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Day 1: Morning (10 AM – 1 PM):
Topic: Comparable companies’ analysis
Step 1: Select the universe of comparable companies
- Study the target;
- Identify key characteristics of the target for comparison purposes;
- Screen for comparable companies.
Step 2: Locate the necessary financial information
- SEC filings: 10-K, 10-Q, 8-K, and proxy statements;
- Equity research;
- Press releases and news runs;
- Financial information services;
- Summary of financial data primary resources.
Step 3: Spread key statistics, ratios and trading multiples
- Calculation of key financial statistics and ratios;
- Supplemental Financial concepts and calculations;
- Calculation of key trading multiples.
Day 1: Afternoon (2 PM – 7 PM)
Topic: Comparable companies’ analysis
Step 4: Benchmark the comparable companies
- Benchmark the financial statistics and ratios;
- Benchmark the trading multiples.
Step 5: Determine valuation
- Valuation implied by enterprise value (EV)/ EBITDA;
- Valuation implied by Price/ Earning (PE).
- Key pros and cons of comparable company analysis
Day 2: Morning (10 AM – 1 PM)
Topic: Comparable transactions analysis
Step1: Select the universe of comparable acquisitions
- Screen for comparable acquisitions;
- Examine other considerations.
Step 2: Locate the necessary deal-related and financial information
- Public targets;
- Private targets;
- Summary of primary SEC filings in M&A transactions.
Step 3: Spread key statistics, ratios and transaction multiples
- Calculations of key financial statistics and ratios;
- Calculation of key transaction multiples.
Step 4: Benchmark the comparable acquisitions;
Step 5: Determine valuation
Key pros and cons of comparable
Day 2: Afternoon (2 PM – 7 PM)
Topic: Discounted cash flow analysis (DCF)
Step 1: Study the target and determine key performance drivers
- Study the target;
- Determine key performance drivers.
Step 2: Project free cash flow
- Considerations for projecting free cash flow;
- Projection of sales, EBITDA and EBIT;
- Projection of free cash flow.
Step 3: Calculate weighted average cost of capital (WACC)
- Determine target capital structure;
- Estimate cost of debt;
- Estimate cost of equity;
- Calculate WACC.
Day 3: Morning (10 AM – 1 PM)
Topic: Discounted cash flow analysis (DCF)
Step 4: Determine terminal value
- Exit multiple method;
- Perpetuity growth method.
Step 5: Calculate present value and determine valuation
- Calculate present value;
- Determine valuation;
- Perform sensitivity analysis.
- Key pros and cons of DCF
Day 3: Afternoon (2 PM – 7 PM)
Topic: Leveraged buyouts (LBO’s)
Key participants
- Financial sponsors;
- Investment banks;
- Bank and institutional lenders;
- Bond investors;
- Target management.
Characteristics of a strong LBO candidate
- Strong cash flow generation;
- Leading and defensible market positions;
- Growth opportunities;
- Efficiency enhancement opportunities;
- Low capex requirements;
- Strong asset base;
- Proven management team.
Economics of LBO’s
- Return analysis: Internal rate of return (IRR);
- Return analysis: Cash return;
- How LBO’s generate return;
- How leverage is used to enhance returns.
Primary exit/ monetization strategies
- Sale of business;
- Initial public offering (IPO);
- Dividend recapitalisation;
- Below par debt repurchase.
LBO financing: Structure
LBO financing: Primary sources
- Bank debt;
- High yield bonds;
- Mezzanine debt;
- Equity contribution.
LBO financing: Selected key terms
- Security;
- Seniority;
- Maturity;
- Coupon;
- Call protection;
- Covenants;
- Term sheets.
LBO financing: Determine financing structure
Day 4: Morning (10 AM – 1 PM)
Topic: LBO analysis
Step 1: Locate and analyse the necessary information
Step 2: Build the pre-LBO model
- Build historical and projected income statement through EBIT;
- Input opening balance sheet and project balance sheet items;
- Build cash flow statement through investing activities.
Day 4: Afternoon (2 PM – 7 PM)
Topic: LBO analysis
Step 3: Input transaction structure
- Enter purchase price assumptions;
- Enter financing structure into sources and uses;
- Link sources and uses to balance sheet adjustments columns.
Step 4: complete the post LBO model
- Build debt schedule;
- Complete pro forma income statement from EBIT to net income;
- Complete pro forma balance sheet;
- Complete pro forma cash flow statement.
Day 5: Morning (10 AM – 1 PM)
Topic: LBO analysis
Step 5: Perform LBO analysis
- Analyse financing structure;
- Perform return analysis;
- Determine valuation;
- Create transaction summary page.
Day 5: Afternoon (2 PM – 7 PM)
Topic: Sell-side M&A
- Auctions
- Organisation and preparation
- First round
- Second round
- Negotiations
- Closing
- Negotiated sale
Day 6: Morning (10 AM – 1 PM)
Topic: Buy-side M&A
Buyer motivation
- Synergies;
- Cost synergies;
- Revenue synergies.
Acquisition strategies
- Horizontal integration;
- Vertical integration;
- Conglomeration.
Form of financing
- Cash on hand;
- Debt financing;
- Equity financing;
- Debt vs. equity financing summary – Acquirer perspective.
Deal structure
Day 6: Afternoon (2 PM – 7 PM)
Topic: Buy-side M&A
Buy-side valuation
- Football field;
- Analysis at various prices;
- Contribution analysis.
Merger consequences analysis
- Purchase price assumptions;
- Balance sheet effects;
- Accretion/ dilution analysis;
- Acquisition scenario’s: 50% stock/ 50% cash, 100% cash, 100% stock.
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