What is Acquisition Finance?
Acquisition Finance is the
use of 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 company's
cash-flow based value and are adapted to the client situation
-- and this may call
for
nonstandard corporate finance techniques and funding sources, |
The
Workshop
This two-day interactive course offers a practical study of the techniques of valuing and financing acquisitions with a special emphasis on leveraged acquisitions abroad by Icelandic companies.
The
workshop will include case studies of actual acquisition financings and
how the target companies can be valued. It will show how a variety of
techniques, including senior secured leveraged loans, vendor finance,
second lien and mezzanine debt can serve as a
catalyst to help an acquisition get accomplished. We'll use
lecture-discussions, spreadsheet analysis, deal memorandums and
hands-on
exercises. These will give KB professionals the opportunity to
demonstrate
their
understanding of techniques that can be employed in advising clients
and funding their acquisitions.
Some Features of the Course
- 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?
- What
are the key terms and conditions, covenants and pricing, of different
sources of acquisition finance, including subordinated notes and high
yield bonds?
- What senior,
subordinated and mezzanine and equity financing techniques are appropriate for
a particular acquisition situation?
- What should one look for in a cash flow analysis to model the
acquisition finance, including the repayment of senior, mezzanine and
equity investments?
Workshop participants will be provided with a package of
materials
useful for developing acquisition financing proposals, including
pertinent articles, case studies based on
actual deals, and sample spreadsheets.
Outline
of Workshop
Date
|
Topics
|
Resources
|
| Day One |
Corporate Valuation
- Valuation methods as strategic tools
- Asset-based valuation
- Using comparables
- Discounted cash flow analysis
- Example: valuing Actavis using the DCF method
- Measuring the weighted-average cost of capital
- Case study: Active Generation. The Lebanese owner of a private fitness-center network aims to sell
to a strategic buyer, but wants to get the best price. What method should he use to value the business?
- Valuing a private company and raising private equity
- Valuation for a start-up business
- Corporate M&A strategy: how to win, how to lose
- Sources of value gains from acquisitions
- Restructuring checklist
- Valuing the business post-acquisition
- Case study: MTC-Celtel. Merger synergy analysis
Acquisition Financing Techniques
- Checklist of senior and subordinated financing techniques
- Senior secured loans
- Case study: Acquiring Valvex. How should the senior debt be priced?
- Asset-based finance
- Sale-and-leaseback financing
- Second lien versus senior-sub mezzanine
- Case study: Second Lien Facility. How would you adapt this term sheet to your client's needs?
- Financing with a bond placement
- Private versus public markets (and 144A)
- Terms and pricing of high-yield bond financing
- Application: Foodcorp's International Debt Placement. Please examine the terms and conditions of this financing.
- Mezzanine: Step-up rates, PIKs, participations, warrants, preferred
- The structure and pricing of sub debt and warrants
- Case study: Woodstream's Mezzanine. What is the effective cost to the issuer of this mezzanine debt issue?
- Terms and conditions of a mezzanine termsheet
- Case study: The Woodstream Termsheet. Examine this termsheet. Which features would you, as investor, insist on? Where would you be willing to give way?
- Performance-linked participation debt: an alternative form of mezzanine
| Presentations
kb-valuation.pdf
kb-techniques.pdf
Case Studies
Active Generation
MTC-Celtel
Acquiring Valvex
Second lien facility
Issuerco PIK
Foodcorp
Woodstream Mezz
Woodstream Termsheet
Spreadsheets
wacc.xls
beta.xls
actavis_valuation.xls
Active Generation
Valuation-related
spreadsheets
Celtel
woodstream.xls
|
Day Two
|
Debt Capacity Analysis and Leverage Tiering
- Debt capacity analysis
for private companies
- Case
study: Ubuntu Properties.
A private company is looking for a means of financing an acquisition
for expansion. Participants estimate the company's debt capacity and
the
owner's
financing options.
- Focus: synthetic ratings and debt pricing
- How to structure and price the leverage for an acquisition or buyout
- Post-acquisition leveraged re-finance
- Paydown
and exit analysis
- Using a model to simulate the cash flows
- Designing the senior, mezzanine and equity funding
- Evaluating an acquisition funding proposal with mezzanine debt
- Case study: Suriname Hydropower Services. Can you model the rate of return on the senior and mezzanine funding for this privatization investment?
Managing an Acquisition Proposal: Valuation and Funding
- Valuation for M&A: financial versus strategic viewpoint
- Valuing a division within a company
- Evaluating funding possibilities
- Terms and pricing of the senior and mezzanine debt
- Case study: Financing the Flexics Acquisition.
The controlling owners of this technology company are seeking a
means of realizing the company's corporate value. How could a buyout,
or an acquisition, be financed?
- Summary and Recap
|
Presentations
kb-debtcapacity.pdf
kb-funding.pdf
Case Studies
Ubuntu Properties
Suriname Hydropower
Flexics Acquisition
Spreadsheets
lbocapacity.xls
Corporate Finance and Debt
Capacity Tables
ubuntu.xls
financing_abc.xls
flexics.xls
|
Additional Resources
Background Reading
Methods of Corporate Valuation
Critique of Valuation Methods
P/E
Ratios
Notes on cost of capital
and capital
structure
Note on Leveraged Buyouts
Second Lien Loans
Mezzanine Finance 1
Mezzanine Finance 2
Subordinated notes term sheet
Property sale-and-leaseback financing
Useful Links
damodaran.com (industry ratios)
reuters.com (US and Global companies)
jpmorgansavant.com (industry comparables)
advfn.com (corporate financial ratios)
bonds.yahoo.com (funding costs)
About the Instructor
Dr. Ian
Giddy,
born in South Africa, has taught finance at NYU, Columbia, Wharton,
Chicago and
in over 40 countries worldwide for the past three 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
North and South America, Europe, Asia, the Middle East and Africa. As a
banker and consultant he has been involved in the
growth of the structured finance market 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. He and his wife are the founders of Cloudbridge, a nature reserve in Costa Rica.
About Kaupthing Bank
Kaupthing Bank is a northern European bank offering integrated
financial services to companies, institutional investors and
individuals. These services include corporate banking, investment
banking, capital markets services, asset management and comprehensive
wealth management for private banking clients
The Bank operates in ten countries, including all the Nordic
countries, Luxembourg, Switzerland, the UK and the US. In addition the
Bank operates a retail franchise in Iceland, where it is headquartered. For further detail, see kaupthing.net.
|
