Day One
Market Background
- Trends in the European M&A and Private Equity markets
- Impact of supply/demand balance in the financing markets
- Positive and negative aspects of leveraged finance
- Case study: Motivations of leveraged finance buyers/sponsors, banks and advisors
Valuing the Business
- Valuation approach of corporate buyers and the difference between value and price
- Key value drivers and the significance of capex and working capital changes
- How to value synergies
- The importance of stress testing
- Case study: Assessing “fair value” for an acquisition target by analysing its historic and projected cash flows provided in an Excel model, considering peer group multiples, estimating the value of synergies and negotiating a bid price. How different would this valuation be for a private equity buyer?
Structuring the Corporate Acquisition
- Paying with shares or cash and whether to borrow the cash
- Financial ratios used as benchmarks for highly leveraged deals
- Optimal capital structure – is it important for companies, how many have identified it?
- Case study: Significance of choice of debt or equity for EPS
- Does EPS matter and has IFRS made a difference?
- The importance of post-acquisition debt reduction via disposals and securitisation
- Case study: Participants determine the appropriate level of debt financing for a large European acquisition, using an Excel model containing historic and forecast financials
- What type of debt: syndicated loan, bonds
- Case study: Financing alternatives for an acquiring company
Leveraged Buy-Outs: Setting the scene
- When/why buyouts take place and characteristics of target companies
- Typical terms for private equity funds – fund life, fees and carried interest
- Types of transaction and key risk factors
- Factors driving development of the Public to Private market and key characteristics
- How does private equity compete with trade buyers?
- Case study: Assessment of attractions and risks for a UK buyout
Day Two
Guest Speaker: Legal and Structuring Issues for LBOs
- Key structuring issues, use of SPVs, Opco/Propco and financial assistance
- Relationship with lenders and cash flows - contractual vs. structural subordination
- Overview of due diligence and documentation in buy-outs
Equity structuring for LBOs
- Institutional equity – structures, risk and return, IRRs, equity instruments used
- Management equity - envy ratios, ratchets
- Case study: Determining management envy ratios
Debt structuring for LBOs
- Senior debt – A, B and C notes – and mix of amortising/non-amortising
- Subordinated debt - mezzanine finance, use of warrants and PIK notes, the emergence of second lien, changing perspectives on high yield bond covenants
- Bridge finance to cover planned high yield bonds, asset disposals, sale & leaseback
- Changes in the players in the leveraged debt market
- Investor perspectives – pricing, structure, covenants (e.g. change of control)
- Stress testing to decide on maximum leverage
- Increasing size of deals and impact on underwriting risks
- Case study: Modelling a European Buyout - Participants assess “optimal” structure for a buyout using a “quick and dirty” Excel model to determine: equity vs. senior, mezzanine vs. revolving credit vs. mezzanine finance; impact of non-amortising senior debt tranches; use of PIK notes; envy ratio; institutional and management IRR.
- Case Study: Participants assess the feasibility of a large European LBO
Exits and Refinancing
- The importance of exit and how exit options have changed
- Case study: Making a decision on exit from investment
- What enables refinancing (or recapitalisations) and how does it impact IRR's
- How companies improving cash flows can take advantage of refinancing opportunities
- Case study:Participants assess feasibility of refinancing a buyout
Perspectives on Risk
- Risk implications of increasing Debt/EBITDA
- Importance of sponsor's involvement in portfolio companies and monitoring
- Managing problems and conflict
- Case study:Contribution to returns for successful deals and reasons for failure for private equity