Business Valuation Courses Valuation Courses

The specialist in highly technical, market-driven banking and corporate finance training

Business Valuation Courses

web: redliffetraining.co.uk email: [email protected] phone: +44 (0)20 7387 4484

The specialist in highly technical, market-driven valuation training

Valuation Courses

web: redliffetraining.co.uk email: [email protected] phone: +44 (0)20 7387 4484

To book this course or find out more, please click the “Book” button

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Advanced Negotiation Issues in M&ADate:

Location: London Price: .....+VAT

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PUBLIC COURSES

• Bank Valuation• Real Estate Modelling• The Advanced LBO Modelling Course• The Corporate Finance Modelling Masterclass• The M&A Course• The Modelling for M&A Course• Valuing a Business• Valuing Start Up and Pre IPO Companies• Valuing a Technology Company

IN-HOUSE COURSES

• Advanced Business Valuation and Modelling Training • Advanced M&A Modelling: A Practical 3 Day Workshop• Advanced Valuation - Valuing Rapid Growth Companies• Applied Financial Mathematics in Excel Training Course• Emerging Market Bank Modelling & Valuation• Excel Auditing Workshop• Lease Modelling in Excel• Modelling Service-Based Businesses• VBA and Macros• Valuation Masterclass - Valuing Difficult Businesses

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IN-HOUSE COURSES

• Valuing Commodity Companies and Sectors• Valuing Cyclical Companies and Sectors - Advanced• Valuing Declining and Distressed Companies - Advanced• Valuing Early Stage and Start Up Companies - Advanced• Valuing Financial Companies • Valuing Emerging Market Companies• Valuing a Pharmaceutical Company• Real Estate Valuation - South Africa• Real Estate Valuation - Hong Kong• Real Estate Valuation - UAE


Corporate Membership Scheme

Our Corporate Membership Schemes are not valid on any courses held on an in-house basis and are in line with our standard Terms & Conditions

If you would like to enquire about one of our Corporate Membership Schemes then please call or email us for more information.

Email: [email protected] Tel: +44 (0) 20 7387 4484

Our Corporate Membership Scheme gives clients the benefit of discounted course places with absolutely no

restrictions.

Clients pay an annual subscription fee of £595 + VAT to receive 20% discount on all public course and conference

bookings irrespective of the numbers booked.

You Corporate Membership Scheme can be used once payment is received and will be valid for one year.

web: redliffetraining.com email: [email protected] phone: +44 (0)20 7387 4484


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Bank ValuationDate: 18-19 June 2018, 25-26 Oct 2018

Location: London Standard Price: £1,300 + VATMembership Price: £1,040 + VAT

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Course Objectives

This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to:

Review the accounting and valuation of banks’ financial statements including the loan book, financial instruments and deriva-tives used for hedging purposes;

Further advance participants’ understanding of the latest Basel III developments including MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR);

Understanding the key metrics to value a bank, including performing all the steps of a Dividend Discount Model (DDM) and Multiples Analysis using Excel.

Course Overview

Day 1

Session 1

The aim of this session is to provide participants with an understanding of the financial statements of a bank. The focus is on the banking book and financial instruments. The reporting and valuation of derivatives is also discussed. ■ Banks’ financial statements overview ■ Accounting for loans

• Non-performing loans • Understanding impairments vs. write-off • Incurred losses (IAS 39) has been re-

placed by expected losses (IFRS 9) ■ Accounting for financial instruments

• Lastest IFRS 9 implications: Amortised cost, FVTPL and FVTOCI

• Level 1, 2 and 3 valuations • Impairments of financial instruments

■ Accounting for derivatives • Hedge accounting: fair value, cash flow

and net investment • Netting derivative assets and liabilities

Case study: Barclays Financial Statements

Session 2 Fundamentals of Regulatory Capital Throughout this module, participants review the current regulatory requirements, in particular Tier I and Tier II capital ratios and understand detailed computations. ■ Overview of regulatory framework ■ Overview of Basel I, II and III and latest

Basel IV updates ■ Overview of calculating available and re-

quired capital• Common Equity Tier 1 (CET1), Tier 1,

Tier 2 and Total capital

• Key reconciliation items from IFRS Book Equity to CET1: minority interests, deferred tax, changes to investment portfolio, etc.

■ Overview of calculating risk weighted assets (RWAs): credit risk RWA, counterparty risk, market risk and operating risk with the latest Basel IV requirements

- Standardised floor of 72.5% based on standardized approach - Simultaneous reduction in standardised risk weights for low risk mortgage loans ■ Overview of key capital, liquidity and funding

ratios• Tier 1 and total capital ratios• Leverage ratios• Liquidity coverage ratios (LCR) and Net

stable funding ratios (NSFR)

Case study: Barclays Regulatory Ratios Review

Day Two Session 3 Forecasting and Modelling Banks Based on the financial statements and publicly available regulatory information of Barclays, participants forecast its financial performance based on its historical statements. ■ Modelling and forecasting the balance sheet:

deposit or loan-driven? ■ The loan and trading book ■ Funing requirements and mix: deposit vs.

wholesale funding ■ Growth in funds under management ■ Modelling and forecasting the income state-

ment

This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to: ■ Review the accounting and valuation of banks’ financial statements including the loan book,

financial instruments and derivatives used for hedging purposes; ■ Further advance participants’ understanding of the latest Basel III developments including

MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR); ■ Understanding the key metrics to value a bank, including performing all the steps of a Dividend

Discount Model (DDM) and Multiples Analysis using Excel.


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Bank ValuationContinued

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Course Content

■ Understanding the income statement drivers ■ Net interest income and margin ■ Non-interest income ■ Forecasting loan impairment through the

credit cycle ■ Operating costs ■ Tax ■ Modelling and forecasting regulatory capital ■ Risk weighted assets ■ Required and available capital under Basel I,

II or III ■ Liquidity requirements and stable funding

requirements ■ Forecasting dividends (payout ratio and/or

minimum capital requirement) ■ Ratio analysis and key performance ratios

Case study: Financial Modelling of Barclays on Excel

Session 4 Bank Valuation Following the forecasting of the bank’s performance, this session focuses on the Dividend Discount Model (“DDM”) and key multiples of Barclays. ■ Free cash flow to equity mode ■ Present value of future dividends ■ Cost of equity for banks ■ Terminal value: review of potential ap-

proaches (key parameters or RoE) ■ Sensitivity analysis ■ Banking trading multiple

• P/BV and adjustment to BV explained• P/E, dividend yield

Case study: DDM and Multiples of Barclays on Excel


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Real Estate ModellingDate: 13-15 Mar 2018, 28-30 Nov 2018


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Course Overview

Course Methodology

This course will teach you all the available techniques and how to practically apply them through the use of Excel, Estatemaster and Argus. An extensive use of case studies will be adopted to illustrate the principles covered. Ultimately delegates will get practical tips on layout and style in building and analysing user-friendly models which are available as additional benefits of the course.

Who Should Attend

This course is designed for delegates who are seeking to improve their technical real estate modelling skills in Excel.

■ Bankers and financiers involved in real estate ■ Directors and business development executives from corporates, equity sponsors and consultan-

cies

Day 1: Building Blocks of Real Estate Modelling

Using Excel for modelling ■ Worksheet organization ■ Data input, management and verification ■ Use of colour/add-ins ■ Naming of cells ■ Location of input variables ■ Review of Excel functions and their use ■ Macros and their use ■ Goal seeking ■ Optimisation ■ Circularity and how to resolve it ■ Working with range names ■ Graphs and charts ■ What is needed from Excel and what is

superfluous ■ Principles of spreadsheets and workbooks

Case Study: Evaluating good and bad Excel financial models

Equity valuation ■ Equity NPV/ IRR and project IRR ■ XNPV, XIRR, MIRR ■ Modelling cash flow and ratios: ■ Allowing for accountancy in real estate

models:• Depreciation• Tax• SPV accounting• Capital allowances

Case Study: Valuation and Cash Flow models

Fundamentals of Real Estate Models ■ Objectives of real estate models ■ Structure of real estate model design ■ Dealing with escalation/inflation ■ Monthly, quarterly and annual modelling ■ Design, testing and feedback ■ Model sensitivity and auditing ■ Revenue and cost modelling ■ Cash adequacy, recourse, standby and li-

quidity ■ Financial coverage ratios and the bank per-

spective ■ What are the software choices for real estate

development? ■ Estatemaster vs Argus vs Excel

Demonstrations: Argus and Estatemaster

Real Estate development modelling issues ■ Architects, planners and real estate develop-

ment ■ Concept and objectives of Construct and

Sell (CS) models ■ Assumptions required for CS models ■ Development cashflow corkscrews ■ Sales prices and taxes ■ Valuation and risk analysis of real estate

development modelsCase Study: Examples of real estate development models

Real Estate investment modelling issues ■ Limited recourse and loan terms and cove-

nants in real estate lending ■ Structuring and financing solutions


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Real Estate ModellingContinued

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Course Overview

■ Real estate investment finance experience worldwide

■ Objectives of real estate investment models ■ Buy and Let (BL) discounted cash flow

modelling issues ■ Risk analysis for real estate investment

models

Case Study: Review of several real estate investment models and their decision-making input

Day 2: Building a Construct and Sell (CS) Model

Building a real estate model. Based on a real example, provided by an equity investor in a real estate transaction, delegates will construct and use a model for the transaction. The exercise will include:

■ Project Review ■ Analysing the inputs ■ Costing construction ■ Dealing with input priorities ■ Data plausibility ■ Modelling loan drawdown ■ Sales price projections and cap rates ■ Establishing value from a construct and sale

transaction

Day 3: Building a Discounted Cash Flow Model (DCF) model

Delegates will continue with the real example from Day 2 to construct a model based on the assumptions of construction, with revised assumptions, and leasing out. ■ Revising construction inputs ■ Loan assessment criteria ■ PGI, EGI and NOI in the model ■ Forecasting NOI and operating expenses ■ Modelling loan amortization ■ IRR NPV and other valuation analysis

Monte Carlo and real estate modelling ■ Methods of handling risk ■ What is Monte Carlo analysis? ■ Worked examples of Monte Carlo analysis ■ Applying Crystal Ball to CS and CL Models ■ Analysing the results ■ Presentation of Monte Carlo results to senior

management

Course Conclusion


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Advanced LBO Modelling - A Practical WorkshopDate: 08-09 Feb 2018, 28-29 Jun 2018, 15-16 Nov 2018

Location: London Standard Price: £1,300 +VATMembership Price: £1,040 + VAT

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Course Overview

This course covers the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model. The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.

The participants will then cover more complex LBO instruments such as warrants and PIKs, how they can be incorporated into an LBO structure and how to calculate returns to each of the equity and debt providers. Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.

The participants will then undertake an adjusted present value (“APV”) analysis to determine where value has been created in the LBO transaction using an APV model and finally look at a recovery analysis for a failed LBO transaction.

Case Study: The participants will use a variety of case studies and exercises during the two days, based on publically quoted and generic companies.

Leverage Overview ■ Background to the LBO market ■ Introductory theory - The effect of leverage

on firm value

Valuing the Target ■ Sourcing information – Historic and forecast

data ■ Analysing equity research

• Key attributes of broker analysis• Pluses and minuses of equity research

■ Building a DCF valuation using equity re-search

■ Modelling the stand alone valuation• DCF valuation• Use of multiples in valuation (EV/EBIT, EV/

EBITDA)

Case Study I: Participants model the stand alone valuation of the target using historic data and equity research

LBO Modelling Overview ■ Key elements of an LBO model

• Comparing and contrasting DCF and LBO models

• Sources and uses of funds

■ From stand alone valuation to LBO analy-sis

Case Study II: Participants use the stand alone valuation of the target to complete an LBO model

Assessing debt capacity for LBO financing ■ Financial interdependencies ■ Financing growth ■ Sustainable debt ■ Target debt capacity assumed in a WACC

calculation, debt capacity and interest cover

■ Debt capacity in LBOs ■ Debt capacity multiples in practice and

credit analysis

Case Study III: Modelling the debt capacity of the target using multiple and credit analysis

Capital providers and their typical characteristics ■ Institutional and management equity ■ Traditional/new lenders ■ Senior tranche profiles


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Advanced LBO Modelling - A Practical WorkshopContinued

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• A, B, C, RCF ■ Subordinated tranche profiles

• Second lien• Mezzanine (with/without warrants)• PIK• High yield bonds

■ More complex issues – warrants and options ■ Typical LBO transaction sensitivity analysis,

management, base and payout cases

Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR for each of the capital providers

Assessing value creation in LBO transactions – APV analysis

■ Key components of an APV valuation• Unlevered value• Value of the tax shield• Direct and indirect cost of leverage

■ APV valuation and DCF valuation ■ APV valuation in a steady state ■ Calculating AP in a steady growth environ-

ment ■ Incorporating APV analysis in an LBO trans-

action analysis

Case Study V: Where has value been created, modelling APV analysis for an LBO transaction


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Corporate Finance Modelling MasterclassDate: 5-9 Feb 2018, 25-29 Jun 2018, 12-16 Nov 2018


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Course Overview

On days one, two and three the course covers the key elements of an acquisition or merger, from the initial stand-alone valuation of the target to the more complex accounting and modelling issues to be considered and finally analysing and assessing the value created by synergy benefits and leverage This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.

