Financial Modelling for M&As and LBOs
September 2010 Dubai
Description
Building a well developed financial models help making informed decisions and correctly estimate risks and opportunities from a deal. This is a set of skills priceless in any market conditions and especially in the current situation when market values of the companies change in the blink of an eye. Sound understanding of valuation principles is a key component in the successful transactions.
This highly practical two day course focuses on building financial models to support M&As transactions and pricing and structuring LBOs.
You will learn how to build a standalone valuation model applying WACC and terminal values and to forecasts free cash flow as well as create pro forma financial statements estimating impact on income and balance sheet. Through practical exercises you will review the accounting principals for consolidation and disposals, calculate the purchase price for a company and cross-check against comparative transactions and control premiums.
Strategies for financing transactions, calculating accretion and dilution and estimation of the value of creation will be examined in-depth.
During the second day you will explore building models for LBO transactions taking into account funding, operational assumptions and exit and return analysis based on different scenarios. You will also have a chance to analyse different nuances of debt modelling.
This hands-on course is designed for professionals already working within the sector who would like to expand their knowledge of new aspects of M&A and LBO modelling techniques. Each session terminates with practical exercise and/or real life case study to illustrate the material which has been discussed earlier.
Main Topics Covered During This Training
- Principles of valuing cash flows for stand alone valuations
- WACC calculations in the model
- Examining different components for a standalone valuation
- Accounting for M&A transactions
- Calculating the purchase price and cross-check against comparative transactions
- Strategies for company valuation and estimating wealth creation
- Strategies for financing deals
- Creating a pro forma statements and assessing the impact on the balance sheet and income statement
- Funding and operational assumptions for LBO modelling
- Building a LBO model
- Debt modelling strategies
- Exit and return analysis
What Will You Learn By The End Of This Training
At the end of the training the participants will be able to:
- Create a standalone valuation models for M&A and LBO transactions
- Create a financial statement assessing the impact on balance sheet and income statement
- Calculate accretion/dilution impact given different financial scenarios
- Estimate wealth creation
- Analyse and assess LBO capital structures
- Estimate exit and return strategies and define impact on IIR
Who Should Attend
From Investment Banks, Corporates, Private Equity and VC, Consultancies and Legal Companies:
- M&A Specialists
- Deal Team Members
- Equity Investors
- Corporate Financiers
- Finance Directors
- Business Development Executives
- Financial and Market Analysts
- Credit and Equity Analysts
- Securities Analysts
- Accountants
Teaching Method
This is a highly practical course with many real life case studies and exercises. Tutor will be focused on teaching practical strategies that can be taken back to your business and put into immediate effect.
You will benefit from comprehensive take away course documentation.
In order to help us establish your individual and business concerns, you will be asked to fill a pre-course questionnaire.
Because of the nature of the course the number of places is limited and will be filled on first come, first accepted basis. We advise to book in advance in order to avoid disappointment.
Delegates are expected to bring a laptop with Microsoft Excel. If necessary, we can provide a laptop for an additional fee of £100 + VAT.
DAY 1: STANDALONE VALUATION & IMPACT OF M&A
Standalone valuation: principles of valuing cash flows
- Absolute valuation
- Earnings compared to cash flows
- Core assets vs. non-core assets
- NOPAT and Free cash flow
- Forecasting free cash flows
Case study: Use of an existing forecasts to derive free cash flows
Standalone valuation: Weighted Average Cost of Capital (WACC)
- Calculation
- Target capital structure
Exercise: WACC calculation in the model
Standalone valuation: terminal values
- Terminal value approaches
- Stable growth
- Multiples approach
Case study: Stable growth and multiple approaches to terminal value
Standalone valuation: final step
- Calculation of total value of the firm
- Dealing with core and non-core assets
- Arriving at equity value
Case study: Link the enterprise value to the total equity value of the firm
M&A: Accounting for transactions
- Review of accounting for consolidation / disposals
Exercise: A few examples on accounting impact
M&A: How much to pay?
- What can an acquirer pay?
- Market-based analysis – comparable transactions and control premium
- Synergy analysis
- Payment to target: cash or shares
Exercise: Calculate the purchase price for a company and cross-check against comparative transactions and control premiums
M&A: Financing the transaction
- Equity issuance
- Use of debt
- Review of different capital structures
M&A: Value creation
- Value creation chart: target vs. acquirer
- Impact of synergies and control premium on value creation
Exercise: A detailed example on wealth creation
M&A: Accretion/dilution
- P/E of acquirer vs. P/E target vs. cash P/E
- Accretion/dilution under different financing structures
Exercise: Calculate accretion/dilution impact given various financing alternatives
M&A: Pro forma financial statements
- Impact on income statement
- Impact on balance sheet
- Goodwill and impairment testing
Exercise: Combine the income statement and balance sheet of 2 companies
DAY 2: MODELLING OF LEVERAGED BUY-OUTS (LBOs)
Overview
- Basic principles of leverage and LBOs
- Drawing the distinction between DCF and LBO analysis
- Free cash flow for debt paydown
- Understanding the key drivers of the Internal Rate of Return (IRR)
Case study: 'Quick and dirty' LBO analysis
Modelling the LBO
- Funding
- Basic deal inputs and assumptions
- Sources and uses
- Exit and returns analysis
- Operational assumptions
- Analysing profitability, financial efficiency
- Exit and returns analysis
Case study: Build a basic LBO model from scratch using 3 cases: management case, private equity case and bank case
Debt modelling
- Rates, credit ratios, covenants
- PIK vs. cash coupons
- Payback: amortisation vs. cash sweep
- Review of different financing scenarios
Case study: Focus on debt structure in the model
Exit and returns analysis
- Calculate private equity returns: IRR & RoI
- Impact on IRR & RoI using different operational and financial assumptions
Case Study: Review private equity returns based on different scenarios
Qayyum Hafeez
Qayyum has over 13 years of investment banking and private equity experience. He is currently working as a senior vice president in GCC based private equity fund in an investment bank in oil and gas industry. His role there is to source, evaluate and invest in private equity and execute M&A and joint venture opportunities in oil and gas industries in the Middle East region. Prior to this, Qayyum was a principal at Odeon Capital Partners, a $120 million private equity fund based in New York City and before in Bear Stearns' Mergers & Acquisitions and Leveraged Finance investment banking groups in New York where he was involved with multi-billion dollar transactions in retail, consumer products, technology and manufacturing industries.
While he was living in New York City from year 2000 through 2008, Qayyum was involved in many teaching and training engagements at university and corporate level. He was a guest speaker at New York University's Stern School of Business as well as taught a full-term MBA course at the Long Island University. His teaching experience include workshops at New York Private Equity Network the association which has over 500 active members.
September 2010 Dubai
Early Bird: Book by 31 July - £1795
After that date £1950
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DISCOUNTS
BIG GROUP DISCOUNTS!
- 3 people - 10% discount. Delegates have to come fromthe same company and register at the same time.
- If you book for 2 courses at the same time you will receive 10% of the full value of the cheaper course.
IN-HOUSE TRAINING
- If you have a team of 4 or more this course can be customised and organised in-house at your convenience. Contact one of our advisors to find out more.
Call us now on +44 (0) 207 193 5035
or send an e-mail to: enquiry@eurekafinancial.com
