A 2-day conference on 31 July-1 August2008
At the Marriott Royal Aurora Hotel                                                              
Moscow
                                                                                                                                                                            

Day One: Introduction to Buyouts

Session 1
Private Equity Background
Current private equity strategies and investment
Recent rates of return, thresholds and investment activity
US and European overseas PE and VC investments
GP and LP relationships
Private equity in Russia

Case Study: Comparison between public equity and private equity return rates in European markets

Session 2
Review of Leveraged Buy-outs (LBOs)
Theoretical justification for LBO
Background and history of LBOs
Success and failure of synergy analysis
Due diligence
Structure of the investment (SPA)
Differences between recent US and European experience
What has been the impact of the subprime crisis on transaction volumes

Case Study: Delegates will review in detail the motivation, participants, timelines, structure and outcome of several UK and Continental LBOs

Session 3
The role of the bank
The Bank’s perspective
Overview Loan Facility structure
DSCR and other ratios
Critical issues for lenders
Banking convenants – use and application
Review of trends in financial ratios / covenants

Session 4
Intermediate finance
Role of second lien
Mezzanine finance
Vendor finance
Sale and leaseback/OpCo PropCo structures
High yield bonds
PIK notes

Session 5
Private Equity and Value Creation
Theoretical perspectives on value creation
Selection versus Value Addition for private equity
Dealflow screening
Contributions of private equity firms to value creation
Method of assessing value (NPV, IRR, MIRR)
Types of equity investment (ordinary/prefs/loan notes)
Role of ratchets

Case Study: Major companies and private equity value creation

Day 2: Modelling

Session 1
Modelling the Transaction
Construction of cashflow, P&L and balance sheet
Post-tax models
Input of depreciation and capital allowances
Handling working capital
Handling operational and finance leases
Input of short-term debt and overdrafts
Key pitfalls in financial model construction
Troubleshooting models

Case Study: Delegates will construct a financial model for an LBO from scratch, and use it to analyse cashflow, balance sheet and P&L for the LBO.

Using the model: repaying debt and building value
Modelling Ratio analysis
Modelling debt repayment rates and schedules
Cash flow waterfalls
Modelling the role of covenants
Treatment of non-recurring charges and tax implications on financial models
Comparison with project finance

Case Study: Delegates will modify their LBO model to include further issues covering cashflow and balance sheet issues.

Using the model: NPV and cost of capital
Cost of Capital and Decision Making
Impact of risk analysis on cost of capital
Computation of Cost of Capital using Alternative Methods
Cost of capital in developing markets
Internal Rates of Return (IRR), modifications to IRR
Rewards to all participants (equity, debt and management) – NPV
Relationship between NPV and value achieved in LBOs

Case Study: Delegates will use financial models for LBO valuations, and compare results with actual outcomes and rewards to participants across a range of transactions

Day 3: Enhancing Value

Session 1
Forecasting in model construction and use
Role of forecasting in LBO analysis
Forecasting techniques available
Advantages and disadvantages of forecasting methodologies
Best practice

Exercise: Delegates will use different forecasting techniques to analyse debt repayment schedules and future equity value

Session 2
The impact of Risk
Risk analysis in debt repayment
Using simulation to assess confidence levels around variables
Assess sensitivities to focus on critical success factors
Monte Carlo analysis in practice
@RISK demonstration and discussion
Tornado diagrams and their use
Real options in LBOs

Case Study: Delegates will use their LBO financial model to analyse the risks and opportunities the LBO will face

Session 3
Running a Private Equity Book
Term sheets and investment structures
Service agreements
Board membership and general level of management involvement
Reporting back to the GP (plan sponsor)
Due diligence and documentation issues:
Sale & purchase agreements
Shareholder
Debt agreements

Case Study: Governance issues for private equity companies

Frequency and type of supervision
How to construct a monitoring structure
Target setting and reporting
Control rights
Maximising value

Session 4
Management perspective
Differences between LBOs and MBOs
Management’s role and duties
Service agreements
Investment Agreement – management input
Warranties – caps and limits
Pre-emption rights
Good/bad leaver – when and how
Valuation of the stake pre-exit

Session 5
Evidence on Exits
Exit alternatives
Flotation on NASDAQ/local markets – pricing differentials and governance issues
Trade sale
MBO
Second round buyout
How to maximise value
Lock-ins, distribution and management equity
Long-term investing
The new importance of dividends
Best practices for private equity funded companies
Where now for buyouts?

Case Studies: Exit strategies from the UK and Continental Europe