The approach has been designed to equip participants to put key concepts into practical use immediately.

Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in transaction analysis.

As part of their work on this course participants model transactions based on real-life companies and scenarios.

On the last two days participants will cover the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model. The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.

The participants will then cover more complex LBO instruments such as warrants and PIKs, how they can be incorporated into an LBO structure and how to calculate returns to each of the equity and debt providers. Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.

The participants will then undertake an adjusted present value (“APV”) analysis to determine where value has been created in the LBO transaction using an APV model and finally look at a recovery analysis for a failed LBO transaction.

Course Content

Days 1, 2 & 3M&A model build up: the starting point ■ Modelling integrated financial statements ■ Model structure ■ Key forecast ratios ■ Sourcing and cleaning historic data ■ What makes a good model?

Modelling – integrating financial statements: participants complete a partially-developed financial model for a public quoted company which integrates P&L, balance sheet and cash flow. This company will be the target company used in the merger analysis

Modelling stand-alone valuation ■ Overview of valuation methodologies ■ What do investment banks do?

■ What methodologies could we use? ■ How should we define firm value? Equity vs.

enterprise value ■ Calculating free cash flow before financing ■ Understanding and calculating WACC ■ Discussion – calculating WACC ■ Key issues with a two stage DCF valuation –

WACC and terminal value assumptions Modelling - valuation: participants calculate the cost of capital and complete a DCF valuation for the target company, producing a stand-alone valuation as a cross check to the acquisition price

Day Two Accounting for corporate transactions ■ Different types of transaction and how they

are modelled in practice


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Corporate Finance Modelling MasterclassContinued

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■ Consolidation accounting under the current IFRS 3 an IAS 27

■ Change of control triggers ■ Accounting for non-controlling interests

(“NCI”) ■ Accounting for disposals ■ Partial disposals – creating a NCI ■ Partial disposal – loss of control ■ Recent changes to acquisition accounting

under IFRS ■ Definition of control ■ Calculation of goodwill

Modelling: delegates complete a variety of transaction models incorporating all types of corporate transaction and calculate the effect of a transaction on a set of consolidated accounts in preparation to perform a merger analysis with the target business and an acquirer

Acquisition finance ■ Types of transactions and synergies ■ Availability of synergies and problems in

achieving them ■ Methods available for valuing synergies ■ Key differences between public vs. private

deals, recommended vs. hostile bids ■ Choices for growth: acquisition vs. organic

vs. joint venture ■ Defence strategies for target companies

resisting a hostile bidCase study: Participants calculate synergies for a case company

Day Three

Structuring acquisition finance ■ Once price has been agreed, how is it paid?

Cash vs. Shares ■ Financing choices for raising cash for an

acquisition: Debt vs. Equity ■ Calculating the success of a deal, accretion

vs value creation ■ The nature of equity instruments ■ The different risks and rewards accruing to

different parties ■ The impact of loan stock, convertibles and

preference shares on WACC ■ Calculating returns to key participants

Case study: Calculating accretion/dilution and the effect of hybrids on cost of capital

Merger modelling case study ■ Completing a merger model ■ Getting to DCF valuation for the combined

business ■ Combined WACC ■ Valuing operating synergies ■ Valuing financing synergies ■ Accretion/dilution analysis vs wealth creation ■ Sense-checking the output and adjusting the

capital structureModelling – bringing it all together: participants complete a complex merger model for an acquisition of the target business incorporating synergy analysis and varying capital structure. The transaction is analysed on an accretion/dilution analysis and a wealth creation/return on capital analysis

At the end of this session participants will have a working acquisition model incorporating a variety of different forms of transaction analysis

Course conclusion: best practice in transaction analysis ■ Participants will have improved their un-

derstanding of and have had experience of modelling mergers and acquisitions from first principles

■ Simple and clear reference Excel models - providing participants with a platform for future internal modelling efforts and aiding decision making

■ Participants who, at the end of the course, understand the drivers on transactions and how transactions can be modified to suit the various parties

Days 4 & 5Leverage Overview ■ Background to the LBO market ■ Introductory theory - The effect of leverage

on firm value Valuing the target ■ Sourcing information – Historic and forecast

data ■ Analysing equity research

• Key attributes of broker analysis • Pluses and minuses of equity research

■ Building a DCF valuation using equity re-search

■ Modelling the stand alone valuation




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Corporate Finance Modelling MasterclassContinued

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Course Content

• DCF valuation• Use of multiples in valuation (EV/EBIT,

EV/EBITDA)Case Study I: Participants model the stand alone valuation of the target using historic data and equity research

LBO Modelling Overview ■ Key elements of an LBO model

• Comparing and contrasting DCF and LBO models

• Sources and uses of funds• Key drivers in an LBO model

■ From stand alone valuation to LBO analy-sis

Case Study II: Participants use the stand alone valuation of the target to complete an LBO model

Assessing debt capacity for LBO financing ■ Financial interdependencies ■ Financing growth ■ Sustainable debt ■ Target debt capacity assumed in a WACC

calculation, debt capacity and interest cover

■ Debt capacity in LBOs ■ Debt capacity multiples in practice and

credit analysisCase Study III: Modelling the debt capacity of the target using multiple and credit analysis

Capital providers and their typical characteristics ■ Institutional and management equity ■ Traditional/new lenders ■ Senior tranche profiles

• A, B, C, RCF ■ Subordinated tranche profiles

• Second lien• Mezzanine (with/without warrants)• PIK• High yield bonds

■ More complex issues – warrants and op-tions

■ Typical LBO transaction sensitivity analy-sis, management, base and payout cases

Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR

for each of the capital providers

Assessing value creation in LBO transactions – APV analysis ■ Key components of an APV valuation

• Unlevered value• Value of the tax shield• Direct and indirect cost of leverage

■ APV valuation and DCF valuation ■ APV valuation in a steady state ■ Calculating AP in a steady growth environ-

ment ■ Incorporating APV analysis in an LBO trans-

action analysisCase Study V: Where has value been created, modelling APV analysis for an LBO transaction




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Mergers & Acquisitions (M&A) CourseDate: 15-18 May 2018, 22-25 Oct 2018


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Course Overview

This four day M&A course covers all aspects of buying, selling, valuing private companies and management buy-outs.

The first day of this mergers & acquisitions course covers creating shareholder value through the pursuit of a successful M + A strategy has been shown to be a far from risk-free activity. Buyers overpaying or using inappropriate financing methods can lead to destruction of value and in some cases financial distress.

The second day of this mergers & acquisitions course covers the topics of the financial ratios used in comparable company valuation, creative accounting, the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.

The third day of this mergers & acquisitions course covers the practical steps that are required to plan, negotiate, and close a successful sale. Valuing the business to be sold and the effective presentation of the commercial attractions of the business are key elements, as are choosing the appropriate advisers and running a competitive auction.

The fourth day of this mergers & acquisitions course covers the principles and practicalities involved in arranging and negotiating a management buyout. In addition to the legal issues to be addressed, the use of bank debt and other financial instruments is examined in the context of developing a

Day 1: The Drivers of Growth

The Drivers of Growth ■ Shareholder value ■ The company life cycle

• The importance of directors recognising the value curve

■ Risk and return• Relating risk to the life cycle phase of the

company / target ■ Product market growth and decline

• Evaluating niches, substitutes, value in innovation

REVIEW: Comparison and contrast of the lifecycle of three different companies, highlighting how success or failure with acquisitions has determined their fate

• ICI• Debenhams• GKN

Growth through Acquisition ■ Assessing the alternatives

• Investment• JV• Acquisition

DISCUSION: Advantages and disadvantages of each

approach ■ Determining the acquisition

• Market objectives ӹConsolidating a fragmented market ӹBuilding the value proposition

• Management issues ӹAssessing cultural fit

• Price parameters ӹKnowledge of comparative deals

• Opportunity cost ӹ Is it a “now or never” deal

REVIEW: The Ansoff Matrix, a handy way to categorise potential risks in acquisition strategies

■ Pitfalls to avoid • Realism of synergies

ӹRisks of prediction, cost and achievement• Accounting standards

ӹWho is the auditor, what principles are followed

• Judging forecasts ■ Scepticism rules

Commercial factors • Target’s history• Recurring revenue• Intellectual property


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Mergers & Acquisitions (M&A) CourseContinued

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Course Content

• Customer list

CASE STUDY: Reviewing company information to arrive at a value, taking into account qualitative and strategic factors

The Acquisition Process ■ Establishing acquisition criteria

• Target size and affordability • Potential synergies• Market / competitor impact• Regulatory factors• Shareholder impact

■ Due Diligence • Investigation prior to offer

ӹPublic sources ӹPrivate sources

■ Verification• Contracts• Accounts• Pensions• Employee disputes• Litigation

CASE STUDY: Reviewing summary information on a company to determine which areas need investigation and who should have responsibility for the task

Structuring the deal ■ Earn-out / deferred consideration ■ Non-compete undertakings ■ Warranties and indemnities ■ Disclosure letters

Acquisition Integration ■ Success / failure factors ■ The importance of the integration team ■ Earn outs and accounting issues ■ Incentivising key managers ■ Establishing clear reporting lines

tax considerations

Day 2:Overview of the Process ■ Motives and objectives of the vendor ■ Which outcome is preferred

• Cash only• “sale with honour”• Management buyout• IPO

■ Timescale

Preparing the Company for sale

■ optimising the operations • removing skeletons, resolving related par-

ty conflicts ■ resolving accounting / audit issues

• tightening up provisions, write offs, stock obsolescence

■ clearing legal points• employee issues • customer / supplier disputes

■ choosing advisers ■ tax considerations

• the vendor’s position • company PAYE, corporation tax

Quiz: What are the top ten objective of a vendor Assessing the value of the business ■ Other factors

• IPR• Market share• Customer base• Niche products• Strategic value to a buyer

Exercise: Calculating the value of a business using different metrics

Initiating the Process ■ Choosing advisers

• Investment bank• Merger brokers• Accountants• Other

■ Agreeing the mandate• Fees

ӹRetainer, success, no go• Exclusions

ӹCompanies and territories• Time limits• Indemnities

■ Preparing key documents • Information memorandum • Support material

ӹConfidentiality undertakings, product information

• Due diligence pack ӹReasons for, use of vital data rooms

Management preparation • Confidentiality• Conflicts of interest• The “sale team”• Presentation material

The Sale Process




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■ The cost / risk / timescale issues in • A trade sale• Buyout• IPO

■ Trade sale approaches • Public auction• Private auction• Bilateral negotiation

■ Organising an auction • Identifying the purchasers

ӹTiering prospects into probables, possi-bles, maybe

• Defining the deadlines ӹThe importance of realism

• Contact and confidentiality ӹDealing with large company buyers

• Judging the offers ӹWill a “no price” offer work?

• Conducting the second stage discussions ӹCompany and management visits

• Preferred bidder and exclusivity ӹHow long for exclusivity?

CASE STUDY: Reviewing an information memorandum on a company sale to assess: the value of the business, the most likely buyers

■ Sealing the deal• Earn-outs

ӹBridging the valuation gap• Warranties, disclosure letter

ӹBuyer / vendor conflict• Time limits, caps• Completion accounts • Comfort letters

■ Alternative outcomes• IPO, timescale• MBO, management conflicts• Post “exit” lock-in• Ongoing relationship

Day 3: Valuation Principles ■ Value to whom? ■ Price and intrinsic value ■ The risk / return trade off ■ Strategic risk

The Accounting Approach ■ Accounting measures of performance and

value ■ Problems of the accounting approach ■ Are profits relevant? ■ GAAP vs IFRS ■ Creative accounting

• How to find it • Recent examples

Review: Was the near collapse of Quindell inevitable?

Accounting Valuation Metrics ■ Asset and net asset valuations ■ Dividend-based models

• Dividend yield• Dividend discounting

■ Application and drawbacks of dividend mod-els

■ Earnings-based • Price / earnings ratios • P/E strengths and weaknesses • PEG ratios • Enterprise value

Exercise: Valuation of a business using different metrics

Comparable Company Valuation Issues ■ Is the comparability achievable?

• Accounting principles • Averages, medians, outlines • Listed vs private

■ Sustainability of earnings ■ Business model flexibility

Exercise: Project Oxford, using comparable company techniques to value a company for acquisition

Calculating the Cost of Capital ■ Assessing the cost of debt ■ Calculating the cost of equity

• The risk free rate• Equity premium • Beta

■ The weighted average cost of capital • The flaws in the capital asset pricing model • Alternative approaches

Exercise: Calculating the cost of equity and the weighted average cost of capital

The Cash Flow Approach to Valuation ■ The time value of money ■ Calculating the discount rate ■ Forecasting free cash flow

• Calculating FCF• Identifying value drivers

■ Terminal value

Exercise: Discounting free cash flow to arrive at a value per share




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Course Content

Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target.

Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target

Day 4: The Growth of Private Equity and Leveraged Buyouts ■ Academic rationale for the use of leverage

• Modigliani/Miller theory • Michael Milken’s research• Growth of shareholder activism

ӹReviving under performers• Changes in company law• The development of the European high

yield bond and securitisation markets

The Principles of Leveraged Finance ■ The use of debt to drive equity values

• Cash flow management ӹReducing debt to drive equity value

• Operational improvements ӹBuilding “need to have”

• Incentivisation of management ӹGetting rich together

• Cash-capture clauses

Exercise: Good or Bad LBO?

Discussion of recent transactions to see which ones the attendees would do, and what lessons can be learned about elements of success or failure

Structuring the transaction • Target IRR

ӹAssessing the return appropriate to the risk

• Assessing debt capacity ӹForecasting future cash generation

• Senior / mezzanine debt mix ӹ Judging asset values

• Forecasting exit values ■ Consideration of non-bank finance

• High-yield bonds ӹTerms and size of issue

• Second lien debt > Too much debt?

• PIK finance

ӹSaint or sinner? • Vendor loan notes

ӹMaking the deal look good

Case Study: Based on information provided attendees are tasked with structuring the finance for an MBO. Answers are discussed to identify the critical elements in the financing

■ Legal elements• Warranties and indemnities

ӹ Investor protection• New Memo & Arts

ӹ Incorporating P.E. control elements • Tag along and drag along

ӹControl of the exit • Veto rights for private equity

ӹControl of management ■ Management

• Jensen and Meckling agency theory ӹWhy buyouts work

• The envy ratio ӹManagement incentivisation

• Agreeing the ratchet ӹCarrot and stick

• Good leaver / bad leaver provisions ӹCovering under performance

Exercise: Agreeing the terms of the envy ratio

Identifying and Closing a Good Transaction ■ Ideal company characteristics

• The three golden rules ■ MBO / MBI

• Assessing management strength ■ Meeting vendors’ expectations

• Structuring the deal ■ Avoiding conflicts of interest

• Recognising the risks of multi-layered financing

■ Due diligence• Investigation and verification

■ Tie-in with contract terms ■ Structuring the debt appropriate to the busi-

ness

Discussion: How to finance the acquisition of Manchester United. The Man U accounts are reviewed with the object of deciding how to finance its acquisition. Answers are compared to the actual result.

Exit ■ Control by P.E. house




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The Modelling For Mergers & AcquisitionsA Practical 3-Day Workshop

Date: 05-07 Feb 2018, 25-27 Jun 2018, 12-14 Nov 2018Location: London Standard Price: £1,800 +VAT

Membership: £1,440 + VAT BOOK NOW

Course Overview

This course covers the key elements of an acquisition or merger, from the initial stand-alone valuation of the target to the more complex accounting and modelling issues to be considered and finally analysing and assessing the value created by synergy benefits and leverage.

This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.

The approach has been designed to equip participants to put key concepts into practical use immediately.Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in transaction analysis.

As part of their work on this course participants model transactions based on real-life companies and scenarios.

By the end of this course participants will understand: ■ Drivers on M&A ■ How to model integrated financial statements ■ How to use financial statements to value a business ■ How to model the balance sheet impact of transactions ■ How to incorporate synergies into modelling work ■ How to differentiate between financing and operating synergies ■ How acquisitions can be structured

Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse leveraged acquisitions: ■ Building up from partially-complete models ■ Working with integrated financial statements ■ Developing the acquisition structure and modelling instruments ■ Running scenarios, iterating and optimising

Each participant should bring a laptop with USB port to the course to facilitate modelling work.

Day 1

M&A model build up: the starting point

■ Modelling integrated financial statements ■ Model structure ■ Key forecast ratios ■ Sourcing and cleaning historic data ■ What makes a good model?

Modelling – integrating financial statements: participants complete a partially-developed financial model for a public quoted company which integrates P&L, balance sheet and cash flow. This company will be the target company used in the merger analysis

Modelling stand-alone valuation ■ Overview of valuation methodologies ■ What do investment banks do? ■ What methodologies could we use? ■ How should we define firm value? Equity v.s. en-

terprise value ■ Calculating free cash flow before financing ■ Understanding and calculating WACC ■ Discussion – calculating WACC ■ Key issues with a two stage DCF valuation – WACC

and terminal value assumptions Modelling - valuation: participants calculate the cost of capital and complete a DCF valuation for the target company, producing a stand-alone valuation as a cross check to the acquisition price Day 2


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Accounting for corporate transactions ■ Different types of transaction and how they

are modeled in practice ■ Consolidation accounting under the current

IFRS 3 an IAS 27 ■ Change of control triggers ■ Accounting for non-controlling interests

(“NCI”) ■ Accounting for disposals ■ Partial disposals – creating a NCI ■ Partial disposal – loss of control ■ Recent changes to acquisition accounting

under IFRS ■ Definition of control ■ Calculation of goodwill

Modelling: delegates complete a variety of transaction models incorporating all types of corporate transaction and calculate the effect of a transaction on a set of consolidated accounts in preparation to perform a merger analysis with the target business and an acquirer

Acquisition finance ■ Types of transactions and synergies ■ Availability of synergies and problems in

achieving them ■ Methods available for valuing synergies ■ Key differences between public vs. private

deals, recommended vs. hostile bids ■ Choices for growth: acquisition vs. organic

vs. joint venture ■ Defence strategies for target companies

resisting a hostile bid Case study: Participants calculate synergies for a case company

Day 3Structuring acquisition finance ■ Once price has been agreed, how is it

paid? Cash vs. Shares ■ Financing choices for raising cash for an

acquisition: Debt vs. Equity ■ Calculating the success of a deal, accretion

vs value creation ■ The nature of equity instruments ■ The different risks and rewards accruing to

different parties ■ The impact of loan stock, convertibles and

preference shares on WACC ■ Calculating returns to key participants

Case study: Calculating accretion/dilution and the effect of hybrids on cost of capita

Merger modelling case study ■ Completing a merger model

■ Getting to DCF valuation for the combined busi-ness

■ Combined WACC ■ Valuing operating synergies ■ Valuing financing synergies ■ Accretion/dilution analysis vs wealth creation ■ Sense-checking the output and adjusting the

capital structure

Modelling – bringing it all together: participants complete a complex merger model for an acquisition of the target business incorporating synergy analysis and varying capital structure. The transaction is analysed on an accretion/dilution analysis and a wealth creation/return on capital analysis

At the end of this session participants will have a working acquisition model incorporating a variety of different forms of transaction analysis

Course conclusion: best practice in transaction analysis ■ Participants will have improved their understand-

ing of and have had experience of modelling mergers and acquisitions from first principles

■ Simple and clear reference Excel models - provid-ing participants with a platform for future internal modelling efforts and aiding decision making

■ Participants who, at the end of the course, under-stand the drivers on transactions and how trans-actions can be modified to suit the various parties

What our clients are saying about the course

“Methodical and clear. Liked how it went through whole process of linking up

financial statements”


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Valuing A BusinessDate: 17 May 2018, 24 Oct 2018

Location: London Standard Price: £625+VATMembership Price: £500 +VAT

Course Overview

Valuation of a business, whether in the context of investment or M&A, is central to the negotiation of a transaction. Methods of valuation vary and a fundamental difference exists between the accounting and cash-based approaches.

The course covers the topics of the financial ratios used in comparable company valuation, creative accounting, the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.

Valuation Principles ■ Value to whom? ■ Price and intrinsic value ■ The risk / return trade off ■ Strategic risk

The Accounting Approach ■ Accounting measures of performance and

value ■ Problems of the accounting approach ■ Are profits relevant? ■ GAAP vs IFRS ■ Creative accounting ■ How to find it ■ Recent examples

Review: Was the near collapse of Quindell inevitable?

Accounting Valuation Metrics ■ Asset and net asset valuations ■ Dividend-based models ■ Dividend yield ■ Dividend discounting ■ Application and drawbacks of dividend

models ■ Earnings-based ■ Price / earnings ratios ■ P/E strengths and weaknesses ■ PEG ratios ■ Enterprise value

Exercise: Valuation of a business using different metrics Comparable Company Valuation Issues ■ Is the comparability achievable? ■ Accounting principles ■ Averages, medians, outlines ■ Listed vs private ■ Sustainability of earnings ■ Business model flexibility

Exercise: Project Oxford, using comparable company techniques to value a company for acquisition

Calculating the Cost of Capital ■ Assessing the cost of debt ■ Calculating the cost of equity ■ The risk free rate ■ Equity premium ■ Beta ■ The weighted average cost of capital ■ The flaws in the capital asset pricing model ■ Alternative approaches

Exercise: Calculating the cost of equity and the weighted average cost of capital

The Cash Flow Approach to Valuation ■ The time value of money ■ Calculating the discount rate ■ Forecasting free cash flow ■ Calculating FCF ■ Identifying value drivers ■ Terminal value

Exercise: Discounting free cash flow to arrive at a value per share

Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target

Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target

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Valuing Start Up And Pre IPO CompaniesDate: 22-23 Mar 2018, 7-8 Nov 2018

Location: London Standard Price: £1,350+ VAT Membership Price: £1,080 +VAT

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Course Overview

This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value companies which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the development stage at which the company operates.

The course covers companies at the early growth and start up stage, such as technology, biotechnology and any early funding stage business. The key challenges associated with such companies are discussed and the best valuation approach considered.

The course also covers pre IPO companies at the rapidly growing phase of development which, depending on the geographic location, may cover a wide variety of sectors. As well as discussing some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken. Examples are provided to illustrate each issue. Participants will be required to bring a laptop to the course.

Overview of valuation approaches ■ Intrinsic valuation – traditional cash flow

techniques ■ Relative valuation – multiple based analysis ■ Probabilistic valuation – scenario analysis,

decision trees and simulations ■ Real options valuation – additional value

created through optionality Other valuation issues ■ Assessing risk – the risky risk free rate and

other current valuation issues ■ The economic cycle – incorporating mac-

ro-economic factors into a valuation

Valuing early stage and start-up companies and sectors ■ A life cycle view of start-up companies

• Start-up companies in context ■ Characteristics of young companies and

sectors• The key challenges with start-up compa-

nies• Visibility – a key valuation challenge

■ Valuation issues – intrinsic value• How to value existing assets in a start-up• Cash burn and the effect on existing as-

sets• The future of the business – high growth

& growth phases• Assessing growth rates - the key compo-

nent of value• Adjusting risk for small fast growing busi-

nesses• Discount rates for pure equity financed

businesses• When to calculate terminal value• Reducing the dependence on terminal

value• Value of equity claims

ӹAssessing equity claims in a early stage business

■ Valuation issues – relative valuation• Problems with start-up multiple analysis• Determining the starting point – revenue

multiples vs profitability multiples• Which year? – Determining stability for

multiple calculation and techniques for “normalising” multiples vs the sector

Valuing a start-up or early stage business in practice ■ Main errors made in valuing early stage busi-

nesses • Macro vs micro analysis• Product success and market share• Bottom up approach to a valuation

ӹCapacity capability• Estimating and using different discount

rates ӹThe use of phased discount rates

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ӹDiscount rates as maturity approaches • Ensuring consistency in a valuation• Private and public multiples• Option to expand valuation

ӹHow optionality affects valuation

Valuing pre IPO companies ■ A life cycle view of pre IPO rapid growth

companies• The rapid growth company in context

■ Characteristics of growth companies and sectors• How are growth companies different?

■ Valuation issues – intrinsic value• How historic numbers are misleading• How asset life may develop in the high

growth phase• How existing assets differ in a rapid

growth business• Where the bulk of value is created by

a rapid growth company – the growth phase

• Capital intensity and the rapid growth business

• The development of risk during the growth phase

• The stage at which a terminal value should be calculated for a rapid growth business – the path to IPO

■ Value of equity claims• The differing equity claims in a rapid

growth business• Participation by different equity holders

■ Valuation issues – relative valuationPeer groups – private vs public companies• Finding similar growth businesses – differ-

ent sectors?• Risk measures – adapting a multiple analy-

sis for risk ■ Valuing a growth business in practice

• Main errors made in valuing growth busi-nesses

• Dealing with immature markets• Assessing product cycles• Ability to execute – the key driver

■ Valuing the operating assets through the growth phase• How operating asset lives develop in the

high growth phase• Ensuring consistency in a valuation• Reinvestment and growth• Assessing investment requirements – the

returns and reinvestment equation• Completing the valuation – combining re-

turns and risk in a model

Valuing Start Up And Pre IPO Companies

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Valuing A Technology CompanyDate: 26 Feb 2018, 12 Nov 2018

Location: London Standard Price: £695 + VATMembership Price: £556 + VAT

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Course Overview

This course is ideal for those who are dealing with technology companies and need to gain an appreciation of their worth.

It focuses on the different techniques that can be deployed in assessing these companies, especially the real options approach which has achieved a wide degree of popularity. The course is also useful to those who are involved in any type of corporate transaction for technology companies from an advisory perspective.

Participants should be familiar with discounted cashflow techniques and have at least a basic understanding of business valuations.

Participants will be required to bring a laptop with a CD-Rom or USB connection to the course.

