Dates                                                                                                       

14-16 April 2010

 Course Overview

The workshop will be highly interactive, with participants being asked to discuss a series of examples and case-studies.

A number of the case studies will require analysis of financial data for the companies being reviewed, for which participants will be given simple Excel spreadsheets to enable them to determine the impact of changes in key variables.

Participants are expected to have some knowledge of the fundamentals but limited experience of valuation, corporate strategy, acquisitions and corporate lending.

The focus of the workshop will be on mainly UK transactions and some European/US examples, across a variety of industries, for private and public transactions.

Since historic data tells us that most acquisitions are failures, the workshop will also review what companies and their advisors do to improve this track record. It is designed to improve participants’ understanding of the strategy and process involved in acquisitions, to assist them in identifying opportunities and understanding the risks and questions to ask.

Participants will be required to a laptop to the course

Course Content

Day One

Shareholder Value and Capital Structure

Session 1: Shareholder Value
The concept of maximising shareholder value
Shareholders vs. stakeholders
The risk/return trade-off

Case study: Shareholder value issues raised by Xstrata and RTZ in 2009

Session 2: The role of multiples
Traditional valuation multiples (P/E) and newer multiples (PEG ratios, etc)
The concept of Enterprise Value and related multiples – EV/EBITDA, EV/EBIT

Case-study: Selecting appropriate multiples for different industry sectors

Case-study: Valuing a UK business at a premium or discount at flotation

Session 3: How the markets value companies
How the equity market values companies and what causes price change
Differences in valuation/pricing parameters for IPOs/markets vs. acquisitions
Share price performance, returns, market indices and benchmarking
How economic profit can help assess corporate returns
The difference between value and price

Case-study: Role play of price discussions between a buyer and private company seller based on initial valuations using historic and prospective multiples

Case-study: Perceptions of value of a UK business and how it avoided takeover

Session 4: Discounted Cash Flow
The key variables for forecasting free cash flows in Enterprise DCF
Forecast periods, terminal value approaches and common errors
Multiples as a reality check, sensitivity analysis, scenario modelling
What usually goes wrong with DCF modelling?

Case-study: Selecting Terminal Value methods for different circumstances

Session 5: Cost of Capital and Optimal Capital Structure
Using the Capital Asset Pricing Model to estimate Cost of Equity, and drawbacks
Significance of the Equity Risk Premium, historic data and differences in views
Which beta to choose, how to validate, adjusting for business risk and leverage
Where to find data to use for an unquoted company
The role of equity in capital structure and impact on WACC

Case-study: Global betas

Case Study: Selecting the appropriate beta for a quoted UK company

Case-study: The impact of capital structure changes on EPS and WACC

Session 6: Bringing it all together
Asset based, dividend discounting, Sum of the Parts, Real Options
When to use equity cash flow and/or Adjusted Present Value (APV)
Relevance of EV/IC vs. ROIC/WACC analysis

Case study: Reviewing valuation analysis to set a target price range

Case Study: Choosing between use of DCF or other methods, using mix of valuation methods used to value companies in different industries

Case Study Assignment: Carry out DCF Valuation of a UK business using a simple Excel model provided, adjust key variables to reflect management ability to add value, determine shareholder perceptions of “fair value” against failed bids, comparable multiples and research analyst target prices.

Day Two

Strategy, Acquisitions and Disposals

Session 1: Strategy
Strategic decision making do companies need to grow?
Strategic assessment - Porter’s Five Forces, BCG Growth / Share Matrix, SWOT, company life cycle, etc.
Choice between acquisition, organic growth and strategic alliances
Acquisition objectives and screening of targets
The role of demergers and spin-offs
Operating decisions and impact on valuation and strategy

Case study: Applying strategic analysis to one of the UK businesses valued

Case study: Relative merits of growth options for UK companies choosing between organic growth, joint venture or acquisition

Case study: Developing an acquisition checklist for a buyer

Session 2: Disposals
The issues raised by strategic reviews of corporate groups
Scope for conflict of interest in a sale situation
Merits and demerits of an auction, issues that arise in hostile bids
Key stages: preparation, targeting potential buyers, managing bids
Impact of marketing success in obtaining bidders on price achieved

Case Study: Motivation of the owners in selling a private UK business

Case study: Predicting success of sale by auction of three companies

Session 3: Valuing the Target
Distinguishing stand alone value from value to the buyer
The use of earn-outs and link with valuation
Synergies and costs of achieving them
Risk areas, sensitivity analysis, what cost of capital to use
Control premium, private company discount, other factors influencing price

Case study: Building synergies into determining the maximum bid price for a UK business, contrasting stand alone value vs. value to the buyer, reflecting the impact of the buyer’s planned financing structure for the acquisition.

Session 4: Financing Decisions – Debt vs. Equity
Paying with cash or shares
Deciding on the appropriate level of debt financing
Financial ratios as benchmarks for highly leveraged deals

Case study: UK corporate managers’ factors in deciding on how much debt is appropriate for their businesses

Case study: Impact on EPS of using debt or equity to finance an acquisition

Case study: Participants analyse competing bids for a quoted company to make their recommendation on which offer to accept

Case study: Rationale for selection of the cash/debt vs. shares mix for Kraft’s acquisition of Cadbury plc

Day Three

Advisors, Financing Products and Making it Work

Session 1: Advisors
Role of advisors and the key skills needed
Public and private deals: similarities and differences
The impact on advisor selection criteria of the type of deal

Case study: Criteria for selecting a corporate finance adviser

Case study: Advisory needs for a conglomerate undergoing strategic review

Case study: Identify defence strategies for a client facing a hostile bid

Session 2: Financing Decisions - Product Choices
Debt vs. Equity vs. Hybrids
The range of debt products, differing features and factors in pricing
Determining the optimal/maximum debt levels
When and why will companies consider bonds in preference to bank loans?
Key terminology: spread, coupon, basis points, yield to maturity
The attractions of raising equity to finance an acquisition, and timing issues
The impact of capital market conditions on the product choices
The role of bridge loans

Case study: How much debt to use for the acquisition of a UK business

Case study: Choosing between financing products for the acquisition of the European division of a global conglomerate by a quoted corporate

Case study: Rationale for rights issue to finance an acquisition

Session 3: Regulatory and Other Issues
Anti trust issues and how negotiated acquisition structures can anticipate and deal with them
Other regulators and their impact on disposals/acquisitions
Buying shares or assets

Session 4: Making it work
When do acquisitions work?
Factors influencing success or failure of an acquisition
The importance of post-acquisition debt reduction via disposals
Where does post-deal integration go wrong?

Case study: Developing a post-deal checklist for a UK company

Case study: How can things go wrong? Review of Morrison-Safeway, RBS-ABN Amro

Case study: Good and Bad Acquisitions – review of UK examples

 
IN ADDITION TO THE PUBLIC DATES ABOVE, THIS COURSE CAN ALSO BE TAILORED TO YOUR REQUIREMENTS AND DELIVERED IN-HOUSE FOR YOU.

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