Giddy | Rabobank Strategic Analysis Course

Amsterdam Institute of Finance

Rabobank Strategic Analysis Course

Prof. Ian Giddy, New York University

The Course
This module is designed to enable Rabobank relationship managers to leverage the bank’s capabilities in corporate finance, capital markets and related investment banking areas, and deliver value to clients. Beginning with the fundamentals of good corporate finance policy, we look for mismatches between goals and practice. We use these mismatches to identify opportunities in selected product areas, including debt and equity and other forms of financing, risk management, and ownership transition.

We use an integrated shareholder value framework – centered on the “value drivers” in a company’s financial strategy – to analyze real-world case studies and exercises. Groups tackle these in a practical manner drawing on the bank’s resources as well as the course contents and written materials and spreadsheets. Together we develop a pre-meeting checklist and find information sources to diagnose a company’s financial strategy and condition.

Materials
Participants will be provided with a package of materials useful to the structuring and analysis of corporate financing and restructuring techniques, including pertinent articles, rating agency reports and sample spreadsheets from actual deals done in Europe and elsewhere. The course will include case studies of actual corporations and their financings, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding of deals through team results and discussions.

Suggested Reading

Features of the Course

Learn or update fundamental corporate finance "best practice" methods
Identify the key value drivers as well as the vulnerabilities of a business
Master methods to calculate the cost of capital
Improve any company's value by reassessing the optimal capital structure
Measure and manage financial risks using derivatives and financing techniques
Apply advanced financing techniques, including hybrid instruments
Be able to identify opportunities for ownership transition, including mergers, buyouts and divestitures

Course Outline

Date	Topics	Resources
Day 1	Strategic Analysis: Goals versus Practice Introduction to the course and the objectives View clients through a Valuation Framework to discover mismatches between business and financial strategy Rationale for focus on opportunities in selected areas, including financing instruments, debt and equity, risk management, and M&A Case study: Goldfield Corporation. In what way would financial restructuring enhance shareholder value in this company? Why finance matters -- and why most companies are undervalued How business risk combined with financial risk influences investors' return expectations Developing flowcharts to match client needs with product solutions The corporate value drivers, and how to change them Case study: Autolinks. Participants evaluate the business and financial risk of this Finnish private company, and how it impacts the company's financing. Understand how analysis of a company's value can be used in a discussion with clients, and develop a checklist of discussion points. Review of valuation methods: Asset-based, comparables, discounted cash flow, option-based Calculating free cash flows and growth rates Enterprise value and EBITDA Case study: Valuing Actavis Value Creation Through Corporate Financing Decisions Review of Effective Cost Analysis: how to measure the cost of debt, cost of equity, and weighted-average cost of capital Case study: Life Time Fitness. Estimating the cost of capital Adjusting the costs of debt and equity for leverage Synthetic ratings and debt pricing Finding the optimal capital structure: debt, equity or mezzanine? Case study: Life Time Fitness (continued). Participants compute the effective cost of capital for a company with various degrees of leverage, and consider how leverage fits in with the company's business and financial strategy. Using the optimization spreadsheet Optimal financing: using the company's assets Asset analysis for acquisition finance Case study: Madras Appliances. Participants compare the techniques and effective cost of various acquisition finance alternatives. Lease or buy? Wet or dry? Example: Grupo Taca Aircraft Financing.	Presentations rabo-analysis.pdf rabo-financing.pdf Case Studies Goldfield 2008 Autolinks Valuing Actavis Life Time Fitness Madras Appliances Grupo Taca Leasing Spreadsheets beta.xls Industry betas actavis_ev.xls actavis_valuation.xls lifetime_wacc.xls leasevbuy.xls
Day 2	Strategy and Risk Management The client's risk profile and risk tolerance Sources of financial and business risk Currency risk: measure the exposure Currency risk: match the financing Identifying interest rate risk and liquidity risk Case study: Aero Lloyd. What is this company's exposure to interest rates and liquidity risk? Business risk: does the financial structure match the corporate risk exposure? Using debt and derivatives to manage financial risks How can quasi-equity financing instruments close the gap? Convertibles as a financing tool Application: Photronics Convertible. Why did Photronics issue a convertible bond to finance its expansion in Asia? Hybrid capital instruments Case study: Lottomatica. How would hybrid financing match this company's strategy and constraints? Strategy and Ownership Transition Ownership transition: exit/transfer choices The "internalization principle." Build or buy? Hold or sell? Going public: liquidity and value gains Selling the business Trade sale or financial buyer? What's it worth? How should we get paid? Case study: Intralinks. What are the exit possibilities for this high-growth company? Partial exit: the earn-out strategy Partial exit: dividend recapitalization Case study: Truck Toys. Evaluate the proposed recapitalization. Summary and conclusions	Presentations rabo-risk.pdf rabo-transition.pdf Case Studies Aero Lloyd Lottomatica Hybrid Intralinks Truck Toys Spreadsheets convertiblebond.xls trucktoys.xls
About the Instructor Ian Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in over forty 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 global capital 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.