Defining the Problems ■ Differences between traditional corporate

valuation and technology valuation

■ Handling data problems that emerge with technology companies

■ Lifecycles and corporate cashflows ■ Review of DCF valuation techniques and

applications to technology businesses

■ Valuing early stage development businesses

Applying the DCF Model to Technology Companies ■ Estimating cashflows and expenditure pat-

terns ■ Evaluating the expected growth rate ■ Links to corporate strategic models ■ Combining growth rate with investment

intensity and return on investment

■ Applying the appropriate discount rate and varying the rate over time

■ Evaluating the stable growth stage and cal-culating the terminal value

■ Inherent problems of using the DCF model to value technology companies

Using Multiples in Technology Valuation ■ Importance of using EBITDA if possible, Us-

ing revenue multiples ■ Examining the broad range of possible com-

parisons ■ Using statistical analysis to improve the

multiple comparison ■ Pitfalls in using multiple approach for technol-

ogy companies

Using the Real Options Approach ■ The problems inherent in using the NPV/DCF

approach to valuation

■ Defining real options – patent rights, expan-sion option, abandonment option

■ Why real options are more applicable to tech-nology companies

■ Basics of real option valuation using binomial trees and a lattice approach

■ Financial option pricing (Black Scholes) and the link to real options

■ Management options and the value of strategic flexibility

■ Using real options approach to improve the un-derstanding of technology valuations


“Covers price vs value”

“A proactive course - helped challenge traditional methods & point out common

errors”“Good discussions regarding the implications

of difference techniques”

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Advanced Business Valuation and Modelling

In-House

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Course Overview

This advanced valuation and modelling course builds on basic concepts by developing DCF techniques and taking a fundamental approach to multiple analysis.

Financial forecasting techniques are developed to incorporate more complex forecasting issues including provisions, off balance sheet finance, JV/associates, minorities, tax losses/deferred tax, and stock options.

More advanced analysis techniques are then used to develop a basic DCF approach including APV and EVA analysis, cost of capital for hybrid instruments and calculating a cost of capital for emerging market stocks. Each are explained in relation to the calculation of capital and return and the impact on modelling cash flows from a company.

Examples are provided to illustrate each issue.

Participants will be required to bring a laptop to the course.

The Value Driver Approach to DCF ■ What return is implied by a two stage DCF

model? ■ Developing DCF techniques to cope with

growth and fade ■ Importance of ROCE and key drivers ■ Three stage DCF models with fade, why this

will produce a more accurate valuation Fundamental Multiples ■ Formula’s for fundamental multiples ■ Identifying key drivers of the following mul-

tiples:• EV/EBITDA: ROCE is key• EV/Sales: is margin important?• PEG: misleading numbers?• Price/Book: good or bad predictor of val-

ue?• Price/sales: when is it useful?• Valuation matrix

Developing the cost of capital ■ WACC revisited ■ Leveraged and re-leveraged betas ■ Dealing with hybrids:

• Calculating equity and debt components• The approach to hybrid betas• Calculating the cost of a hybrid

■ Dealing with cost of capital in emerging mar-kets• Calculating the equity risk premium• What is the cost of debt?• Default rate and relative standard devia-

tion approach

Further DCF analysis ■ APV analysis – how much value is created by

leverage? ■ EVA analysis – how much value is created in

the future? ■ Comparison with DCF and conditions for equiva-

lence with DCF

Modelling Course Content:

Modelling more complex DCF analysis ■ Explicit forecast period issues ■ Terminal value issues ■ How adjustments affect valuation ■ Adjusting the cost of capital for hybrids ■ Adjusting the cost of capital in emerging mar-

kets

Modelling APV and EVA ■ APV under static and constant growth ■ APV and DCF equivalence – required conditions ■ Modelling EVA valuation ■ EVA and DCF equivalence – required conditions

Modelling extra’s – dealing with ■ Tax losses and deferred tax ■ Stock options - expenses & dilution ■ JV/Associates: cost or valuation? ■ Dividends ■ Minorities – forthcoming changes to Non-Con-

trolling Interest ■ Provisions


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Advanced M&A ModellingIn-House

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Course Overview

This course follows on from the M&A modelling course and develops some of the principles previously covered but moves beyond simple synergy analysis to analyse other options available to an acquirer to extract maximum value post acquisition.

The course looks at more complex M&A transactions post acquisition including different types of disposals, asset sales, carve outs or trade sale/IPO and the process used to determine whether a disposal will enhance the value of an acquired business. Sometimes these disposals will be voluntary and sometimes forced through competition issues.

In each case the participants model the impact of the various types of transaction on a case company and assess the most appropriate transaction for the business. The course then examines the various issues associated with restructuring a business post acquisition as a means to extract value, including when restructuring is the best option and the forms of restructuring that can be considered. Each form of restructuring after an acquisition is again modelled using a case company. This course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.

The approach has been designed to equip participants to put key concepts into practical use immediately.

Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in financial modelling.

By the end of this course participants will understand: ■ The decision making process for various types of value extraction post acquisition ■ How to model different types of value maximisation by way of disposal ■ The restructuring process for the capital structure of an acquired business and in which circum-

stances to apply it ■ How to model and assess different restructuring options

Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse corporate transactions: ■ Building up from partially-complete models ■ Working with integrated financial statements ■ Running scenarios, iterating and optimising

Each participant should bring a laptop with USB port to the course to facilitate modelling work

Refresher: Accounting for corporate transactions ■ Different types of transaction and how they

are modelled in practice ■ Consolidation accounting under the current

IFRS 3 and IAS 27 ■ Accounting for disposals ■ Partial disposals – creating a NCI ■ Partial disposal – loss of control ■ Recent changes to acquisition accounting

under IFRS

Case study – The participants will model

the initial acquisition transaction that will form the basis for the post acquisition analysis and value the combined business to arrive at a staring valuation Overview of post-acquisition corporate transactions ■ Historic trends in corporate disposals ■ Involuntary disposals vs voluntary disposals ■ Reasons for voluntary disposals ■ Accounting for different types of disposal

• Asset sales• Partial disposal of equity• Full disposal of equity

■ Disposals, spin offs, carve outs and other


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disposal options ■ Restructuring and recapitalisation

Disposal and spin off process ■ Disposal or spin off decision

• Completing the financial analysis ■ Formulation of the restructuring plan

• Relationship between the parent and subsidiary

• Determining the assets and liabilities of the disposal

■ Dealing with shareholders ■ Completing the deal

Financial evaluation of a disposal ■ Estimation of after tax cash flows ■ Determination of the disposal unit’s risk

adjusted discount rate ■ Present value of the disposal related cash

flows ■ Assessing the market value of liabilities ■ Calculating disposal proceeds and value

creation

Modelling asset disposal post- acquisition ■ Asset restructuring and value creation ■ Removing a diversification discount, addi-

tivity in practice ■ Using equity to restructure, share repur-

chases ■ Asset disposals – the decision process and

modelling a transaction

Case study – The participants will model the first approach to value creation post-acquisition transaction by reviewing an operating unit of the acquired business to determine whether to dispose of any of the assets of the unit by way of asset sale to enhance the value of the acquired business. The participants will then analyse the resulting business

Modelling a spin off post- acquisition ■ Trends in spin offs, involuntary spin offs

and defensive spin offs ■ Potential tax issues with spin offs ■ Treatments of warrants and convertible

securities ■ Seller financial assistance ■ Allocation of debt and bond obligations ■ Wealth effect of spins offs in capital mar-

kets

Case study – The participants will review the various subsidiaries of the acquired

business to determine whether to dispose of any of the units by way of spin off to enhance the value of the acquired business. The participants will then model the spin off transaction and analyse the resulting business.

Modelling equity carve outs post- acquisition ■ Background to equity carve out in capital

markets• Characteristics of carve out firms• Use of carve out proceeds• Carve outs vs IPOs• Carve outs vs spin offs

■ Equity carve out or IPO – the decision pro-cess and modelling a transaction

Case study – The participants will review the various subsidiaries of the acquired business to determine whether to dispose of any of the units by way of carve out to enhance the value of the acquired business. The participants will then model the carve out transaction and analyse the resulting business.

Assessing asset restructuring ■ Sum of the parts valuation ■ Assessing restructuring costs and benefits ■ Undertaking a restructuring analysis for a

business• Sum of the parts valuation – multiples• Sum of the parts valuation – free cash

flows• Valuing the effect of cost reduction• Monetising real estate• Share repurchases

■ Other options – voluntary liquidation or bust ups

■ Developing a restructuring plan for disposals

Case study – The participants will complete a series of case studies on various aspects of an asset restructuring. The participants will also analyse and assess the various restructuring options to determine which will create the most value.

Restructuring companies post acquisition ■ Overview of companies that may require re-

structuring post acquisition• Types of business failure• Causes of business failure and options for

dealing with them• Bankruptcy trends• Dealing with financial distress• Framework for recapitalisations


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Case study – The participants are introduced to a new transaction between a healthy and distressed company. The participants model the transaction and value the combined business.

Restructuring options post acquisition ■ Out of court workouts and bankruptcy

• Out of court workouts• In court reorganisation• Pre-packaged bankruptcy• Liquidation

■ Reorganisation vs liquidation ■ Reorganisation process – corporate control

and default ■ Accounting treatment

• Troubled debt restructuring• Asset impairment• Fresh start accounting

■ Valuing recapitalisations• Valuing new debt• Valuing equity• Recovery value• Recapitalisation rights and options

Case study – The participants model the various types of distressed company restructuring options and determine which option is preferable. The participants also value different elements of the post- acquisition transactions to assess various recapitalisation options.




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Valuing Rapid Growth Companies and SectorsIn House

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Course Overview

This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value sectors which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the sector in which the company operates.

The course covers companies at the rapidly growing phase of development which, depending on the geographic location, may cover media, telecoms and pharmaceutical sectors. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.




techniques ■ Relative valuation – multiple based analysis ■ Adapting risk – time varying WACC ■ Adjusting for survival

Other valuation issues ■ Assessing risk – the risky risk free rate and



Valuing rapid growth companies and sectors ■ A life cycle view of rapid growth companies

• The rapid growth company in context ■ Characteristics of growth companies and

sectors• How are growth companies different?







• The stage at which a terminal value should be calculated for a rapid growth

business ■ Value of equity claims

• The differing equity claims in a rapid growth business

• Participation by different equity holders ■ Valuation issues – relative valuation

• Peer groups• Finding similar growth businesses – differ-

ent sectors?• Risk measures – adapting a multiple analy-

sis for risk

■ Valuing a growth business in practice• Main errors made in valuing growth busi-

nesses • Dealing with immature markets• Assessing product cycles• Ability to execute – the key driver

■ Valuing the operating assets through the growth phase• How operating asset lives develop in the

high growth phase• Ensuring consistency in a valuation• Reinvestment and growth• Assessing investment requirements – the

returns and reinvestment equation• Completing the valuation – combining re-

turns and risk in a model

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Applied Financial Mathematics in Excel Training

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Course Overview

This workshop focusses on the underlying mathematics techniques which underpin project finance, energy, leasing and other analysis models. Rather than using a financial calculator such as an HP12C, the workshop demonstrates how to apply financial mathematics to Excel effectively.

Starting with a review of model design, the workshop introduces present and future values and shows how these basic concepts can be used to solve a range of financial mathematics problems. The workshop ranges over complex cash flows, depreciation, structured amortisation, fixed income, derivatives and data analysis.

Workshop ObjectivesThis one-day workshop explores:

■ Financial concepts underpinning a range of models ■ Model design standards ■ Cash flow methods ■ Fixed income models ■ Derivative concepts ■ Basic statistics

The workshop is highly practical and each session begins with a discussion of each technique followed by practical exercises. At the end of the workshop, delegates will understand how to apply financial mathematics to Excel spreadsheets.

Workshop Teaching MethodThe programme is taught using formal lectures combined with practical and interactive case studies and exercises to reinforce the concepts covered in each teaching session. Emphasis is placed on delegates gaining practical, hands-on experience of building financial models in Excel.

Comprehensive product notes and modelling software will be provided for future reference. Delegates receive a full pack of Excel software and templates for future reference as part of the course materials.

