Agenda

• What they do and how they’re paid
• Investment banks
• Stockbrokers
• Solicitors
• Reporting accountants
• Financial PR consultants
• Other

Proposing terms for a sell-side and a buy-side mandate

• Understanding price vs. value
• Understanding multiple drivers – risk, growth and reinvestment rates
• Understanding the link between multiples and the discounted cash flow approach
• Understanding the value drivers of the company
• Using PE, EV/EBITDA, PBV, PS, PCF and other multiples
• DCF framework model and variants including EVA and CFROI/CFROC
• Fade rates on long-term cash flows
• Problems with calculating terminal value and long-term growth rates
• Estimating asset life
• Evaluating the stable growth period
• Handling problems of research expenditure and operating lease payments
• Effective and actual tax rates
• The concept of normalised earnings flows to avoid abnormal cash flow patterns
• Using multi-period terminal value models
• Methods of valuing intangible assets
• Valuing on a stand-alone basis and valuing with synergies
• Control premium
• Liquidity discounts
• Evaluating price premium in relation to sector

Valuing an MBO opportunity

• Review of Capital Asset Pricing Model (CAPM)
• How to derive equity risk premiums in different countries
• How betas are derived – regressing company and market returns
• De-leveraging betas to produce asset betas
• A bottom-up method of calculating beta reflecting business mix and leverage
• Which beta to choose for company valuation?
• Problems with CAPM – is it really still a valid concept?
• WACC calculation
• Optimal capital structure and gearing risk
• Is WACC dead given the capital raising ability of modern firms?

• Rationale for flotation
• Reasons for and against
• Alternatives
• Official list or aim
• Suitability
• Sponsor’s role and responsibilities
• Re-organisations
• Taxation implications
• Timing
• Underwriting policies and issues

Identify the rationale for flotation

• Types of equity
  • Ordinary shares
  • Preference shares
• Convertibles and warrants
• Pricing
  • Fixed price or tender/auction process
• Bookbuilding
• Oversubscription and greenshoes
• Allocation
• Issue methods for flotation
  • Offers for subscription/sale
  • Placings
  • Introductions
• Allocation of shares in the flotation of a company

Evaluating a recent IPO

• Type of issues
  • Rights issues
  • Calculation of TERP
  • Bonus issues
  • Open offers
  • Vendor placings

Analysing a recent rights issues of a PLC

• Type of deals
• Types of synergies
• Problems with synergies
• Role of PMI

Understanding vendors’ motivations

• The role of the venture capitalist
• Private equity involvement
• The development and rationale for different types of buy-outs
  • MBOs
  • MBIs (Management Buy-Ins)
  • BIMBOs (Buy-In Management Buy-Outs)
  • JUMBOs (Joint Venture Management Buy-Outs)
  • VIMBOs (Vendor Initiated Management Buy-Outs)
  • IBOs (Institutional Buy-Outs)
• Key features of a successful MBO
  • Management, business
  • Market momentum
  • Capex requirements
  • Lack of cyclicality
  • Cash flow
• Structure of an MBO
  • Senior debt: features, alternatives and the use of securitisation
  • Mezzanine finance: features, equity warrants and high yield bond alternatives
  • Increasing use of PIK alternatives
  • Institutional equity: latest trends, problems and how they are overcome
  • Methods of participation for the vendor and their rationale
  • Management equity, ratchets and structuring the ratchet mechanism: linking
    the IRR with the rewards for management
• Initiating the MBO: problems for management and vendors
• The equity investment and loan arrangements: contents of key legal agreements in buy-outs
• Financial assistance and how to overcome the problem if the target is private (“whitewash” procedures)
• Exit routes
  • Trade sales
  • IPO
  • Second/third round buy-outs
  • Leveraged recapitalisation

A recent private equity deal

• Overview and rationale of types of corporate funding
• Debt – short and long-term funding instruments
• Quasi debt instruments – second lien, mezzanine finance, warrantless mezzanine and warranted mezzanine, PIK, PAYC, toggles
• Bank loan structures – alphabet notes, syndications
• Corporate financing decisions and use of debt finance
• The role of high yield bonds in corporate financing activity
• High yield debt pricing
• Use of credit derivatives in the debt markets
• Cash flow modelling debt instruments; DSCR, interest cover and EBITDA multiples

Structuring an LBO deal

• Role of take-over panel
• Review of key rules of the code and general principles
• Substantial acquisition rules
• Role of the competition commission
• European merger regulations
• Relevance of Companies Act
• Practical aspects of UK public take-overs, including timetables

Participants analyse a competitive bid situation and recommend to shareholders which offer to accept

• Strategies and tactics
• Bidder only
• Target only
• Both bidder and target

Participants analyse a hostile take-over bid and suggest the strategy and tactics to be used by the bidder and the target