Corporate Finance

This course cover the following modules:

The Role of the Participants in Corporate Finance

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

Corporate Valuation Techniques

• Understanding price versus 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

Weighted Average Cost of Capital (WACC) and the Discount Rate

• 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?

Preparations for Flotation

• 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

Equity Issue Methods

• Types of equity
• Convertibles and warrants
• Pricing
• Bookbuilding
• Oversubscription and greenshoes
• Allocation
• Issue methods for flotation
• Allocation of shares in the flotation of a company

Subsequent (“secondary”) Issues

• Type of issues

Reasons for and Types of Acquisitions (including effect of synergies)

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

Private Acquisitions in Practice: Step-by-Step Approach

• Investigation into the target
• The long form report
• Legal considerations
• Negotiations
• Documents required
• Profit forecasts and earn-outs

Private equity, LBOs and MBOs

• The role of the venture capitalist
• Private equity involvement
• The development and rationale for different types of buy-outs:
• Key features of a successful MBO
• Structure of an MBO
• 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

Financial Structuring

• 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
• Cashflow modelling debt instruments; DSCR, interest cover and EBITDA multiples

Public Take-overs and Mergers

• 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

Hostile Public Take-overs

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