Delegate ProfileThis is a course for analysts and practitioners who want to use Excel as a tool to assist with the decision making process. Senior financial professionals using Excel spreadsheets who should attend include:

■ Financial analysts ■ CFO's ■ Financial controllers ■ Analysts ■ Accountants ■ Credit managers ■ Treasury managers ■ Risk managers ■ Middle office staff ■ Mergers, acquisitions and buyout specialists and corporate finance staff

Delegate LevelDelegates will be expected to have finance knowledge and a working knowledge of Excel, including:

• Opening and closing Excel files • Excel screen menu and standard toolbar • Auto fill • Moving around a worksheet • Moving around the sheets in a workbook • Creating files


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Applied Financial Mathematics in Excel Training

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• Deleting files and individual sheets • Changing column width and row height • Entering simple formulas • Entering labels • Cell referencing • Centring titles and merging cells • Simple cell formatting • Number formats • Changing font sizes and colours • Copy, cut and pasting cell contents • Inserting graphic objects • Custom views ■ Previewing worksheets ■ Printing documents and ranges

Basic Model Design ■ Model design refresher ■ Importance of layout, colours and organi-

sation ■ Useful Excel techniques and shortcuts

Exercise: reconstructing a model

Single Cash Flows ■ Basic concepts ■ Time value of money ■ Available Excel functions ■ Simple and compound interest ■ Nominal and effective rates ■ Effect of compounding ■ Conversions and comparisons ■ Effect of changing interest rates on annui-

ties ■ Amortisation methods

Exercise: calculating payments and amortisation for structured loans

Multiple Cash Flows ■ Basic concepts ■ Common NPV/IRR mistakes ■ Effect of changing interest rates

Exercise: constructing and valuing a complex cash flow with multiple rates

Depreciation ■ Depreciation methods ■ Available functions

Exercise: depreciating assets and comparing results

Fixed Income ■ Bond cash flows refresher ■ Yield calculations ■ Relationship between yield and price ■ Clean and dirty prices with accrued interest ■ Modelling duration and modified duration ■ Convexity ■ Uses of duration and convexity ■ Zero coupons ■ Coupon days

Exercise: modelling bond risks

Options ■ Options pricing ■ Components of options price ■ Payoffs ■ Generating pricing models (Binomial, Black

Scholes etc.) ■ Put call parity ■ Greeks

Exercise: constructing a binomial and a Black Scholes model

Basic Statistics ■ Useful statistical functions ■ Descriptive statistics ■ Distribution shapes ■ Sampling ■ Variance and standard deviation ■ Statistics add-in ■ Analysing a dataset

Exercise: reviewing a dataset and presenting conclusions


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Emerging Market Bank Modelling & ValuationIn-House

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Course Overview

This course covers the key elements of modelling and valuing the activities of an emerging market commercial bank, including the main elements of retail and commercial banking.

After an overview of the key elements of bank analysis, participants will build an integrated financial statement forecast model, projecting asset and liability balances, interest rates and spreads for key assets and liabilities, using industry best practices.

A real-world emerging market case study and financial filings will be used to extract key information. Participants will learn industry-specific forecast methodologies and apply them in a financial model.

The course will allow participants to understanding how the Basel II, 2.5 and III compliance requirements effect bank regulation, including minimum capital requirements, the supervisory review process and disclosure. The course will allow participants to calculate risk-weighted assets, tier one and tier two capital and to model a bank income statement using the balance sheet as a driver.

Once the participants have built a financial model, they will use this to value the case study bank using cash flow based and multiple based valuation techniques.

The participants will consider the type of cash flow model to be used for each case study bank, the various cash flow models that could be used and how issue such as terminal value should be treated.

The interaction with the regulatory capital requirements and how the upcoming Basel III regulations will affect capital requirements will be considered.

Case Study: The participants will use a variety of case studies and exercises during the three days, based on emerging market case study company.

Participants will be required to bring a laptop and a calculator to the course.

■

The fundamentals of bank analysis

■ Banking in context and corporate structure ■ Examine the components of the balance

sheet • Liquid items – cash and deposits • Trading items, derivatives and other short

term items • Loans and advances • Equity and reserves • Off balance sheet items • Accounting and valuation issues – impact

of different valuation approaches on the capital base and income statement

Case Study I: Participants analyse the liquidity and maturity of a case study balance sheet

Analysing the components of the income statement

• Interest income • Fees and commissions • Income from affiliates

■ Performance analysis - explain the impor-tance of key ratios: profitability, operational, and risk ratios

■ The CAMELs approach to bank analysis

Case Study II: Participants analyse the income statement of a case study company and calculate various key ratios for the business


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Building a financial institution forecast model

■ Overview of bank accounting & regulation ■ Key elements of a bank model

• The balance sheet as a driver • Key elements of the income statement • Determining economic drivers for different

types of banks

Case Study III: Participants are introduced to the bank forecasting model and review its structure, linking up the balance sheet and income statement

Modelling different banking activities

■ Overview of the key activities in a commer-cial bank

■ Modelling the core activities: determining the key drivers • Retail banking • Consumer lending and credit cards • Commercial banking • Investment banking • Asset / wealth management

■ Incorporating core activities into the income statement and balance sheet

Case Study IV: Participants build out the case company model incorporating the various core activities into the model

Commercial banks and the regulatory framework

■ Basel II compliance and its effect on bank regulation • Pillar I: minimum capital requirements • Pillar 2: supervisory review process • Pillar 3: market discipline

■ Basel III and the effect on capital ratios ■ Calculating risk-weighted assets ■ Calculating tier one and tier two capital

Case Study V: Participants model risk-weighted assets and tier one and tier capital for a case company

Further issues to consider in a bank model ■ Debt service and income as operating or

financing expense ■ Regulatory constraints on reinvestment and

implications on growth ■ Projecting cash flows ■ Incorporating regulatory constraints into the

model ■ Dealing with regulatory capital ratios ■ Calculating minimum capital adequacy

Case Study VI: Participants complete the case company model incorporating a cash flow forecast and various regulatory ratios

Auditing the model and sensitivity/scenario analysis

■ Balancing the model and checking for accuracy ■ Error-proofing techniques & sensitivity analysis ■ Ratio analysis – the key efficiency, operating

and financial ratios for a bank ■ Building scenarios – the key drivers ■ Sensitivity analysis - flexing financials and

capital structure including the implications of Basel III on capital requirements

Case Study VII: Participants build error proofing techniques and scenario/sensitivity analysis into the case company model and produce efficiency, operating and financial ratios for the case company

Case Study VII: Participants build error proofing techniques and scenario/sensitivity analysis into the case company model and produce efficiency, operating and financial ratios for the case company

Valuing a bank

■ Valuation issues – getting to intrinsic value in a bank valuation• Issues with a bank business model• Key accounting issues in the bank sector• The valuation issues surrounding regulatory

capital ■ Valuation issues – relative valuation tools used

in a bank valuation• The key multiples used• Deriving multiples from fundamentals

■ Valuation approaches for a bank – building a dividend discount model• Determining the number of stages to be

used• Calculating the discount rate• Maturity phase and terminal value assump-

tions





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Case study VIII: Participants build a dividend discount valuation for the case company

■ Valuation approaches for a bank – building a residual income model• Determining the number of stages to be

used• Calculating the discount rate• Maturity phase and terminal value as-

sumptions

Case study IX: Participants build a residual income valuation for the case company

■ Valuation approaches for a bank – building a cash flow to equity model• Determining the number of stages to be

used• Calculating the discount rate• Maturity phase and terminal value as-

sumptions• Implication of changing capital require-

ments including Basel II I capital ratios

Case study X: Participants build a cash flow to equity valuation for the case company





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Excel Auditing WorkshopIn-House

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Course Overview

Spreadsheets are used throughout financial institutions for financial calculations, budgeting, forecasting, projects and data analysis. Many institutions do not establish a formal review process for operational spreadsheets and it is assumed that the analysts check their own work. Yet there are many recorded instances of spreadsheet failures and the costs and losses involved.

This workshop aims to show delegates a number of tried and tested techniques in a practical one-day workshop that will immediately prove useful and offer rapid payback. It does not matter whether the delegates are involved in accounting or project finance, the techniques in the workshop can be applied to all kinds of spreadsheets. Anybody using Excel to make financial decisions should be confident about the accuracy of their models and this workshop will certainly improve delegates modelling expertise.

Workshop Objectives

This one-day workshop explores:

■ Aims and outlines governing model design and construction ■ Designing and building in accuracy ■ Internal and external auditing techniques ■ Planning a model review and audit

The workshop is highly practical and each session begins with a discussion of each technique followed by practical exercises. The models become more complex during the day culminating with a final case study to include all the elements.

Workshop Teaching Method

The programme is taught using formal lectures combined with practical and interactive case studies and exercises to reinforce the concepts covered in each teaching session. Emphasis is placed on delegates gaining practical, hands-on experience of the design and auditing of financial models in Excel.Comprehensive product notes and modelling software will be provided for future reference. Delegates receive a full pack of Excel software and templates for future reference as part of the course materials.

Delegate Profile

This is a course for analysts and practitioners who want to use Excel as a tool to assist with the decision making process. Senior financial professionals using Excel spreadsheets who should attend include:

■ Financial analysts ■ CFO's ■ Financial controllers ■ Analysts ■ Accountants ■ Credit managers ■ Treasury managers ■ Risk managers ■ Middle office staff ■ Mergers, acquisitions and buyout specialists and corporate finance staff



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Delegate LevelDelegates will be expected to have finance knowledge and a working knowledge of Excel, including:

■ Opening and closing Excel files ■ Excel screen menu and standard toolbar ■ Auto fill ■ Moving around a worksheet ■ Moving around the sheets in a workbook ■ Creating files ■ Deleting files and individual sheets ■ Changing column width and row height ■ Entering simple formulas ■ Entering labels ■ Cell referencing ■ Centring titles and merging cells ■ Simple cell formatting ■ Number formats ■ Changing font sizes and colours ■ Copy, cut and pasting cell contents ■ Inserting graphic objects ■ Custom views ■ Previewing worksheets ■ Printing documents and ranges

Common Spreadsheet Errors ■ Reasons for model auditing ■ Assessing potential financial losses ■ Links to operational risk framework ■ Basis of spreadsheet design to reduce

errors ■ Excel internal methods

Exercise: reconstructing a model

Auditing Framework ■ Controls, risks, control activities, informa-

tion, communication ■ Internal and IT controls ■ Database of available spreadsheet types ■ Reporting, regulatory compliance and

operations ■ Defining spreadsheet types ■ Scoping necessary controls ■ Split of responsibilities ■ Developing a project plan ■ Identifying and classifying deficiencies

Exercise: reviewing spreadsheet types and planning an audit

Internal Auditing Techniques ■ Consistency checks ■ Built-in Excel techniques ■ Dealing with links and circular references ■ Improving spreadsheets to allow for internal

auditing techniques

Exercise: checking a multi-page spreadsheet

External Auditing Techniques ■ Matching and consistency checks ■ External techniques and methods ■ Creating an auditing checklist

Exercise: finding errors in multiple spreadsheets

Auditing Macros ■ How to audit macros ■ Minimum required documentation ■ Understanding macro functionality

Exercise: auditing macros in existing model

Software ■ Third party software available ■ Advantages and disadvantages ■ Auditing using software

Exercise: using software for auditing

Auditing Practical ■ Review of a complete model ■ Listing weaknesses and errors

Exercise: presenting full audit and report

Workshop Summary ■ Future Planning ■ Developing a plan for future spreadsheet

projects ■ Design improvements ■ Monitoring ■ Documentation ■ On-going testing






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Lease Modelling in Excel Training CourseIn-House

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Course Overview

When looking at any leasing opportunity, the ability to perform accurate and realistic analysis is imperative. In today's ever-changing business environment, the capability to write simple spreadsheets is not enough: you have to be able to produce accurate tools for analysis. With this in mind, a well-structured financial model can facilitate and improve the reliability and quality of your decision-making.

This workshop is designed for professionals involved in lease structuring and controlling, who would like to utilize the powerful features of Excel more effectively. New accounting standards have been announced and the workshop objective is to develop and build a comprehensive model incorporating pricing, latest accounting, evaluation and asset management.

Lease Modelling Training Objectives This two-day workshop explores: ■ Aims and outlines governing model design and construction ■ Designing and building accurate financial models ■ Lease accounting standards ■ Evaluation and pricing methods in Excel

The workshop is highly practical and involves building a complete leasing model from a skeleton starter model.

Workshop Teaching MethodThis course is both practical and interactive. It has been designed to be immediately relevant to professionals involved in the structuring of a lease transaction and for professionals involved in determining the method of finance for a particular asset or asset class. Through a series of formal lectures, practical and interactive case studies and worked examples, you will understand how and why a particular technique is used. Emphasis is placed on delegates gaining practical hands-on experience of the design and construction of lease models.

Delegates receive a full pack of Excel software and templates for future reference as part of the course materials.

