deals:
• Creating a funding structure
• Valuation
• Due diligence
• Negotiation
Case study: Delegates evaluate a potential LBO in terms of the funding structure and respective rewards to involved parties.
Case study: Delegates evaluate a potential LBO in terms of alternative funding options.
M&A integration
What are the key issues in making an acquisition work?
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Pre M&A integration planning
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Scheduling and setting milestones
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Identification and estimation of potential problem areas
• Technology
• Organisational structure
• Culture
• Management and administration
• Compensation and motivation
• Divestitures
Case study: Delegates discuss pitfalls and alternative approaches to post-merger integration success. They prepare an action plan for the effective integration of two organisations.
Case study: Delegates discuss cultural and ethical issues relevant to post-merger integration success.
Course review
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The course director is Emeritus Professor of Finance and Accounting at Henley Business School, University of Reading, and a Visiting Professor of Finance at University College, London.
Currently, he is the CEO of his own group of companies and an advisor to a number of organisations at board level, including one in the Middle East. He has advised numerous companies, financial institutions, and private equity groups, and he has worked extensively in developing markets in Asia, South America, Africa, the Middle East and Central/Eastern Europe. As a private equity investor the course director was a founding member of a group that secured a successful AIM listing on the London Stock Exchange in the late 1990’s.
The course director has a unique blend of academic and business experience. From his academic studies, all undertaken part-time whilst working, he has a PhD in Finance, a Masters in Management Studies (MBA) and a first degree in Psychology, Sociology and Economics. During the professional part of his career he qualified as a Chartered Management Accountant, Company Secretary and Corporate Treasurer. He is a Fellow of the Chartered Institute of Management Accountants, the Institute of Chartered Secretaries and Administrators, and the Association of Corporate Treasurers.
He has written numerous articles and both authored and co-authored many books; the most recent is due for publication in 2013.
Courses run by this instructor
Johannesburg Hotel, Johannesburg, South Africa
This programme takes place on a non-residential basis at a central Johannesburg hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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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