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Who should attend
Acquisition Finance - Structuring the Deal is designed for all professionals involved in acquisition transactions, buyouts or recapitalizations. It can be used as a follow-up to AIF's Mergers and Acquisitions program or as a stand alone course for participants familiar with valuation and the basics of M&A.
About the course
The importance of how a deal is structured is captured in the saying, ‘You name the price and I’ll name the terms – and I’ll win every time!’ The Acquisition Finance - Structuring the Deal program combines theory and practice, providing the tools to understand the financial side of structuring the deal. The program has been completely redesigned to give additional emphasis on SMEs as well as traditional corporate acquisitions. Topics include capital structure, debt capacity, leveraged buyouts, acquisitions, restructuring, and deal design.
How you will benefit
- Understand the tradeoffs between equity and debt financing and learn how to exploit unused debt capacity
- Better understand how to complete deals in difficult markets
- Examine the types of debt and equity best suited to the acquirer’s and target’s objectives
- Strengthen your ability to assess a proposal for acquisition finance quickly and insightfully in varying market conditions
- Analyze bargaining and deal design in acquisition finance and merger advisory work; two unique simulation exercises give attendees a feel of the pressures involved in funding and completing a deal
- Explore cash flow and balance sheet models for structuring the deal
- Understand determinants of the acquisition premium and the impact on financing
- Analyze the market reaction to different types of financing
- Understand the role of collars, toeholds, earn outs and termination fees
- Examine payment methods in European acquisitions
- Gain the expertise to enter the financing process with confidence and skill
Goals and objectives
This program presents current tools and concepts related to evaluating highly leveraged acquisitions and designing appropriate financing. In this two-day program, we consider the choice between debt, equity or other securities, how to fully exploit the debt capacity of the firm, and what types of financing best suit both buyer and seller objectives. We combine these perspectives with an emphasis on the creation of value for equity holders, mezzanine investors and bankers. Additional attention is given to the analysis of SMEs.
The program begins with an overview of acquisition finance and a discussion of how leverage can create or destroy value. Following this, lecture and case discussions present a framework for the analysis of highly leveraged transactions from multiple viewpoints. Particular attention is given to capital structure considerations. The second day of the program continues with the practical application of deal design and a discussion of risk mitigation in M&A deals.
The specific aims of the program are to:
Provide a framework for critically evaluating financing proposals and the alternative choices confronting the deal designers. It will survey the tools and analytics that could be employed in assessing the deal terms and the (hidden) alternative terms. The emphasis is on very practical means of developing a “view” about these proposals.
Help understand the impact of leverage on a deal and assess associated challenges in valuation and risk analysis. Key goals are to understand possible opportunities for transaction design, to think critically about the specifics of financing, and to anticipate the implications of deal design for success, measured both in completion of the deal and its long-term success.
Understand bargaining and deal design in acquisition finance and merger advisory work. The program emphasizes the range of choices confronting the deal designer and the need to make sensible trade-offs in arriving at a successful agreement.
Acquisition Finance – Structuring the Deal combines theory with empirical evidence, practical insights and case examples including both private and public deals.
Overview of Acquisition Finance: Structuring the Deal
This session presents an overview of the program - outlining advantages, risks and current trends in acquisition finance. Particular attention is given to sources of gains in acquisition finance and the opportunities and risks entailed in highly levered transactions. The following topics will be discussed:
- Timeline of the Acquisition Process
- How Acquisition Finance Creates Value
- Types of Deals
- Participants, Products, Risk and Return
- The Importance of Markets
- Motives for Acquisition
- The Whole Deal Approach:
- - Understanding Participant Motivations
- - The interaction of Deal Components
Valuing the Target– a Quick Review
This session provides a review of valuation tools and models, discussing the strengths and weaknesses of each as well as their application to acquisition finance.
- Discounted Cash Flow
- Comparable Transactions
- Determining the Discount Rate
- Terminal Value and The Exit Process
- Valuing Synergies
- Specialized Cases
- - Valuing the SME
- - Challenges of Valuing Privately Held Firms
- - Valuing Late-Stage Companies and Buyouts
- - Estimating Cash Flow for SMEs
- - Estimating Discount Rates for SMEs
- - Liquidity Discounts and Control Premia
- Different Approaches to Estimating Value
Capital Structure - Theory
- How Capital Structure Creates or Destroys Value
- Capital Structure Theory – A Review
- The Three Impacts of Debt
- Debt vs. Equity
- Empirical Evidence
Capital Structure - Practice
- Balance Sheet and Cash Flow Models
- Determining Discount Rates
- - Public Companies
- - Private Companies
- Understanding the Cycle of Purchase Price Multiples
- Different Approach of PE re Valuation and Capital Structure
- Ideal Qualities for LBO Candidates
- Considering the Various Types of Debt and Equity
Structuring the Deal: Mitigating Risk
- The Most Important Risks of the Deal
- Mitigating Deal Risk
- Contracts and Contingencies
- Termination Fees
- Fixing the Broken Deal
Ralph Walkling holds the Stratakis Chair in Corporate Governance and is Founder and Executive Director of the Center for Corporate Governance at the LeBow College at Drexel University where he is also Professor of Finance. He is Past President of the Financial Management Association, an internati...
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