LBO & Merger Modelling

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Course Description

This practical computer based 3 day course is designed to provide you with an in-depth understanding of LBO and merger modelling methods in order to make effective business decisions based on sound valuation of businesses.

You will have a chance to learn about the core concepts of the LBO and merger modelling, establishing the financing and structuring of a deal, modelling various types of acquisitions and disposals as well as assessing the debt capacity of a company. 

You will gain the tools to value and account for a merger of two businesses and explore the concept of synergy valuation. 

By the end of the training you will be able to:

  • Understand the core concepts of LBO modelling and why transactions work and fail
  • Determine the purchase price
  • Establish the financing and structuring of a deal
  • Be able to build an LBO model including the sources of funds statement and debt waterfall schedules
  • Assess the debt capacity of a company
  • Be able to analyse the various capital structures available in an LBO deal and their impact on return
  • Model various types of acquisitions and disposals
  • Generate an accretion/dilution analysis
  • Using cash and the P/E of cash analysis
  • Explore the accretion/dilution ratio vs. wealth generation

Prerequisites: To attend this course, participants should have an intermediate knowledge of accounting,  a good working knowledge of financial modelling and Excel and a good understanding of traditional valuation methodologies. 

Delegates are expected to bring a laptop with Excel. If necessary we can provide one for an additional fee. 

What Will You Learn

Main Topics Covered During This Training

  • LBO analysis and the key drivers in an LBO valuation
  • Differences between DCF and LBO analysis
  • Modelling the LBO in practice
  • Assessing debt capacity
  • Structuring the debt package
  • Why transactions work and fail
  • The different types of transactions and how they are accounted for
  • Modelling various types of acquisitions and disposals
  • Determining the purchase price
  • Synergy analysis
  • Generating an accretion/dilution analysis
  • Using cash and the P/E of cash
  • Accretion/dilution vs. wealth generation
  • Financing and structuring the deal

Who Should Attend

Participants requiring an understanding of LBO and combination valuation techniques and how corporate transactions are analysed and valued should attend this course.

From Corporates, Investment Banks, Private Equity, Consulting, Accounting and Legal Companies:

  • Equity Research, Analysts and Sales
  • Equity Capital Markets
  • Investment Managers
  • Members of M&As Departments
  • Corporate Financial Managers
  • Corporate Development
  • Corporate Finance Lawyers
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LBO & Merger Modelling - Combination Valuation - 3 day course

Day 1: LBO Modelling - Hybrid Valuation

Leveraged buyout analysis

  • Basic principles of LBOs
  • Introduction to players and financing instruments
  • Drawing the distinction between DCF and LBO analysis
  • The key drivers in an LBO valuation
  • Free cash flow for debt paydown
  • Assessing IRRs

Exercise: Summary analysis, participants produce an LBO valuation from a forecast cash flow

Modelling the LBO

  • Sources & uses
  • Simple income statement and cash flow forecasting
  • Management case
  • Bank base case
  • Payout case
  • Debt modelling
  • Rates, ratios, covenants
  • Payback: amortisation vs. cash sweep
  • Exit and returns analysis

Case study: Participants build a basic LBO analysis from scratch

Assessing debt capacity

  • The key ratios used in analysing debt capacity
  • How to improve the debt capacity for a business
  • Bank priorities and the way in which debt is priced and managed

Case study: Participants assess the debt capacity for a company

Structuring the debt package

  • How is the debt package structured?
  • Senior debt tranching
  • Second lien debt
  • Subordinated debt
  • Payment in kind (“PIK”)

Case study: Participants add further features into the LBO model, including different debt payment schedules and PIK instruments

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 Day 2 & 3: Merger Modelling

Corporate transaction theory

  • Transaction theory and rationale
  • Why transactions work
  • Why transactions fail 
 
Modelling a transaction
  • The different types of transaction and how they are accounted for
  • Consolidation accounting under the current IFRS 3 and IAS 27 and the new approach that will be taken by the revised IFRS 3, IAS 27 and IAS 28
  • Change of control triggers
  • Accounting for controlling interests (“NCI”)
  • Accounting for disposals
  • Partial disposals – creating a NCI
  • Partial disposal – loss of control
 
Case study: Participants model various types of acquisitions and disposals
 
Determining the purchase price
 
  • How much can an acquirer pay?
  • Market-based analysis – comparable transactions and control premium
  • Synergy analysis
 
Case study: Participants calculate the purchase price for a company and cross-check against comparative transactions and control premiums
 
Transaction analysis
 
  • Generating an accretion/dilution analysis
  • Using cash and the P/E of cash
 
Case study: Bringing it all together, case study analysing a static merger with accretion and dilution analysis
 
Wealth generation and ratio analysis
 
  • Accretion/dilution vs. wealth generation
  • Financing and structuring the deal
 
Case study: Bringing it all together, case study modelling a merger with a transaction analysis
 
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LBO & Merger Modelling <p>This practical computer based 3 day course is designed to provide you with an in-depth understanding of LBO and merger modelling methods in order to make effective business decisions based on sound valuation of businesses.</p> <p>You will have a chance to learn about the core concepts of the LBO and merger modelling, establishing the financing and structuring of a deal, modelling various types ... In-Company