Comprehensive course analysis
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Who should attend
- Anyone interested in value investing in distressed situations
- Anyone providing advisory services to firms in distressed situations
- Professionals working in hedge funds, private equity, or direct investment
- Those working in advisory roles serving companies facing restructuring or who are engaged by investors who are considering an investment in distressed companies
- Those who entrust their money to distressed investors who wish to be familiar with the process employed and able to assess alternative investors and their strategies and performance
About the course
Gain key insights into investing and restructuring in distressed situations
After the longest bull market in history, many investors, managers, regulators and commentators are anticipating a period of economic and financial underperformance which is expected to expose a significant number of companies to financial distress. In this 3-day program, we will take a ‘value investing’ approach to analyzing such special situations. You will learn to assess the degree of financial distress, estimate the extent of the investment opportunity, and determine what turnaround steps might be required to ensure an acceptable return on investment in a distressed situation.
Identify opportunities in distressed markets
This program offers you a conceptually challenging curriculum, exploring both the theoretical basis and practical application of the major elements of value investing in distressed situations. Following this course will give you crucial insights into the fundamentals of value investing. It will enable you to estimate the fundamental, intrinsic, value of the underlying business and examine whether, when and on which debt securities the business is expected to default.
We will practice using the content of the typical ‘cap table’ to provide a ‘snapshot’ of the financial situation and demonstrate how to perform a ‘waterfall’ analysis to assess where the value will ‘fall’ in the capital structure. This will help you to identify the most or least interesting investment options based upon the difference between the current market price and the intrinsic value of the security.
Develop an investment thesis
Once you have identified the potential investment opportunities we will develop the investment thesis for a given security. This will require an assessment of the likely restructuring and turnaround proposals, such as amendments to extend maturity, debt for equity exchange offers or seeking protection in the legal insolvency/restructuring regime. We will discuss the legal environment (including a base understanding of the US Chapter 11 and similar regimes in other countries), as well as examine the game-theoretic behaviors which will impact both the restructuring of the business and the deal-making across the capital structure.
Last but not least. As negotiation is an essential skill of the distressed investor, we will also highlight the important ‘soft skills’ associated with earning an exceptional return on investment in special situations.
How you will benefit
- Explore the theory and practical application of investing in distressed situations
- Develop a thorough understanding of the fundamentals of value investing
- Estimate the fundamental value of a business using discounted cash flow valuation
- Examine debt capacity and its implications for investors
- Learn to use the content of the typical capitalization table
- Gain the skills to perform a ‘waterfall’ analysis
- Identify potential investment opportunities
- Practice with building an investment thesis
- Assess restructuring and turnaround proposals
- Discuss the legal environment in distressed situations
- Explore the game theory behind investing and restructuring in distressed situations
- Improve your negotiation skills to earn an exceptional return on investment in special situations
During this program we will work through a series of conceptual and numeric examples, conducted as group work and discussed in plenary session, enabling you to deepen, and exhibit, your understanding of the fundamental concepts. The cases will also enable you to practice the steps in the investment analysis process being taught in this program. The process and the conceptual basis for this approach to value investing in distressed situations will be explained and elaborated on Day 1, and the refinement and application of the process will be further illustrated and practised in the case studies and class discussions of the remaining two days.
- The game theory behind investing and restructuring in distressed situations
- Identifying the pathways for restructuring
- Estimating the value available for distribution
- Estimating where in the capital structure the cash flow and value will cascade
- Identifying the fulcrum security
- Assessing the need for, and potential for recovery from a restructuring
- Assessing an exchange offer
- Negotiating an investment and rights offering
- The ‘human side’ of distressed investing and advisory
Kevin Kaiser joined the finance faculty at INSEAD in 1992 where he is currently Professor of Management Practice and Director of the Transition to General Management programme. Kevin is also Director of the ABN Amro Managing for Value Research Fund at INSEAD, and is active in conducting and shari...
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