- resources in finance

The International Investor

Corporate Valuation & Leveraged Finance

Prof. Ian Giddy
New York University

Why a "Strategic Corporate Valuation" Approach?
Strategic corporate valuation involves the application of analytical methods of valuation to help determine the company's business and financial strategy. The goal is to increase the value of the business through M&A, restructuring techniques and leveraged financing instruments.

The Workshop
This course offers an in-depth study of the strategic applications of corporate valuation techniques with a special emphasis on leveraged finance and extracting cash value through financial restructuring. Starting with the company's "value drivers," we introduce the key decisions - investment, financing and risk management - that contribute to shareholder value. Running through the computations of corporate valuation and financing, we discover the sources of value creation in acquisitions. We apply this to several case studies, revealing also how leverage, divestitures or acquisitions can alter the value of a company.

The workshop will include case studies of actual corporations and how valuation methods influence their strategy, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding of techniques through presentations and discussions. Participants will be provided with a package of materials useful for corporate valuation, including pertinent articles, and sample spreadsheets from actual deals done and case studies.

Pre-Course Preparation
Participants should read the articles listed, and review all the course materials in advance. The will be no time available during the workshop for background reading.

Outline of Workshop



Day One Valuing a Business
  • Valuation methods as corporate decision-making tools
  • The 5 principles of corporate finance
  • The corporate value drivers, and how to change them
  • Valuation as a tool to discover restructuring opportunities
  • Review of valuation methods
    • Asset-based valuation
    • Using comparables -- and when they make no sense
    • Enterprise value and EBITDA
    • 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
  • Valuing a business in a developing country
  • Case study: Garden State Paper. Can you assess the valuation for this Central American company to help it raise private equity financing?

Applying Valuation Methods to Mergers, Acquisitions and Divestitures

  • Corporate M&A strategy: how to win, how to lose
  • Sources of value gains from acquisitions
  • Example: Orascom Construction. Should this Middle Eastern company expand through acquisitions of local cement companies?
  • Restructuring checklist
  • Identification and valuation of operational synergies
  • Identification and valuation of control gains
  • Case study: MTC-Celtel. Before-and after merger synergy analysis for the acquisition of an African mobile phone network.
  • Where pure financial restructuring can add value
  • Case study: The Goldfield Company. What is this company worth? How would you finance an acquisition? What would you change?

Valuation for Financial Buyers

  • Implementing a sponsor buyout: senior, mezzanine and equity finance
  • Debt capacity and exit analysis
  • The "VC Method" of valuation
  • Focus: synthetic ratings and debt pricing
  • How to structure and price the leverage for an acquisition or buyout
  • Case study: Nukem. A private equity perspective on the buyout value of the security services division of a nuclear power company.
Valuing a Business
Valuation Methods and M&A

Case Studies
Actavis Free Cash Flows
Valuing Actavis
Active Generation
Garden State Paper

P/E Ratios
Industry ratios
Cost of capital
Valuation-related spreadsheets
Active Generation solution

Methods of Valuing a Business
EBITDA and Valuation

Day Two 

Leveraged Acquisition Finance

  • Debt capacity analysis for private companies
  • Case study: Ubuntu Properties. A private company is looking for a means of financing an expansion in South Africa. Participants estimate the company's debt capacity and the owner's financing options.
  • Post-acquisition leveraged re-finance
  • Paydown and exit analysis
  • Case Study: Reykjavik Fleet Leasing. An exercise in exit analysis.
  • Exit and ownership transition

Mezzanine Financing Techniques

  • Mezzanine finance -- what does it mean?
  • Checklist of senior and subordinated financing techniques
  • Senior secured debt in emerging markets -- what does it mean?
  • Sale-and-leaseback financing
  • Collateralized loans versus securitized finance
  • Second lien and senior-sub mezzanine
  • Case study: Second Lien Facility. How would you adapt this term sheet to your client's needs?
  • Mezzanine: Step-up rates, PIKs, participations, warrants, preferred
  • Application: Sealy PIK. What is the effective cost of this PIK note?
  • The structure and pricing of sub debt and warrants
  • Example: Woodstream's Mezzanine. What is the effective cost to the issuer of this mezzanine debt issue?
  • Negotiating a mezzanine termsheet
  • Case study: Cognis Refinancing. The post-LBO refinancing of this german chemicals company illustrates the legal relationship among debt sources.
  • Performance-linked participation debt: an alternative form of mezzanine
  • Mezzanine as a catalyst in private emerging market finance
  • Case study: Suriname Hydro Company. What are the advantages and disadvantages of the Contingent Payment notes in this deal? What are the exit possibilities?
  • Convertible notes and redeemable preferred stock

Acquisition, Financing and Exit

  • Private equity entry and exit strategies
  • Case study: Flexics ME. The controlling owner of this Dubai-based plasma technology company is seeking a means of realizing its corporate value. What is Flexics ME worth as an acquisition target to Photronics, and how much of a premium should be paid? What is it worth in the IPO market, and could it be worth more to LBO investors?
  • Summary of workshop

Leveraged Finance
Mezzanine Finance

Case Studies
Ubuntu Properties
Reykjavik Fleet Leasing
Second Lien termsheet
Sealy PIK
Woodstream termsheet
Cognis Refinancing
Suriname Hydropower

Flexics ME

flexics data.xls

A Note on LBOs
Second Lien Loans
Mezzanine Finance 1
Mezzanine Finance 2

About the Instructor
Ian Giddy is a professor of finance at New York University, USA. He has taught finance at NYU, Columbia, Wharton, Chicago and abroad for the past thirty years. 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, Dr Giddy has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous financial institutions and corporations in Europe, North America, the Middle East and Asia. He has lectured in more than forty countries, and has been involved in corporate finance for over 15 years. 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. | | | | contact
Copyright ©2006 Ian Giddy. All rights reserved.