Benefits of Attending ■ Understand the scope and techniques of modelling to help improve the pricing, structuring

and profitability of lease transactions ■ Evaluate latest accounting standards applied to leasing ■ Build and develop specialized lease evaluation models ■ Incorporate risk and sensitivity analysis to your lease models ■ Add asset management to cash models

Delegate Level for Attendees

Delegates will be expected to have finance knowledge and a working knowledge of Excel, including: ■ Opening and closing Excel files ■ Excel screen menu and standard toolbar ■ Auto fill ■ Moving around a worksheet ■ Moving around the sheets in a workbook ■ Creating files ■ Deleting files and individual sheets ■ Changing column width and row height ■ Entering simple formulas ■ Entering labels ■ Cell referencing ■ Centring titles and merging cells ■ Simple cell formatting ■ Number formats



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■ Changing font sizes and colours ■ Copy, cut and pasting cell contents ■ Inserting graphic objects ■ Custom views ■ Previewing worksheets ■ Printing documents and ranges

Basic Excel functions and the ability to insert functions: ■ Basic financial functions - NPV, IRR, NPER, RATE, PV, PMT, FV ■ Logic functions - IF, AND, OR

In addition, attendees need some basic finance knowledge for the modelling workshops such as: ■ Present value ■ Future value ■ Nominal and compound interest rates ■ Net present value ■ Internal rate of return

Day One - Lease Modelling Techniques

Introduction and Overview ■ Review of current leasing industry changes

and accounting standards ■ Refresher key terms and types of leases ■ Outline of financial modelling for leasing ■ Examples of Excel financial models ■ Concepts of spreadsheet best practice ■ Common modelling errors

Exercise: analysing examples of modelling techniques

Lease Model Design ■ Model design and structure – key steps ■ Exercise: Defining a model plan for a finan-

cial calculator ■ Useful Excel techniques and methods

Exercise: starting the workshop case model

Pricing and Structuring ■ Review of lease pricing theory ■ Generating lease cash flows ■ Calculating model NPV and IRR ■ Merged cost of capital derivation ■ Lessor return measures

Exercise: building and valuing cash flowsRisk Techniques ■ Risk and multiple answers ■ Built-in scenario techniques ■ Advanced financial functions

Exercise: layering risk techniques on to the course model

Day Two - Lease Modelling Techniques

Lease Accounting for the Lessee ■ Review of accounting standards e.g. IAS 17,

SSAP 21, SFAS 13, FASB Model and IFRS 16 ■ Useful Excel functions ■ Modelling requirements for the income and

balance sheet ■ Suggested schedule layout

Exercise: adding leasing accounting to the course model

Lessor Lease Accounting ■ Lessor accounting under current and new

standards ■ Accounting methods explained

Exercise: adding leasing accounting to the course model






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Tax-based Lease Evaluation ■ Actuarial methods applied to Excel ■ Overview of evaluation methods ■ Optimisation and targeting ■ Goal seek and Solver methods

Exercise: targeting returns using the course model

Asset Management ■ Asset management issues ■ Risk assessment by asset class ■ Determining asset risk profile ■ Upgrading, settlements and additions

Exercise: calculating risk profiles on course model

Model Completion ■ Model review ■ Final model check






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Modelling Service-based BusinessesIn-House

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Course Overview

Financial modelling for service businesses has long been a relatively neglected area in the academic and workplace training environments. A possible reason is that as such businesses are relatively sparing in their capex requirements, they do not face such obviously life-threatening financial risks as, say, a utility that passes a point of no return in the construction of a multimillion-pound power plant before discovering that it has seriously overestimated long-term demand for the plant’s output, or underestimated the risk that the plant’s basic technology could become obsolete.

It is also undoubtedly the case that it is less problematic to model projects whose cash outflows occur predominantly at the outset and whose future cash flows are overwhelmingly positive, than projects whose cash flows principally comprise incremental changes to future operating inflows and outflows. Despite the fact that the strategic financial decisions made by managers of service-based businesses might be less eye-catching than those made by their counterparts in the capital-intensive industries, their decisions are no less complex and no less critical to their firms’ long-term health and even to their survival.

And whereas it might be true that a nuclear power station cannot economically be converted to coal-burning, it is certainly not true that supposedly ‘soft’ human resources are infinitely adaptable - or freely exchangeable in a supposedly efficient market for highly skilled labour. This course is designed for senior managers of service businesses as well as for their financial and strategy advisers. It will enable them to contribute more positively to the strategic decision making process, not only by refining and formalising their modelling skills which in many cases might have been ‘picked up on the job’, but also by enhancing their ability to communicate financial data, projections and arguments more effectively and persuasively.

The course aims to strike an optimum balance between theoretical rigour and practical utility. On the first day, the more didactic segments are lavishly illustrated with real-world examples, and are frequently interspersed with group exercises (mostly computer-based) and with less formally structured discussions.

On the second day, participants work collaboratively and continuously on a major Excel-based valuation of two real-world service companies or projects, and the course ends with presentations of their findings by two or more of the groups, for critical analysis and discussion by the entire class.

Day 1

Basics of financial modelling ■ Establishing the objectives of the modelling

exercise, e.g.• Improving risk-adjusted returns from an

existing business• Optimising the deployment of one or

more existing non-financial scarce re-sources

• Repositioning an existing business• Disposal of an existing business• Acquisition of another business or as-

sets, as (i) an extension of the existing business or (ii) a complement to the existing business or (iii) diversification

• Financial planning (e.g. capital structure, liquidity management, debt covenant renegotiation)

■ Specifying the desired outputs, e.g.• Net Present Value or Internal Rate of

Return of an internal project• Enterprise or Equity Value, or key perfor-

mance metrics of an existing business or of a potential acquisition

• Forecast of positive or negative headroom within existing / proposed debt limits

• Forecast of compliance or non-compliance with other financial covenants

■ Specifying the necessary inputs, e.g.• Historic financial statements (adjusted as

necessary to conform to the preparer’s own accounting policies)

• External assumptions to support projec-tions

• Component elements in cost of capitalThe modelling process ■ Identifying the drivers of profit and cash flow

• Identify and specify historic relationships between variables in costs and revenues

• Estimate expected changes to historic driv-ers in light of management action (i.e. the project) and external developments

• Identify and specify drivers for new lines of



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■business

• Identifying key risks and their likely evo-lution and impact, e.g. differential infla-tion rates for specific inputs and outputs, unforeseen action by government

■ Steps in preparation of future financial statements• Focus on line items that have been or are

expected to become key and /or material• Use drivers to roll forward from historic to

future financial statements• Sense-check output from future values of

cash, debt, equity and working capital ■ Five steps in an NPV-based analysis (project

appraisal)• Estimate time horizon (economic useful

life)• Estimate relevant (i.e. incremental,

non-financing, after tax) cash flows• Estimate cost of capital (CAPM or divi-

dend model?)• Calculate NPV• Interrogate result via sensitivity and sce-

nario analysisJustify positive NPV, qualitatively and quantitatively, by independent reference to identifiable source of competitive advantage, or to the creation of valuable options

Special points to watch ■ Accounting issues:

• Consistency of accounting policies gener-ally

• Revenue recognition principles and prac-tice

• Recording and valuation of non-physical work-in-progress

• Deferred income and expense• Provisions, e.g. for returns, warranties,

after-sales service• Finance versus operating leases• Longer-term contracts: timing mismatch-

es between (a) revenue and cost recogni-tion, and (b) cash flow

• Foreign currency differences• Deferred taxation• Treatment of intangible assets generally,

and specifically: ӹCapitalisation of eligible development expense ӹGoodwill ӹAmortisation and impairment

■ Sources of forecasting error, and possible remedies, for instance:• Optimism bias, either in amount, tim-

ing and/or amount of future cash flows (compensate by adjusting hurdle rate of return, or converting expected cash flows to certainty equivalents)

• Failure to identify how management ac-tions and inactions can create, destroy or exercise potentially valuable options, possibly in apparently unrelated business areas (explore outcomes of simple deci-sion-tree analysis)

• Miscalculate economic life of project (‘people projects’, unlike power stations, can transition imperceptibly into activities that are different from what management intended)

Basic tips and tricks for constructing an Excel-based valuation that is at once comprehensive, coherent, consistent and flexible

■ The template must be appropriate to the purpose of the exercise

■ Line and column descriptions must indicate relationship between values: “Go and look at the formulae” is no way to treat grown-up readers

■ Assumptions (and variations of assumptions) must be highlighted

■ Sources and relative reliability of different data inputs must be highlighted

■ Top-level results must be summarised on front sheet, and indicate not only a point value but a range of values, as well as an indication of the principle parameters for the range

Day Two

Extended exercise in comparative valuation of two companies in the same or similar service industries, e.g. IT software and support, facilities management, profes-sional services.

The day will start with a plenary brainstorming session to identify the principal points of interest in the exercise, ranging from the strategic and intangible issues to the down-to-earth practicalities of sourcing data, formulating assumptions and processing the data into a coherent presentation.

Throughout the day, the trainer will be on hand to give individual support as required, and to act as a channel to share individuals’ insights and experiences with the group as a whole.

In the last session of the day, two or more groups will be invited to present their work to the class as a whole, for discussion and critical analysis.

Finally, the trainer will hand out his own ‘model model’, in two contrasting formats, for the participants to compare with their own work.






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VBA and Macros

In-House

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Basics

■ Excel VBA overview ■ Understanding macro steps ■ Exercise: writing simple macro to format

a sheet and set up print areas ■ Modifying macro steps ■ Storing values in variables ■ Adding comments ■ Stepping through macros ■ Exercise: stepping and controlling files

with automation macros ■ Getting help on macros ■ Exercise: setting up best practice macro

template ■ Debugging macros ■ Exercise: find errors in existing macros ■ Objects, properties and methods

Range Object

■ Selection property ■ Range property ■ Exercise: setting sheet and workbook

properties ■ Targeting cells ■ Counting the cells in a selection ■ Exercise: counting cells in a range ■ Using the Offset statement ■ Retrieving the value of a cell ■ Retrieving a formula from a cell ■ Setting the value of cells ■ Exercise: setting values and properties ■ Exercise: set up audit tool

Using Visual Basic

■ Language structure ■ Using variables ■ Declaring variables ■ Data types ■ Exercise: retrieving data types ■ Making decisions ■ Exercise: including error code ■ If statements ■ For and while statements ■ Looping structures ■ Exercise: circular references macro ■ Exercise: Fibonacci sequence macro

Interactivity ■ Assigning a macro to a menu ■ Exercise: headers and footers macro

assigned to a menu ■ Assigning a macro to a toolbar ■ Assigning macros to other objects ■ Exercise: dynamic menu macro ■ VBA toolbox ■ Working with events ■ Exercise: Auto_Open/Close macro ■ Built-in dialogue boxes ■ Using form controls ■ Exercise: set up disclaimer form


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Valuation Masterclass - Valuing Difficult BusinessesIn-House

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Traditional valuation approaches for non-financial businesses focus on the use of multiples or cash flow based analysis. What these techniques assume is a stability and a risk profile that is not found in the more difficult types of business to value. This leads to errors in valuation that traditional valuation tools struggle correct, indeed errors that analysts are sometimes unaware of. Assumptions about risk and profitability need to be adapted when dealing with these types of business and this advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value companies and sectors which cannot be valued using traditional valuation techniques.

The first area covered where analysts struggle to value business correctly is at the early growth and start up stage (the Facebook stage), which would cover sectors such as technology, biotechnology and any early funding stage business. Traditional valuation tools struggle to estimate profitability (what size will the eventual market be?) and risk (will the company survive and how does risk change if it does?) The key challenges associated with such companies are discussed, the problems with traditional valuation approaches and the best valuation approach considered. The second area is more mature but rapidly growing companies which, depending on the geographic location, may cover technology, media, telecoms and pharmaceutical sectors. Here risk is again a problem area, but the rate and timing of the peak in growth becomes a key issue (the Apple stage).

Thirdly cyclical and commodity companies are analysed to identify the issues with sectors such as resources, energy and chemicals companies, where analysts seem to become more focused on the ability to forecast the economic than the company and specific approaches to long run commodity prices are analysed ($40 or $100 oil). Finally in the graveyard stage declining companies are considered where traditional valuation approaches become less relevant and a “wind down” approach may be applicable. Here traditional tools again fail to value risk, but where significant money can be made if a company survives. The course covers the best techniques to assess risk in these types of businesses and how option techniques can be applied to valuation.

As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. As such the course provides an “analytic toolkit” for anyone looking to value almost any type of non-financial company across a range of sectors and lifecycle stages.



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Course Content

Overview of valuation approaches

■ Intrinsic valuation – traditional cash flow techniques

■ Relative valuation – multiple based anal-ysis

■ Probabilistic valuation – scenario analysis, decision trees and simulations

■ Real options valuation – additional value created through optionality

Other valuation issues

■ Assessing risk – the risky risk free rate and other current valuation issues

■ The economic cycle – incorporating mac-ro-economic factors into a valuation

Valuing early stage and start-up companies and sectors

■ A life cycle view of start-up companies• Start-up companies in context

■ Characteristics of young companies and sectors• The key challenges with start-up com-

panies• Visibility – a key valuation challenge

■ Valuation issues – intrinsic value• How to value existing assets in a start-

up• Cash burn and the effect on existing

assets• The future of the business – high

growth and growth phases• Assessing growth rates - the key com-

ponent of value• Adjusting risk for small fast growing

businesses• Discount rates for pure equity financed

businesses• When to calculate terminal value• • Reducing the dependence on

terminal value• Value of equity claims

■ Assessing equity claims in a early stage business

■ Valuation issues – relative valuation• Problems with start-up multiple analy-

sis• Determining the starting point – reve-

nue multiples vs profitability multiples• Which year? – Determining stability for


■ Valuing a start-up or early stage business in practice• Main errors made in valuing early stage

businesses • Macro vs micro analysis• Product success and market share• Bottom up approach to a valuation

■ Capacity capability• Estimating and using different discount

rates ■ The use of phased discount rates ■ Discount rates as maturity approaches

• Ensuring consistency in a valuation• Private and public multiples• Option to expand valuation

> How optionality affects valuation

Valuing rapid growth companies and sectors

■ A life cycle view of rapid growth compa-nies• The rapid growth company in context

■ Characteristics of growth companies and sectors• How are growth companies different?







