A Masterclass in Corporate Finance

IFF Training

IFF Training

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About the course

The art of good negotiation is to understand the perspective of counterparties and other organisations. The Masterclass in Corporate Finance looks at transactions from the viewpoint of the managers of the company itself, and highlights the negotiation and commercial issues in dealings with debt financiers and shareholders that arise from the differences in perspective and objective.

This course will help you answer these key questions:

  • In what business areas should we direct our growth?
  • Should that growth be through organic investment or by acquisition?
  • What analytical processes will guide the implementation of individual components of the strategy?
  • Should the business units be controlled from the centre, or should management be delegated?
  • How should we manage exposures to such volatilities as commodities, interest and foreign exchange?
  • Should we fund the enterprise with aggressive levels of debt, or with conservatism?
  • Should we issue publicly traded instruments or err towards private placements?
  • How will we square conflicts between accounting impacts andm economic/cashflow/value objectives?
  • What performance measures will be prioritised in designing and implementing corporate strategy?

You’ll leave with a large volume of excel files and additional reading material on a wide range of corporate financing topics

Learn how to:

  • Choose which areas to direct your company's growth
  • Use analytical processes to guide the implementation of individual components of the strategy
  • Decide between controlling from the centre, or delegating
  • Manage exposures to such volatilities as commodity exposures, and exposures to interest rates and foreign exchange
  • Choose when to fund with aggressive levels of debt, or with conservatism
  • Decide whether to issue publicly traded instruments or err towards private placements
  • Square conflicts between accounting impacts and economic / cashflow / value objectives
  • Prioritise performance measures when designing and implementing corporate strategy

Case studies and practical sessions

  • Performing a valuation & sensitivity analysis
  • A financing structure that failed spectacularly
  • Modelling tasks
  • A strategy that went wrong
  • Planning & implementing a contested acquisition

Agenda

Introduction

  • What is corporate finance?
  • Theory vs. practice

The Building Blocks of Corporate Finance

  • The difference between a price and a value
  • Why markets are not perfect and the implications arising
  • The financial market cycle
  • Overview of valuation and pricing methodologies
  • Value drivers
  • The central role of risk
  • The central role of Free Cash Flow – derivation and importance
  • The investment rule and its exceptions
  • The relationship of FCF, ROC, IRR
  • The drivers of cashflow volatility – company dynamics

Corporate Valuation

  • When should each of the techniques be used
  • The limitations of accountancy based data
  • The EPS fallacy
  • The merits of DCF
  • Identifying the correct Risk Free Rate
  • The share market premium controversy
  • Additional risk premia
  • Time horizons & dealing with the continuing period
  • Sensitivity analysis of the valuation to determine the range
  • Application of the valuation in decision making context

Case Study - Valuation

  • Performing and sensitising a Valuation Analysis

Day 2

Frequently Encountered Errors in Valuation Models

  • Mismatch of time horizons
  • Dealing with inflation
  • Dealing with currency exposures
  • The risk free rate in multinational businesses
  • The modelling of capital expenditures
  • The misuse of proxies
  • Infiltration of pricing and/or accounting components
  • The miscalculation of IRR

Pricing Analysis

  • Why naïve application of pricing multiples can be dangerous
  • The adjustments that need to be made to the data in comparative analysis
  • Dealing with accounting inconsistencies and normalisations
  • The hazards in identifying comparable businesses
  • Enterprise Value
  • The multiples – EBITDA, EBIT, Sales, Assets, SHF, etc
  • Managing the source data to derive sectoral benchmarks
  • How to derive conclusions from the correlations and observations
  • Demonstration of a pricing model

Finance and Capital Structuring

  • Growth strategies
  • The role of liquidity
  • The danger of ‘optimal capital structure’ theory
  • Reaction of the financial markets to volatility
  • The effect of leverage on value – contrasting schools of thought

Case Study

  • A financing structure that failed spectacularly

Day 3

Leveraged Finance

  • The structure and objectives of private equity funds
  • The analysis of a business in the context of a leveraged buyout
  • The financing structures typical to LBOs
  • Why financial buyers can usually outbid trade buyers
  • Coverage requirements of senior financiers
  • Adaptations for MBOs – management ratchets
  • Platform LBOs
  • The range of exit options, the impact on IRR, sensitising the analysis
  • Legal complications
  • Modelling LBOs
  • The 5 drivers of an IRR in LBOs
  • Currencies - balance sheet hedging, cashflow hedging or value hedging – which way to go?

