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Euromoney Training
Acquisition Finance Workshop
Prof. Ian Giddy
New York University

Acquisition Finance
Acquisition Finance is the use of the debt, equity and hybrid financing techniques to achieve an acquisition or leveraged buy-out in a cost-effective manner. The focus will be on identifying the financing solutions that match the situation -- and this may call for nonstandard corporate finance techniques and funding sources, Examples include structuring the payments so that it is tax effective for the seller, and building in a debt repayments schedule that matches the merged companies antidcipated cash flows. The financing instruments to be covered include senior debt, subordinated notes, seller financing, high yield bonds, warrents and convertibles, and equity sources including seller "stub" equity, private equity funds and public offerings.

For more resources see the instructor's website,
Who Should Attend?
The seminar is of relevance to both potential issuers and investors in acquisition-related instruments, and to the bankers who serve them. These include corporate finance officers, commercial and investment bankers, securities analysts; investment officers; corporate treasurers and other individuals whose professional future may be enhanced by an understanding of acquisition finance techniques.

Participants will be provided with a package of materials useful to the structuring and analysis of merger and LBO financing techniques, including pertinent articles, rating agency reports and sample documentation from actual deals done in Europe and elsewhere.

Ian Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in 30+ countries abroad for the past two decades. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, he has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous corporations and financial institutions in the U.S. and abroad. As a banker and consultant he has been involved in the growth of the structured and acquisition finance markets in the USA, Europe and Asia. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail Guide. - resources in finance

Acquisition Finance is the use of the debt, equity and hybrid financing techniques to achieve an acquisition or leveraged buy-out in a cost-effective manner.

The Workshop

This workshop will be taught around four major topics employing in-depth group work on case studies, financial analysis and deal documentation. The focus will be on valuing acquisition targets and the design and pricing of  situation-specific financing instruments to achieve the acquisition goal. Examples of such situations include: competitive bids, acquisition of distressed companies, acquisition of companies with disposable assets, and private equity and leveraged buyouts by financial sponsors.

Senior debt is typically the foundation of acquisition finance, and delegates will learn about bridge financing, term loans and revolving lines. Subordinated debt often fills the gap between senior secured debt and equity, and this category can take many forms, including second lien notes, high yield bonds and mezzanine notes. Equity-linked securities, including warrant bonds, convertible notes, preferred stock, index-linked securities and others now offer corporations and banks a means of financing that offers higher yields without burdening the acquiror with burdensome interest payments. Companies seek the best features of debt and equity, while lenders and investors often demand the security and priority of claims offered by debt, while expecting some upside in exchange for the risks they take.

This workshop explores why and when corporations and financial institutions should use these different acquisition financing techniques depeding on the particular circumstances of the buyer or the seller, including tax and creditworthiness considerations. Together we will sketch a roadmap for choosing among the alternative forms of these techniques that are employed in today's capital market.

One goal for participants is to develop a check list or rapid overview of the key criteria in an acquisition deal, to consider when analysing a proposal, so as to grasp the main strengths and risks of the financing alternatives after an initial analysis. 

The workshop will include case studies of actual financings, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding of deals through group work and plenary discussions.

Key Issues

Some of the issues to be explored:

  • How should a target company be valued? How does the method of valuation affect the availability of funds from banks, institutional investors and private equity investors?
  • How can one assess the potential gains from an acquisition? How dependable are these projections, from an investor's viewpoint?
  • How much money is needed for the transaction, including fees and restructuring costs?
  • How are syndicated acquisition credits structured and priced?
  • What are the key terms and conditions, covenants and pricing, of different sources of acquisitions finance, including subordinated notes and high yield bonds?
  • How do equity-linked financing techniques such as warrant notes work, and when does it make sense to use them? How are they priced?
  • What are the essential features of sponsor-led buy-out finance? How can one structure the financing of a management buyout to raise the funds needed without losing control?

Outline of Workshop
Date Topics Resources
Day 1
Pricing and Financing an Acquisition
  • The Keys to M&A Finance: Valuation of the Target, Valuation of the Synergies, Assessment of Debt Capacity
  • The Gains from Acquisition: Operational and Control Synergies
  • Case study: Goldfields. Led by the instructor, delegates attempt a valuation of this mid-cap company from a financial sponsor's viewpoint.
  • A Review of Valuation Tools for Acquisitions
  • Negotiating the Price and Form of Payment
  • Case study: Ciba-Allied Colloids. We assess a valuation from a strategic buyer's viewpoint in the face of a rival bid.
  • Case study: NTL-Telewest. Delegates consider the relative merits of paying with cash versus shares.
  • How much is the target worth? How should we pay?
  • Case study: Mardi-Gras. Delegates decide how much and how to pay for an acquisition.
  • Pricing and Financing an Acquisition
  • Case study: MTC-Celtel Should the acquirer be willing to pay more than the IPO value for this mobile communications company and if so, how will the acquisition debt be repaid?
  • Financing the Deal
  • Senior, Mezzanine and Equity: The Details, with Examples
  • Syndicated Acquisition Bank Credit
  • Case study: Funding the Valvex Acquisition. Teams of delegates examine the pricing and syndication structure of a term acquisition loan and revolver.

Valuing a Business
The syndicated leveraged loan market

P/E Ratios
Industry ratios
Cost of capital spreadsheet
Comparables valuation
Constant-gowth valuation
Multi-stage growth valuation
Synergies valuation

Day 2
Leveraged Acquisition Finance
  • Role of Leveraged and Structured Finance in European and International M&A and LBO deals
  • Why Leveraged Acquisitions?
  • Case Study: Invitel Hungary  Delegates consider the challenges of acquiring a debt-ridden company
  • Mezzanine Acquisition Finance
  • Mini Case Studies: Coach USA, Woodstream. Delegates compare the pricing of different sources of mezzanine acquisition funding.
  • Example of Spreadsheet-Based Debt Capacity Analysis for Leveraged Finance
  • Focus: Synthetic Ratings and Debt Pricing
  • How to Structure and Price the Leverage for an Acquisition or Buyout
  • Use of Hybrids in Management Buyouts and Leveraged Finance
  • Case study: Le Meridien. Delegates work out the possible senior structured and mezzanine financing possibilities for an acquisition of this hotel group.
  • Post-Acquisition Finance: Debt Paydown Through Disposals and Refinancing
  • Case study: Financing the Kabel Deutschland Acquisition. We discuss this bridge-to-securitization financing led by Goldman Sachs.
  • Implementing a Management Buyout: The Sequence
  • Hands-0n Exercise. Delegates apply to tools and ideas of the course to undertake a step-by-step analysis of a company's debt capacity, including building in a repayment plan and exit strategy.
  • Summary and Recap

Note on Leveraged Buyouts
Mezzanine Finance 1
Mezzanine Finance 2

Corporate Finance and Debt Capacity Tables
lbocapacity.xls | | | | contact
Copyright ©2005 Ian Giddy. All rights reserved.