• The stage at which a terminal value should be calculated for a rapid growth business

■ Value of equity claims• The differing equity claims in a rapid

growth business• Participation by different equity holders

■ Valuation issues – relative valuation• Peer groups• Finding similar growth businesses – dif-

ferent sectors?• Risk measures – adapting a multiple

analysis for risk ■ Valuing a growth business in practice

• Main errors made in valuing growth businesses

• Dealing with immature markets




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■Course Content

• Assessing product cycles• Ability to execute – the key driver

■ Valuing the operating assets through the growth phase• How operating asset lives develop in

the high growth phase• Ensuring consistency in a valuation• Reinvestment and growth• Assessing investment requirements –

the returns and reinvestment equation• Completing the valuation – combining

returns and risk in a model

Valuing cyclical companies and sectors

■ Characteristics of cyclical and commodity sectors• The impact of global pricing – compa-

nies as price takers ■ Valuation issues

• Base year fixation ■ Where do I start from and why? ■ Determining the cycle starting point

• The macro point of view ■ The demand and supply fundamentals

• Selective normalisation ■ How do I get to mid cycle? ■ Some key errors in cycle assessment ■ Valuing a cyclical business in practice

• Normalised valuations ■ Taking the cycle out of the equation

• The adaptive growth approach• Probabilistic approaches

■ Using probabilities to reduce forecasting limitations• Normalised earnings multiples

■ Back to mid cycle…..• Adaptive fundamentals• Real options for underdeveloped re-

sources ■ The extraction/development decision and

its value• Valuing a natural resource firm

Valuing declining companies and sectors

■ A life cycle view of declining companies• The graveyard shift – is there still value

available? ■ Characteristics of declining companies and

sectors• Terminal vs temporary decline – will the

patient get better? ■ Valuation issues – intrinsic value

• Where is the value in a declining busi-

ness?• Is it possible to extract value – going

concern vs fire sale• Positive and negative growth and its

effect on valuation – how growth can be a negative

• Discounting cash flows - incorporating credit risk into a discount rate

• Will the business survive – incorporat-ing default risk

• The importance of terminal value in a declining business

■ The approach to wind up valuation ■ The approach to a cost of exit ■ Valuation issues – relative valuation

• Peer groups ■ Walking with zombies

• Incorporating distress ■ Valuing a declining business in practice

• Autopilot optimism ■ Forecasting for the worst ■ Avoiding the hockey stick

• Discount rate contortions ■ The impact of distress of the discount rate

• Dealing with distress• The treatment of debt and an APV ap-

proach to valuation ■ Determining the components of value in

distressed companies ■ The value of unleveraged assets ■ The value of the tax shield – taxable prof-

its?• Valuing equity as an option

■ Using option techniques as an option on recovery

■ The value of closure ■ The probability of default - Techniques

used in assessing default – the world of the credit analyst




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Valuing Commodity Companies and Sectors

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The course covers commodity companies, identifying the issues with sectors such as resources, energy and chemicals companies. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.






created through optionality




Valuing commodity companies and sectors ■ Characteristics of commodity companies

ӹThe impact of global pricing – companies as price takers

■ Valuation issues• Base year fixation

ӹWhere do I start from and why? ӹDetermining the cycle starting point

• The macro point of view ӹThe demand and supply fundamentals

• Selective normalisation ӹHow do I get to mid cycle?

ӹSome key errors in cycle assessment ■ Valuing a cyclical business in practice

• Normalised valuations ӹTaking the cycle out of the equation


ӹUsing probabilities to reduce forecasting limitations

• Normalised earnings multiples ӹBack to mid cycle…..

• Adaptive fundamentals• Real options for underdeveloped resources

ӹThe extraction/development decision and its value

• Valuing a natural resource firm

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Valuing Cyclical Companies and Sectors - AdvancedIn-House

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Course Overview


The course covers cyclical and commodity companies, identifying the issues with sectors such as resources, energy and chemicals companies. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken. Examples are provided to illustrate each issue.



ӹUsing probabilities to reduce forecasting limitations

• Normalised earnings multiples ӹBack to mid cycle…..

• Adaptive fundamentals• Real options for underdeveloped resources

ӹThe extraction/development decision and its value

• Valuing a natural resource firm




created through optionality




Valuing cyclical companies and sectors ■ Characteristics of cyclical and commodity

sectors• The impact of global pricing – companies

as price takers ■ Valuation issues

• Base year fixation ӹWhere do I start from and why? ӹDetermining the cycle starting point

■ The macro point of view ӹThe demand and supply fundamentals

• Selective normalisation ӹHow do I get to mid cycle? ӹSome key errors in cycle assessment

Valuing a cyclical business in practice• Normalised valuations

ӹTaking the cycle out of the equation

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Course Content

Valuing Declining Companies and SectorsIn-House

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Course Overview


The course covers companies at the declining stage where traditional valuation approaches become less relevant and a “wind down” approach may be applicable. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.





decision trees and simulations ■ Real options valuation – additional value cre-

ated through optionality




Valuing declining companies and sectors ■ A life cycle view of declining companies

• The graveyard shift – is there still value available?

■ Characteristics of declining companies and sectors• Terminal vs temporary decline – will the

patient get better? ■ Valuation issues – intrinsic value

• Where is the value in a declining business?• Is it possible to extract value – going con-

cern vs fire sale• Positive and negative growth and its effect

on valuation – how growth can be a nega-tive

• Discounting cash flows - incorporating credit risk into a discount rate

• Will the business survive – incorporating default risk

• The importance of terminal value in a declining business ӹThe approach to wind up valuation ӹThe approach to a cost of exit

Valuation issues – relative valuation

• Peer groups ӹWalking with zombies

• Incorporating distress ■ Valuing a declining business in practice

• Autopilot optimism ӹForecasting for the worst ӹAvoiding the hockey stick

• Discount rate contortions ӹThe impact of distress of the discount rate

• Dealing with distress• The treatment of debt and an APV ap-

proach to valuation ӹDetermining the components of value in distressed companies ӹThe value of unleveraged assets ӹThe value of the tax shield – taxable profits?

• Valuing equity as an option ӹUsing option techniques as an option on recovery ӹThe value of closure

■ The probability of default - Techniques used in assessing default – the world of the credit analyst

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Course Content

Valuing Early Stage and Start Up Companies and SectorsIn-House

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Course Overview


The course covers companies at the early growth and start up stage, which would cover sectors such as technology, biotechnology and any early funding stage business. The key challenges associated with such companies are discussed and the best valuation approach considered.

As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.




techniques ■ Relative valuation – multiple based analysis



ro-economic factors into a valuation Valuing early stage and start-up companies and sectors ■ A life cycle view of start-up companies

• Start-up companies in context ■ Characteristics of young companies and sec-

tors• The key challenges with start-up compa-

nies• Visibility – a key valuation challenge

■ Valuation issues – intrinsic value• How to value existing assets in a start-up• Cash burn and the effect on existing as-

sets• The future of the business – high growth

and growth phases• Assessing growth rates - the key compo-

nent of value• Adjusting risk for small fast growing busi-

nesses• Discount rates for pure equity financed

businesses• When to calculate terminal value

ӹReducing the dependence on terminal value ӹValue of equity claims

• Assessing equity claims in a early stage business

Valuation issues – relative valuation• Problems with start-up multiple analysis• Determining the starting point – revenue

multiples vs profitability multiples• Which year? – Determining stability for


Valuing a start-up or early stage business in practice

• Main errors made in valuing early stage businesses

• Macro vs micro analysis• Product success and market share• Bottom up approach to a valuation

ӹCapacity capability• Estimating and using different discount

rates ӹThe use of phased discount rates ӹDiscount rates as maturity approaches

• Ensuring consistency in a valuation• Private and public multiples• Option to expand valuation

ӹHow optionality affects valuation

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Course Content

Valuing Financial CompaniesIn-House

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This course will be useful for executives who work with and need to place a valuation on banks and other financial institutions.

It considers in depth the financial structure and risk associated with financial institutions and explains how the different traditional valuation methodologies may be varied to suit the individual circumstances in each case.

The course also includes the application of EVA and CFROI as evaluation techniques and applies them specifically to financial institutions.

The course is also useful to those who are involved in any type of corporate transaction for financial institutions from an advisory perspective. Participants will be required to bring a laptop with a CD-Rom to the course.

Course Overview

Introduction to FI Valuation ■ Valuation and pricing techniques - perspec-

tive ■ Risk and the pricing of risk ■ Differences between financial institution and

corporate valuation techniques ■ Income volatility for banks, insurance com-

panies, asset managers, other FI’s ■ Return on equity and Price/BV ■ The relevance of cost of capital ■ Limitations of accounting-based data ■ Problems associated with using traditional

DCF techniques for valuing FI’s

Understanding Financial Structure and Risks of Financial Institutions ■ Asset and liability structure of a financial

institution ■ Retail banks, investment banks, asset man-

agers and insurance companies ■ Profitability and diversity of income source ■ Structure and management of risks ■ Case study example of European bank illus-

trating risk profile Advanced Discounted Cash Flow Techniques ■ Loan portfolio default rates and provisioning

policy ■ Concentration and position risks ■ Discounted cashflow value of loan portfolio

■ Discounted cashflow value of on-balance sheet instruments

■ Market risk of derivative positions and im-pact on value

■ Case study example of valuing a bank’s asset base

Evaluating the FI Revenue Base ■ Diversity of revenue base ■ Margin spread and the effects of yield curve

movements ■ Transfer pricing impact ■ Shareholder value added measurement ■ Strategic value management ■ Case study example of adding value through

strategic value management

Further Pricing Techniques ■ Comparatives – determination, adjustments

and multiples ■ The influence of banking issues ■ Case studies using comparatives to value

FI’s ■ Problematic issues in valuation including risk

profiles, goodwill ■ The relevance of equity in financial institu-

tions (including CAD and Basel II) ■ Economic Value Added ■ CFROI Valuation Model and the Future

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Course Content

Valuing Emerging Market Companies

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Course Overview

This programme has been designed to develop the participants’ understanding of the key issues facing Finance professionals valuing Emerging Market (EM) companies.

At the end of this programme, the participants will be able to:

■ Understand the key challenges arising from EM companies, namely currency volatility and coun-try risk premium;

■ Compute a Discounted Cash Flows (DCF) and trading multiples valuation of EM companies; ■ Analyse and choose appropriate currency in cash flow forecast and discount rate; ■ Decide on appropriate risk free rate, beta and country risk premium to be used in the discount

rate; ■ Perform a two-stage Terminal Value for high-growth EM companies; ■ Decide on sensible use of trading multiples in EM.

Case Study: The participants will use a variety of EM case studies and exercises during the training

Participants will be required to bring a laptop and a calculator to the course.

Introduction ■ How does EM differ from developed markets

• Family-owned business• Inflation and growth rate• Country risks• Commodity risks• Lack of transparency• Corporate governance• Access to data

■ Are local trading multiples available? ■ Should DCF be the main source of value? ■ Key valuation issues to consider

• Choice of currency in forecast and dis-count rate

• Discount rate and country risk premium• Two-stage Terminal Value for high growth

with use of fades• Valuation discount necessary?

Information Gap and Accounting Standards ■ Access to data/financial statements ■ IFRS reporting or local GAAP? ■ Inflation accounting use in hyperinflation

countries

Currency Issues ■ EM country currency systems

• Pegged vs. floating exchange rate ■ Nominal or real cash flows ■ Currency volatility

• Exchange rate• Own purchaing power (inflation)

■ Choice of currency in valuation• Currency consistency - same currency in

forecasts as per discount rate ■ Local EM currency vs. standard (i.e, US$)

• Standard currency and use of Forward rates for foreign exchange conversion

Case Study I: Participants compute the Free Cash Flows of Tata Motors

Discount Rate - Cost of Debt ■ Risk free rate

• Any public traded bonds outstanding?

• Local currency or US$• Use of default spread with synthetic rat-

ing ■ Sovereign default rating ■ Pitfall of double-couting or triple-counting

risks

Discount Rate - Cost of Equity ■ Beta

• Beta reliable and liquid?• Use of ADR or GDR betas?• Choice of well-diversified global index

■ Country risk premium methods • Sovereign default spread method• Relative equity market volatility method• Composite method

Case Study II: Participants calculate betas and cost of equity for Gerdau Steel

Two-stage Terminal Value ■ Entire value in Terminal Value highly sensi-

tive to perpetuity growth rate and WAC ■ Alternative terminal value approach: value

driver• Disaggregating return on invested capital

- profitability and efficiency ■ Building a two-stage terminal value model

using separate annuity and perpetuity rates

Case Study II: Participants compute a two-stage Terminal Value of EM corporate

Trading Multiples in EM ■ Size of sample: less than a handful real

comparables? ■ Considering other EM regions ? ■ Using discount to developed markets trading

range

Overall Valuation Discounts ■ Significant risk from nationalization or ex-

propriation ■ Subjective discount or scientific method? ■ Use of decision trees and probability weight-

ing

In-House

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Course Content

Valuing a Pharmaceutical Company

In-house

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Course Overview

If the business model of the modern pharmaceutical industry did not already exist, management consultants and business schools would surely have invented it as a fictional basis for exploring the challenges posed by a perfect storm of every conceivable risk and uncertainty.