Limited Recourse Financing

  • Why the normal investment rule is non-applicable in project financings
  • Evaluation methodology for limited recourse transactions
  • The 5 drivers of a Sponsor IRR

Evaluation in Other Specialised Contexts

  • Assessing capital expenditure proposals
  • APV contrasted with DCF
  • The practical difficulties with dividend valuation
    • when should dividend valuation be used
  • Adaptations required for evaluation in emerging markets
    • inverse derivation of the growth rate or the market penetration required
    • issues with risk free rate, market premium and betas
    • availability of substitutes
    • when to acknowledge value is speculative
  • Valuation of private companies

Modelling Corporate Cashflows

  • Modelling logic
  • Valuation models, transactions structuring models, statistical probability models, data manilpulation models
  • When to model risk and when to model value
  • Modelling currencies
  • Cost drivers
  • Dealing with escalation
  • Volatility and sensitivity
  • Sensitivity, scenario, and breakeven analysis
  • Demonstrations of analysis worksheets

Exercises

  • Various modelling tasks

Day 4

A Review of General Skills

  • What is wrong with IRR and XIRR functions
  • The correct calculation of IRRs
  • What is wrong with the NPV function
  • The correct calculation of NPV
  • Better tax and depreciation calculations with the VDB function
  • Enhancing the presentability of a model with macros

Shareholder Value

  • Traditional methods of assessing shareholder value
  • Shortcomings in those approaches
  • Evaluation of managerial performance – the EVA logic
  • The calculations for Economic Value Added
  • The analytical approach
  • How EVA aids strategy formation
  • Market Value Added – does it make sense?

Case Study

  • A strategy that went seriously wrong

Negotiated Acquisitions – Private Treaty Sales

  • The different types of acquisition – a classification
  • The range of synergies that may be applicable
  • The due diligence procedure – scope and method
  • The data room
  • Negotiation ‘timetable’ for an agreed offer
  • The sale process – open tender, dual track, closed tender, parallel sale, one-on-one
  • The concept of winners curse
  • Valuation in the context of acquisitions
  • Earn-outs
  • Why the majority of acquisitions fall short of value achievement objectives
  • The role of investment banks, reporting accountants, lawyers, PR firms, brokers, etc
  • The fiduciary duties of the vendor directors
  • Managing the negotiation process
  • Exclusivity and break fees
  • Purchase assets or shares – pros and cons
  • The Sales & Purchase Agreement – key clauses
  • Warranties and indemnities
  • Post-acquisition integration
  • Complications in cross border acquisitions
  • Antitrust, monopolies and competition law

Day 5

Overview of M&A Regulation

  • The law that is applicable for the transaction
  • The European Takeovers Directive
  • The timetable
  • Rules for the protection of minorities
  • Dissemination of information
  • Squeeze out rights
  • Implications of share purchases and sales before and after announcement
  • Permissible transactions during bid
  • The treatment of contingent rights to shares
  • Concert parties
  • Offences related to transactions in shares
  • The fundamental differences in the USA approach
  • Tender offers

Planning Acquisitions

  • The 10 step analytical process
  • Pros and cons of a launchpad
  • Offer structure and offer price
  • The benefits of a board recommendation
  • The advantages of a share-for-share offer
  • Vendor placings
  • The pros and cons of an all cash offer
  • Determining debt capacity where uncertainty of outcome of bid
  • Multiple offers
  • Conditions attached to the offer
  • Tax and accounting considerations
  • Financial assistance under s.151 (or the equivalent in other OECD jurisdictions)
  • Ways around financial assistance laws in various jurisdictions

Contested Bids

  • What is permitted on each side
  • Implications of rule breaches
  • Timetable
  • Poison pills and shark repellents
  • Crown jewel lockups
  • Planning the strategy and the tactics
  • Mandatory theresholds
  • Arbitrageurs and the arbitrage spread
  • Debt financing complications
  • Equity financing complications
  • Implications of Articles 9 and 11 of the Directive

Case Study

  • Planning and implementing a contested acquisition

Experts

Richard Capps

Richard obtained a law degree from Cambridge University and was called to the English Bar in 1976. Shortly thereafter he entered banking joining Chase Manhattan Bank where, for most of the 5 years service, he was a corporate relationship manager in London and New York. For the following 6 years ...

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A Masterclass in Corporate Finance at IFF Training

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Disclaimer

Coursalytics is an independent platform to find, compare, and book executive courses. Coursalytics is not endorsed by, sponsored by, or otherwise affiliated with any business school or university.

Full disclaimer.

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