Acquisition finance refers to the
valuation and financing of strategic and financial acquisitions.
Finance is the use of debt financing to effect management
buyouts and to bridge-fund acquisitions. Today many
companies are looking at leveraged finance as a broader tool,
including the use of leverage for share buybacks and special dividends
or to consolidate ownership, or as an alternative to a trade sale or
IPO for exit, or for refinancings.
workshop on acquisition and leveraged financing techniques will be
around several major topics employing in-depth group work on case
financial analysis and
documentation. The focus will be on identifying acquisition situations
for highly leveraged finance solutions, and the design and pricing of
the high-spread loans and high-yield bonds as well as the equity
instruments that support the leverage. Examples of such situations
and leveraged buyouts, financing acquisitions,
defensive financial restructuring, recapitalizations, and asset-based
techniques such as leveraged leasing. A
catalyst for leveraged buyouts is so-called mezzanine finance that
falls between senior debt and pure equity.
workshop explains why and when corporations
employ leveraged funding in acquisitions, and in what form. In three
information-packed days of instruction
and application, we offer an economic analysis of
the valuation and price negotiations in acquisitions, an insight into
when LBOs succeed and
when they fail, paydown and exit strategies, methods of cash-flow
modelling, and a framework for
among alternative leverage and mezzanine techniques. One
goal for participants is to develop a checklist of the key criteria in
a leveraged finance deal. This will help them to identify the main
strengths and risks of each
structure or proposed deal.
The workshop includes
case studies of actual financings and sample documentation. It offers
exercises, and will give participants the opportunity to augment
understanding of deals through group work, presentations and
is of relevance to potential
corporate borrowers, to lenders, and to those involved in buyouts and
acquisitions. This includes corporate officers,
commercial and investment
securities analysts, private equity specialists, asset managers, and
individuals whose professional future may be enhanced by an
of acquisitions and leveraged and mezzanine finance techniques.
will be provided with a
useful to the structuring and analysis of specially tailored leveraged
pertinent articles, rating agency reports and sample documentation from
actual deals done in North America, Europe and elsewhere.
Some of the issues to be explored:
- What is the acquisition target worth? How can we negotiate
the price and form of payment?
- What financing techniquers are available? What is the role
of leveraged finance in acquisitions?
can senior and mezzanine debt be used to facilitiate an acquisition?
How can one
assess a company's borrowing capacity?
- What are the key credit, pricing and rating issues
surrounding leveraged and acquisition financing?
recapitalizations: how do they really work, and what are their
advantages and disadvantages?
- What is the right pricing and covenant structure for
leveraged acquisition lending?
- How do mezzanine financing techniques such as warrant notes
work, and when does it make sense to use them? How
are they priced?
- How can one model the cash flows and debt paydown in a
- How can collateralized debt
obligations be used to manage a leveraged loan portfolio?
|| Acquisitions: Valuation and Finance
- The keys to M&A finance:
Valuation of the target, valuation of the synergies, assessment of debt
- The gains from acquisitions:
Operational and control synergies
study: Goldfields. Led by the instructor, delegates attempt a
valuation of this mid-cap company from a financial sponsor's viewpoint.
- How much is the target worth? How
should we pay?
- A review of valuation tools for
value and EBITDA
cash flow analysis
- Example: Valuing Actavis using
comparables and the DCF method
- Sponsor vs trade acquisitions:
comparing valuation analysis
- Measuring the synergies
- Pricing and financing an acquisition
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
finance as a temporary capital structure
the deal done: bridge finance
study: A Bridge Too Dear. How should the bridge loan be priced?
And the senior debt?
- Capital market refinancing: ISS bonds
- Equity bridge lending
- Implementing a management buyout:
and equity finance
- Spreadsheet-based Debt Capacity
for leveraged finance
- Focus: synthetic ratings and debt
- How to structure and price the
funding for an acquisition.or buyout
study: The LBO
of ISS. Delegates undertake a step-by-step analysis of the
company's debt capacity and the LBO financing possibilities.
the relationship between the partners
and exit analysis
- Case study: Reykjavik Fleet Leasing.
What value should we place on this company at exit?