It is perhaps doubtful whether investors, managers and analysts would have believed that any business model embodying such a perfect storm would be sustainable and therefore worth studying at all – were it not for the fact that in the pharmaceutical industry, real life really is stranger than fiction.

Nowhere are all the risks and uncertainties confronting the pharmaceutical industry more clearly or comprehensively exposed to view than in the process of valuation.

This one-day intensive workshop begins with an in-depth analysis of the pharma business model itself, and then explores in detail the theoretical and practical barriers to the application of the most widely employed valuation metrics and methods.

It locates common pitfalls, and shows how a judicious selection of ‘horses for courses’ can help us to establish at least a conditional range for possible valuations in different contexts.

The course is ‘intensive’ rather than ‘advanced’, in the sense that it is strongly interactive in tone and structure (Excel-based exercises figure prominently, especially in the second half), yet it assumes no more than a basic understanding of financial statements and of a few of the most widely used measures of financial performance and condition, such as return on capital and p/e ratio.

As the participants are being asked to ‘unlearn’ much of their previously unchallenged conventional wisdom, those who come to the table with less ‘inherited baggage’ might even have an advantage!

Review of the pharma business model, with copious illustrations ■ Long, unpredictable and variable life-cycles of

individual products, from discovery, through pre-clinical and clinical development, to launch and eventual patent expiry

■ Low correlation in timing and amount of costs and revenues

■ Imperfect diversification of product portfolios (in terms of product numbers, sizes, types, and stag-es in life-cycle)

■ Exposure to a wide range of long-term uncon-trollable factors – demographic, epidemiological, scientific (‘looking for needles in haystacks’), political, geopolitical and economic

■ Uncomfortably close and unusually complex relationship with government (healthcare policy and priorities, regulation, pricing regime, overall demand)

■ High risk of unforeseen technical failure, and costly and protracted lawsuits

■ Little freedom to plan for long term, in face of constant threat from opportunistic predators

Overview of conventional models: their general strengths and weaknesses, when they work best – and when they work least well ■ Primary models

• NPV based on Free Cash Flow (FCF)• Comparables and benchmarking• Book-based models• Market multiples

■ Secondary refinements• Sensitivity and scenario analysis• Decision tree analysis and real options• Monte Carlo analysis

How conventional valuation models are challenged by the pharma model, as for instance: ■ Data samples and populations (e.g. on overall

amounts and timings of costs and revenues) too small, heterogeneous and idiosyncratically distrib-uted to be statistically useful

■ Conventional measures of mean and dispersion inoperable

■ Genuine comparability, between companies, be-tween deals, and between therapies, unduly elusive in practice

■ Conventional modelling techniques unable to ac

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■ commodate shifting levels of risk through the product life-cycle: inapplicability of standard CAPM and dividend-based model of expected returns

■ Lack of informed market consensus on criteria for analysis

■ Chronic tendency towards optimism in manage-ment commentary, e.g. on value of pipeline, stage of development, timing of launch and subsequent success in market

■ Shortcomings of the accounting regime in:• capturing relevant costs and accommo-

dating mismatch in timing of costs and revenues

• reaching consensus on intangible assets• resolving problems of business combi-

nations Finding a way forward ■ General principle: do as much work as possible

before confining one’s brain in the fixed con-fines of an Excel spreadsheet!

■ Strategic analysis of the relative strengths and weaknesses of the business to be valued and of the sector(s) in which it operates, using a standard framework such as Porter’s Five Forc-es

■ Bottom-up approach: refining institutional FCF into product-specific FCFs, using• Bottom-up estimates of revenue and costs

based on demographic, epidemiological and other factors:

• Product-specific rNPVs (risk-adjusted NPVs), instead of entity-wide NPV, with individual discount factors calibrated according to (i) costs, (ii) revenues and (iii) risks appropri-ate to individual major product characteris-tics at each stage of its life-cycle

■ Top-down approach: sense-checking the dif-ference between (a) market EV and (b) sum of the product rNPVs from the bottom-up ap-proach, by seeking possible reasons for• positive differences (e.g. pipeline, well-

struck balance between diversification and internal synergy, bargaining power in M&A market)

• negative difference (e.g. accident-prone management, above-average vulnerability to competitors, predators and government)

Bringing it all together – 1: Working with Excel

Basic tips and tricks for constructing an Excel-based valuation that is at once comprehensive, coherent, consistent and flexible

■ The template must be appropriate to the case, facilitating comparison with comparable cases and highlighting differences with contrasting cases

■ Line and column descriptions must indicate re-lationship between values: “Go and look at the formulae” is no way to treat grown-up readers

■ Assumptions (and variations of assumptions) must be highlighted

■ Sources and relative reliability of different data inputs must be highlighted

■ Top-level results must be summarised on front sheet, and indicate not only a point value but a range of values, as well as an indication of the principle parameters for the range

Bringing it all together – 2: Constructing a pharma valuation

Participants will work in small groups on a comprehensive valuation exercise under the close supervision of the trainer, who will help resolve individual problems while acting as a channel for sharing each group’s insights and experiences with the class as a whole.

The workshop concludes with presentations by one or more of the groups to the class as a whole, in an exercise designed not only to give them self-confidence in their technical skills but also to enhance their ability to communicate their findings to colleagues.


“Course material were interactive and independent”

”Interesting practical insight, discussions and examples”

”Case study very relevant”

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Real Estate Valuation - South Africa

In-House or via Live Webinar

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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in South Africa, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.

Top 5 Learning Objectives ■ Understand the most widely-practiced property income and capital valuation techniques ■ Identify the cost of capital for real estate ■ Successfully implement discounted cash flow valuation frameworks ■ Acquire the ability to value a range of different types of properties ■ Appreciate international differences in valuation approaches

Day 1

Real Estate As An Investment ClassProperty Performance Analysis ■ How is property measured? ■ Identifying what makes a good property ■ Problems and issues with performance

evaluation ■ Sources of data ■ Evolution of data measurement ■ International comparisons of performance ■ Current issues in performance manage-

ment

Case Study: Best international practice in property performance measurement

Property In The Investment Portfolio ■ Concept of Modern Portfolio Theory (MPT) ■ Measuring variance (Beta and equivalents) ■ Constructing a portfolio ■ Property correlation with other assets ■ Best international practice on property in a

portfolio ■ International trends in property correlation

Case Study: Pension fund and private equity investment in African property

RICS Valuation Standards ■ Appraisal of income property – RICS Valu-

ation Practices and international compari-sons

■ Comparison with corporate finance valua-

tion ■ Reporting according to IFRS standards ■ Types of valuation approach ■ Important aspects of the RICS Valuation

Standards (including valuer independence)

IFRS Valuation and Real Estate

Concepts of fair value ■ Accounting implications of the valuation of

non-financial assets i.e. investment properties and property plant and equipment, leasing, impairment, and comparisons with equity

Relevant IFRS standards for real estate ■ 8 Operating segments ■ 13 Fair Value ■ 16 Property, plant and equipment ■ 17 Leases

Case Study: Does the transaction fall under IAS 17? If so, is it a finance or an operating lease?

■ 23 Borrowing costs ■ 36 Impairment ■ 40 Investment property ■

Case study: Deciding whether a property is an investment property

Case Study: Ascertaining the reliability and accuracy of the values taken into financial statements in compliance with IFRS statements



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Basic accounting decisions and their implications for preparers and users ■ Choosing between the cost model and the

fair value model ■ Cost model: how to determine initial cost

including borrowing costs and appropriate depreciation schedule

■ Identifying relevant indicators for impair-ment review

■ Estimating recoverable amount: ‘Value in use’ versus ‘Fair value less costs to sell’

■ Fair value model: Estimating fair values (a) of unique assets and (b) in illiquid markets

■ Setting valuation assumptions ■ Trading and development properties

Case study: Property leases: some special issues and their impact on the financial statements

■ Rent-free periods and other incentives ■ Tenants’ improvements ■ Step-up rents ■ Disclosures, especially with regard to

management judgements, impairment and revaluations

■ Review of corporate accounts, GAAP and IFRS consolidation rules and other issues associated with SPVs

Worked exercises: Comparing corporate annual reports with real estate values calculated

Group discussion: Is valuation in South Africa adhering to best international practice?

Residential Property – Assessing Capital Value ■ Why buy residential real estate? ■ Does rental income matter for residential

property? ■ What are the main problems? ■ Measurement criteria for residential real

estate – hedonic approaches ■ Qualitative issues, competition, style and

marketing

Case Study: Residential price trends in South Africa – comparative analysis

Day Two

Discounted Cash Flow For Real Estate Investments

Net Operating Income (NOI) ■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate ■ Capital expenditure issues ■ Differences between property types ■ Approaches to the cap rate

Case Study: The band of investment approach

Projecting Cash flows ■ The dynamic behaviour of the 4-Q model: sta-

bility versus oscillations ■ Real estate pricing behavior: backward or for-

ward looking? ■ Forecasting markets: univariate analysis, vec-

tor auto regressions, structured models. ■ Forecasting examples ■ The definition and evaluation of “risk”

Case Study: Forecasting techniques

Creating And Using A Detailed Discounted Cash Flow (DCF) Model ■ Debt service and pre-tax cash flow ■ The sinking fund ■ Lease variations ■ Differences between sectors ■ Estimating resale value ■ Terminal capitalisation rates

Exercises: Delegates will use a number of real world examples to create and use spreadsheets for DCF valuation

Real Estate Valuation and the cost of capital ■ What is the significance of the cost of capital? ■ Differentiation between debt and equity ■ Hybrid products ■ The pecking order theory of cost of capital ■ Market derived cost of capital

Case Study: estimating the cost of capital for a real estate company

Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in South Africa ■

Case Study: Data availability on land prices






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The Cost Approach ■ Type of costs ■ Methods of evaluating costs ■ Sources of cost estimation ■ Incurable and curable depreciation ■ Market extraction method

Exercises: Delegates will use spreadsheet models to calculate a range of cost estimates for individual properties

The Sales Comparison Approach ■ Value, worth and price ■ Sources of comparable data ■ Identifying points of comparison and differ-

ence ■ Sales comparison approach example

Exercises: Using the sales comparison approach in practice

Highest And Best Use Approach ■ Definitions of HBU ■ Site value ■ Improved value ■ Calculating HBU

Case Study: Business Plan for a major project analysed

Leasing Analysis ■ Introduction to leases

Exercises: Stop calculations, lease valuation and feasibility rents

■ Analysing comparables ■ Analysing rental prospects

Exercises: Depreciation, net operating income and yield calculations

■ Securing tenants in relation to valuation and finance

■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Africa – issues, the law and values

Day FourIntroduction To Real Options ■ How to calculate real option value ■ Comparing the Black-Scholes and Binominal

Expansion model ■ Real world examples ■ Problems with real option calculation ■ Application to distressed firms’ equity and

other financial

■ Applications

Exercise: Delegates will study a range of real option calculations using customised spreadsheet models

■ Does property possess real options? ■ Examples of possible real estate real options ■ Call Option approach to land value ■ Samuelson-McKean approach ■ Difficulties of measurement ■ Potential benefits

Exercise: Delegates will value a potential development on the basis of conventional DCF and real option analysis

Valuation In Practice ■ How is valuation practiced by chartered sur-

veyors? ■ What are the key elements of the RICS valua-

tion guidelines? ■ What is the evidence on valuation practice in

COUNTRY? ■ What to look for in a valuation report ■ What are the differences between countries?

Case studies: Examples of real estate valuation reports (RICS and others)

Course Conclusion





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Real Estate Valuation - Hong Kong


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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in Hong Kong, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.


Day 1



ment




Case Study: Pension fund and private equity investment in ASPAC property



■ Comparison with corporate finance valua-

tion ■ Reporting according to IFRS standards ■ Types of valuation approach ■ Important aspects of the RICS Valuation















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Group discussion: Is valuation in Hong Kong adhering to best international practice?




marketing

Case Study: Residential price trends in Hong Kong – comparative analysis

Day Two

Discounted Cash Flow For Real Estate Investments

Net Operating Income (NOI) ■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate ■ Capital expenditure issues ■ Differences between property types ■ Approaches to the cap rate











Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in Hong Kong







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■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Hong Kong – issues, the law and

values



other financial ■ Applications









Course Conclusion





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Real Estate Valuation - UAE


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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in UAE, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.


Day 1



ment




Case Study: Pension fund and private equity investment in Middle Eastern property



■ Comparison with corporate finance valuation ■ Reporting according to IFRS standards ■ Types of valuation approach ■ Important aspects of the RICS Valuation















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Group discussion: Is valuation in UAE adhering to best international practice?




marketing

Case Study: Residential price trends in UAE – comparative analysis

Day Two

Discounted Cash Flow For Real Estate InvestmentsNet Operating Income (NOI)

■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate ■ Capital expenditure issues ■ Differences between property types ■ Approaches to the cap rate











Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in UAE







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■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Middle East – issues, the law and

values



other financial ■ Applications









Course Conclusion




The specialist in highly technical, market-driven banking and corporate finance training

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