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Who should attend
- Investment bankers
- Fund managers
- Equity analysts
- Equity traders
- Equity sales
- Corporate finance lawyers
- Credit analysts
- Treasurers and finance directors
- Compliance officers
About the course
Elevate your knowledge of financial analysis and corporate valuation techniques
This comprehensive 5-day programme comprises two days of training in financial analysis underlying corporate valuations, followed by the three days of training in corporate valuation techniques.
The 2-day introduction will provide you with an understanding of:
- How to analyse a firm’s financial statements when undertaking corporate valuations, including how to derive underlying earnings and cashflow
- Ratio analysis, including profitability, performance, leverage, liquidity, returns to firm and equity
- The impact on valuation of debt, financial assets, quasi-debt, provisions, deferred taxes, off balance sheet liabilities and other factors
The subsequent 3-day training covers the following:
- Valuation fundamentals Equity and EV multiple valuations DCF valuations
- Applying different valuation techniques and forecasting, using Excel
- The impact of capital structure on valuation
- The impact of corporate finance transactions on valuation
- How qualitative factors influence valuations
This practical course 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 you gaining hands-on experience of the various valuation techniques.
Module 1: Financial Statement and Business Analysis
Day 1 Financial analysis for valuation
Income statement analysis
- Cleaning up the reported results to derive underlying performance
- Adjusting for exceptional and non-core items – restructuring, provisions, impairments, discontinued items, MTM of financial assets and liabilities, disposal gains/losses, employee benefits (IAS 19), business combinations (IFRS 3), leases (IAS 17), customer loyalty programmes (IFRIC 13)
- How failing to calculate the correct underlying earnings figure will materially distort your valuation
- Revenues and earnings – sources, sustainability, growth outlook, main risk factors
- The nature of the cost base including sources of volatility (commodity prices, currency, regulation, interest rates, tax rates and other risk factors)
- The impact of hedging (currency, interest rate, commodity)
- The impact of joint ventures, associates and NCI
- Calculating key financial ratios from the income statement; calculating performance ratios
- Analysing the cashflow profile of the firm
- What are the main risks to the cashflow?
- What are the main sources and uses of cash?
- Are new investments adding value?
- Are earnings converted into operating cashflow?
- The impact of net working capital changes and capital spending
- What is the potential for paying dividends and for share buybacks?
- Calculating key financial ratios from the cashflow statement
Balance sheet analysis
- The nature of the asset base: PP&E, intangibles, financial assets, joint ventures and investments
- Understanding the firm’s capital intensity and operating leverage
- Consolidation policies – is there any value in off balance sheet entities?
- What to include in gross debt
- What to include in net debt
- Valuation adjustments for derivative assets and liabilities, operating leases, contingent liabilities, and other off balance sheet liabilities
- Valuation adjustments for NWC, deferred taxes, pension deficits, provisions
- What is the outlook for impairments or revaluations?
- Is the book value of equity important to the valuation?
- What is the impact of credit metrics (leverage, interest cover, interest rates, liquidity, covenant breaches) on valuation?
- Calculating key balance sheet ratios to assess a firm’s financial position relative to its sector
- Overview of major new IFRS accounting standards (IFRS 9, 15, 16)
- Accounting tricks to enhance profitability and operating cashflow
Overview of a forecasting model for valuation
- Creation of key value drivers, including macro-economic and company specific
- Building up the income statement and balance sheet
- Deriving the cashflow statement
- Deriving cash available for distributions
- Dealing with circularity
- Scenario analysis
- Return analysis
Module 2: Corporate Valuation – techniques and application
Enterprise value versus equity value
- Calculating equity value including NCI
- Calculating gross debt and net debt
- Adjusting for provisions, quasi-debt, equity linked instruments, equity kickers, options etc
Introduction to corporate valuations
- Valuation fundamentals
- Drivers of valuation – ROIC, WACC, growth, size
- The FCF perpetuity valuation formula
- The key value driver valuation formula
- Economic profit and enterprise value added
- ROIC vs. WACC – computation and drawbacks
- Case studies: valuing companies using the above formulae
- Equity multiple valuations based on net income, EPS, dividends and NAV
- PE ratios, PB ratios and dividend yields
- EV multiple valuations based on revenues, EBIT, EBITDA, EBITDAR
- Adjustments to group EV to derive operating EV
- Adjustments to EV multiples to derive the correct underlying multiple
Multiple valuations continued
- Choosing comparable firms
- Reconciliation of multiple valuations to the key value driver formula
- Examining how using different multiples gives different valuations
- Earnings versus cashflow
- EPS dilution/enhancement
- Case studies: valuing companies using multiple analysis
- Calculating OPAT and unlevered free cashflow
- The CAPM; unlevered and levered betas, risk premia, kd, ke, tax shields and WACC
- Explicit forecast period and terminal value
- Assessing the terminal value (multiple or perpetuity method)
- Case studies: modelling in Excel to produce DCF valuations
DCF valuations continued
- Importance of final year forecasts – fading the forecasts
- Comparing valuations using multiples vs. DCF
- Advantages and drawbacks of each valuation method
- Calculating NPV and IRRs
Impact of corporate finance transactions on valuations
- Friendly/hostile takeover
- New equity offerings – calculating the TERP
The impact of capital structure on valuation
- Increasing equity value through the use of debt
- Focus on shareholder value – dividend policy and share buybacks
- Companies suited to leverage
- Debt markets and credit ratings
- Analysing debt capacity
The impact of qualitative factors on valuation
- Credit ratings and outlooks, country risk premia, CDS spreads, interest rates, currencies, geo-political risks
- Growth outlook, volatility, technological risks, impact of internet, regulation, level of competition, scope for differentiation, barriers to entry, new competitive threats, capital intensity, changes in vertical integration, buyer power and supplier power, changing consumer habits, product life cycle, degree of consolidation vs fragmentation
- Market position, competitive advantages, cost position, ability to innovate and re-act, new product introductions, product and geographical diversification, level of vertical integration, event risk management, M&A track-record
- Corporate governance, management, operating, financing and corporate finance strategies
Former Executive Director of CSFB and Lehman Brothers, the Course Director has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new...
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