Investment Banking Course - Investment Banking University

Click here to load reader

Embed Size (px)

Transcript of Investment Banking Course - Investment Banking University

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    1

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    2

    Investment Banking Course Investment Banking University

    Michael Herlache MBA

    Doctor of Business Administration Candidate

    VP, M&A at AltQuest Group

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    3

    For my wife, Svitlana, whom is my treasure.

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    4

    About the Instructor: Michael Herlache is the VP of M&A at AltQuest Group, a middle market boutique investment bank located in Fort Lauderdale, Florida. He lives in

    his home in Florida with his wife, Svitlana. Michael has an MBA in Finance from Texas A&M University and is getting his Doctorate in Business

    Administration with a focus on finance. To learn more about AltQuest Group, please go to www.AltQuest.com.

    For those interested in going through a formal investment banking training program associated with this text, the Investment Banking University

    (www.InvestmentBankingU.com) courses syllabus is based upon the content of this book.

    file:///C:/Users/Michael%20Herlache/Desktop/Books/Investment%20Banking/www.AltQuest.comfile:///C:/Users/Michael%20Herlache/Desktop/Books/Investment%20Banking/www.InvestmentBankingU.com

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    5

    Contents of Investment Banking Course: PERPETUITY SCIENCE:

    Part I: Perpetuity Methodology

    1: What is a Perpetuity?

    FOUNDATIONS OF VALUATION:

    Part II: Tracking Value (Accounting)

    9: Tracking Value with Accounts

    Part III: Analyzing Value (Finance)

    10: Analyzing Value with Finance

    Part IV: Modeling Value

    11: Finance with Excel

    12: Financial Statement Modeling

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    6

    BUILD-SIDE:

    Part V: How to Build a Perpetuity?

    13: How to Build a Benefit Stream?

    14: How to De-Risk the Benefit Stream?

    14: The Consumption Process & Growth Hacking

    15; Reasoning to Platform

    Part VI: Perpetuity Analysis

    16: How to Be a CEO?

    17: How to Be a Consultant?

    Part VII: Perpetuity Management

    19: Perpetuity Management

    20: Valuation Methodologies

    21: Framing Valuation

    22: The Market for Perpetuities

    23: Index Building & Benchmarking

    24: Financial Data Sources

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    7

    SELL-SIDE:

    Part VIII: How to Sell a Perpetuity?

    25: Investment Banking

    26: How to Become an Investment Banker Methodology

    Part IX: The Middle Market

    27: Middle Market Breakdown

    Part X: M&A Multiples

    28: M&A Multiples

    Part XI: Investment Banking Coverage Methodology

    29: Investment Banking Coverage Methodology

    37: Index Building & Benchmarking

    38: Financial Data Sources

    39: Industry or Sector Newsletter

    40: Industry or Sector Report

    41: Rolodex Building

    Part XI: M&A Origination Methodology

    29: M&A Origination Methodology

    Part XII: Mandate/Target Matching Methodology

    30: Mandate/Target Matching Methodology

    Part XIII: Deal Structuring

    31: Deal Structuring

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    8

    Part XIV: M&A Process

    32: M&A Process

    Part XV: Firm Building & Management

    33: How to Build a Boutique Investment Bank?

    34: Running the Boutique Investment Bank

    Part XVI: Deliverables & Coverage

    35: Investment Banking Deliverables

    42: Adjusted EBITDA

    43: Valuation

    44: Teaser

    45: CIM (Confidential Information Memorandum)

    45: Purchase Agreement

    BUY-SIDE:

    Part XVII: How to Buy a Perpetuity?

    46: The Principle of Investing

    47: How to Be a Warren Buffett?

    48: The Operating Model

    49: The Financial Buyer aka Private Equity (LBO)

    50: The Strategic Buyer aka Corporation (Merger)

    50: Perpetuity Science & Portfolio Theory

    48: How to Start a LMM Search Fund?

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    9

    CASES:

    Part XVIII: Cases

    52: Cases

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    10

    Introduction to Course There are many investment banking texts out there that claim that financial modeling and valuation is the core work of the investment banker.

    This is simply not the truth. The core work of the investment banker is origination, mandate/target matching, and deal structuring. It should

    follow that a text/course on investment banking should be based upon the same. It is the good fortune that the reader has encountered such a

    book/course. Investment Banking: M&A Origination, Execution, Financial Modeling & Valuation explains origination, mandate/target matching,

    and deal structuring (i.e. how investment bankers actually make their money).

    For those new to investment banking you are first going to want to clarify whether you would like to work on the sell side for a few years or

    pursue a career in investment banking. The skills that you will need to get started in investment banking are different than those that you will

    need to have a long and successful career in investment banking. The role in investment banking transforms from one that is research, financial

    modeling & valuation based into one focused on origination and facilitating the M&A process. M&A (Mergers & Acquisitions) is the core product

    of investment banking, and the other products, advisory & capital-raising, simply support this. We founded Investment Banking University

    (www.InvestmentBankingU.com) to prepare students for both bulge bracket and middle market investment banking career opportunities.

    We see a paradigm shift occurring in the field of investment banking. The idea that you need to spend three years of your life as an analyst doing

    80+ hour workweeks building financial models to become an investment banker is a faulty paradigm. The real value add of an investment banker

    is not financial modeling & valuation, but rather origination, mandate/target matching, and deal structuring. You dont need Goldman Sachs

    permission to be an investment banker just like you dont need McKinseys permission to be a consultant. Investment banking for private

    companies in the middle market is a great way to build your initial coverage and career as an investment banker without sacrificing a family life or

    your health.

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    11

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    12

    Perpetuity Science

    The standard MBA curriculum at most business schools is broken down along siloed subjects such as accounting, finance, management,

    operations, and marketing and attempts to teach students how to be a mid-level manager at a large corporation for the rest of their lives.

    Unfortunately, these jobs are mostly gone, having been shipped overseas or automated. This MBA curriculum is thus outdated and not

    appropriate for the 21st century when most individuals will have multiple jobs and roles throughout their careers and lives.

  • INVESTMENT BANKING: M&A ORIGIINATION, EXECUTION, FINANCIAL MODELING & VALUATION

    13

    The more appropriate field of study which has yet to make it to business schools is known as Perpetuity Science. Perpetuity Science is the

    body of knowledge, methodologies, and optimization models related to the building, selling, and buying of perpetuities. It explains how

    perpetuities can be built, managed and exited from to create wealth. Perpetuity science is a paradigm shift in business and finance

    education in that it replaces the siloed subjects traditionally taught in undergraduate and graduate business schools with a holistic

    methodology that integrates industry and the capital markets into one framework.

    Instead of a disparate business taxonomy along the lines of economics, finance, accounting, marketing, etc., we have an initial taxonomy

    broken down in relation to the perpetuity, namely:

    Build-side the building of perpetuities (entrepreneurs, corporations)

    Sell-side the selling of perpetuities (investment bankers, wall street)

    Buy-side the buying of perpetuities (private equity, corporate M&A)

    Within each of the three, we have various methodologies and optimization models that may touch on various subjects such as accounting,

    finance, economics. By starting with perpetuity science however, the student can better synthesize the various moving parts of industry and

    the capital markets.

    When first learning about industry and the capital markets, one should first understand the nature of the perpetuity, which is the basis for

    industry & the capital markets. The perpetuity can be modeled with the following formula:

    Perpetuity value = CF / r

    Where CF represents t