DAY 1
PRIVATE EQUITY MARKET OVERVIEW
- Traditional players
- New Investors
- Contrasting Hedge Funds/PE funds characteristics
LBO MODELLING OVERVIEW
- Overview of simple LBO model to:
- Highlight links between Income Statement, Cash Flow & Balance sheet;
- Explain uses & sources statement; and
- Explain proforma balance sheet
Case Study I: Introduction to Wagadada case study and the detailed LBO model
USES OF FINANCE
Purchase Equity
- Current pricing trends
- Target characteristics
- Typical valuation metrics
- EBITDA
- DCF
- Size/Control/Liquidity discounts
- Buying shares or assets
- Explaining cash free or debt free purchases
- Common issues with completion balance sheets: what are you actually buying?
Structuring Purchase to Maximise Fund Returns
- Tax issues
- Managing the investment
Refinancing Needs
- Existing debt when can/should you keep it?
- Capex requirements
- Working capital needs
Financing Fees
- Typical trends in arrangement fees and commitment commission spreads
- Institutional equity fees
- Typical transaction advisors costs
- Stamp duty costs
Case Study I: Modelling the uses of Finance
SOURCES OF FINANCE
Institutional and Management Equity
- Typical funding terms (dividend, capital and voting rights) and target returns
- Protecting the funds investment
- Incentivising the management, management exits/ratchets
DAY 2
SOURCES OF FINANCE (cont’d)
Debt Providers and Their Typical Characteristics
- Traditional/new lenders
- Senior tranche profiles
- A, B, C, RCF
- Subordinated tranche profiles
- Second lien
- Mezzanine (with/without warrants)
- PIK
- High yield bonds
- When to issue public or private debt
- Current trends & issues
Capital Structure
- Optimum capital structure?
- Stressing for defaults
- Typical Financial Covenants
- General covenants
- Ideal capital structure
- Calculating the weighted average cost and duration of lending structure
Case Study II: Choosing the best capital structure from 3 typical competing offer letters
Case Study I: Wagadada: Modelling the Sources of Finance
MODELLING THE PROFORMA BALANCE SHEET
- What changes
- Treatment of costs/purchased goodwill
Case Study I: Wagadada: Modelling the proforma balance sheet
MODELLING THE CASHFLOWS
- Estimating cashflows from operations and investing
- Calculating the funding shortfall/surplus
- Modelling the new debt balances after mandatory and discretionary debt & interest payments/new issues
- Incorporating the cash working capital needs
- Flexing the Sources of funds: Modelling the Management, Institutional, Preference Equity and Revolver, Senior and Subordinated debt
- Estimating an optimum financing structure – maximising all parties IRR ratio’s and lenders ratio’s
EXITS: CONTRASTING DIFFERENT OPTIONS
- De-gearing investment: Invitel
- Refinancing/Secondary Buy outs: Gala
- IPO: La Tasca
- Trade sale
- Private Equity Securitisation: Prime Edge
- Liquidation: What happens when it all goes wrong?
Case Study III: Schefenacker – estimating your pay back from a work out
Case Study I: Wagadada modelling exit valuation and IRR’S
SENSITIVITY ANALYSIS