- Post-acquisition refinancing and
and exit analysis
Bridge Too Dear
Methods of Valuing a Business
to Leveraged Finance
A Note on LBOs
Build-Ups and Leveraged Recapitalization
leverage: roll-ups and recaps
of high leverage on business efficiency and shareholder risk
recaps with share buybacks or special dividends to enhance shareholder
study: Sealed Air Corporation. Delegates learn how a company with stable and growing free cash flows
can exploit its debt capacity, and discuss the
risks it takes in doing so.
- Leveraged recaps for ownership transition
study: Ahlsell's Leveraged Recap. We look at the tiering of
funding instruments in this Swedish leveraged dividend recapitalization.
- Stapled finance
- Leveraged defensive recaps
- Leveraged rollups (or buildups)
study: Ubuntu Properties.
The owner of a private company is looking for acquisition finance.
Delegates estimate the company's debt capacity, its cost of capital and
- Survey of leveraged finance
techniques, and when it makes sense to use them
the optimal financing mix: debt, equity or mezzanine?
- The players and the market today: LBO
funds, private equity houses, advisory firms and others
- Syndicated acquisition lending
versus cash flows as support for leverage
- Case study: Funding the Valvex Acquisition.
Delegates examine the
pricing and syndication structure of a term acquisition loan and
- Case study: Cognis. How
second-lien lending contributed to the leveraged refinancing of a
a second lien termsheet
- Case study: Sealy. When do the
investors get repaid? How much?
subordination in PIKs
study: Jefferson Smurfit. Delegates identify the factors that
determine the rating of this "Holdco PIK"
- Warrant notes
study: Woodstream. Who gets the warrants, and what are they
- Convertible notes and preferred
pricing and other key terms and their negotiation
study: Suriname Hydropower Services. Teams seek to structure a
performance-linked mezzanine note for a private emerging-market company.
the Valvex Acquisition
Value of Loan Covenants
Mezzanine Finance 1
Mezzanine Finance 2
High-Yield Debt Market
a Buyout: Cash Flow Modelling
Yield and Hybrid Bond Financing
- Modelling a LBO: key corporate numbers
a LBO: key predictions
a LBO: financing assumptions
- Case study: Jordan Cement. This
case offers a framework to explore the power of cash flow modelling and
sensitivity analysis in a leveraged buyout.
Derivatives and CDOs in Leveraged
Finance: Instruments and Pricing
in covenants, pricing and defaults
- Example: Piaggio high yield bond.
Delegates consider a high yield bond issue by an Italian company.
What terms and conditions would such a bond require, and what pricing
and fees would be involved?
The US high yield market for non-US issuers
issuance under 144A and subsequent registration
- Case study: The Hertz High Yield Bonds.
consider a high yield bond issue used for part of the funding of a
What terms and conditions did this bond require, and what pricing
and fees would be involved? How did the terms and pricing differ from
those of term loan funding?
of US and Eurobond market
of subordinated capital financing
debt (example: KB Bank)
stock (example: Capitec)
(example: US Bancorp)
are Hybrid Securities?
- Case Study: Lottomatica. We debate
the use of deeply subordinated hybrids, from the point of view of
issuer and of investor.
derivatives and leverage: the market and instruments
and pricing of credit default swaps
study: Chase Secured Loan Trust Notes. Delegates analyze a
private-placement risk transfer instrument.
finance in the CDO market
- Case study: KKR Financial CLO.
Why did KKR get involved with the CDO market? How did it achieve an
AAA rating on a portfolio of leveraged and mezzanine debt?
synthetic CDOs and super-senior credit default swaps
- Case study: Noname Bank Synthetic CLO.
Delegates learn the role of the super-senior unfunded tranche in a
Using CDS and CDO techniques to lay off the risk in of a portfolio of
High Yield Bonds
High-Yield Debt Market
Sources: damodaran.com, Bank of America
Business Capital, and others
- Valuation Models
(xls) - Rough calculation for choosing the correct valuation model.
Finance & Debt
Calculation (xls) - Estimates a rating and cost of debt based on
the coverage of debt by an organization.
- LBO Valuation
(xls) - Analyzes the value of equity in a leverage buyout.
- Sample documentation for
leveraged loans, leases, etc
Giddy has taught finance at NYU, Columbia, Wharton, Chicago and
in over forty countries abroad for the past three decades. He was
Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The
author of more than fifty articles on international finance, he has
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 ABS 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
River Watertrail Guide. He and his
wife are the founders of Cloudbridge,
a nature reserve in Costa Rica.