Understanding Company Valuations for Mergers & Acquistitions Course Agenda

Course Agenda
Day 1 - An Introduction to Valuation

09:00 - 09:20 – Welcome and introduction to course objectives

09:20 - 10:30 –Introduction to Company Valuation

  • How the market values companies and what causes prices to change
  • How companies try to persuade the market to change its view of value
  • Valuation of IPO
  • The role of the research analyst
  • Case-study: Examining the valuation of Marks & Spencer and what happened in 2004

10:30 - 10:45 – Coffee

10:45 - 12:30 – Using comparable multiples

  • Traditional valuation multiples (P/E) and newer multiples (PEG ratios, etc)
  • The concept of Enterprise Value and  related multiples – EV/EBITDA, EV/EBIT
  • Case-study: Estimating valuation based  on historic and prospective multiples. Which multiples for which sectors and which time periods?
  • Case-study: Selecting appropriate multiples for different industry sectors

12:30 - 13:30 – Lunch

13:30 - 14:45 – Which companies are comparable?

  • Criteria for selecting comparable companies
  • Case-study: Comparable companies for Virgin Mobile, premium vs discount, implications for pricing at flotation and then as an acquisition target for NTL
  • How to decide if the sample of companies and ratios makes sense
  • Case-study: Selecting comparable companies for a flotation candidate

14:45 - 15:15 – When to use other valuation methods

  • Asset based, dividend discounting, Sum of the Parts, Real Options
  • Case study: Can dividend discount models be used to value any type of UK company?

15:15 - 15:30 – Coffee

15:30 - 16:30 – Discounted Cash Flow Analysis (DCF)

  • Why discount cash flows?
  • What assumptions tend to have most  impact on a DCF valuation
  • Case study: The impact of different assumptions on DCF valuation

16:30 – 17:00 – Bringing it all together

  • How to draw conclusions from valuation results
  • Case study: Reviewing the results of a valuation analysis using different methods and recommending a target price range

17:00 – Close

Day 2 - DCF Valuation

9:00 - 10:30 – Free cash flow

  • The concept of free cash flow
  • Key assumptions in free cash flow forecasting
  • Case-study: critiquing assumptions used to forecast a company’s free cash flow

10:30 - 10:45 – Coffee

10:45 - 11:30 – Terminal value

  • The importance of terminal value and the different methods used
  • Case-study: selecting suitable terminal value methods for a variety of companies and circumstances including infrastructure projects and private equity investments

11:30 - 12:30 - Cost of capital

  • Significance of a company‟s Weighted Average Cost of Capital (WACC)
  • Key steps in estimating cost of debt and equity 
  • Use of the Capital Asset Pricing Model (CAPM) for estimating cost of equity
  • Significance of the equity risk premium, historic data and differences in views
  • Where to find data to use for an unquoted company

12:30 - 13:30 – Lunch

13:30 - 14:30 – Cost of capital case-studies

  • Case-study: analysing the cost of capital estimates for a quoted company
  • Case-study: reviewing the impact of key assumptions on estimates of cost of capital for an unquoted company

14:30 - 15:15 – Determining present value

  • Converting forecast free cash flows into a DCF valuation from enterprise value to equity value
  • Case-study: adjusting terminal value and cost of capital assumptions to assess the impact on the final valuation

15:15 - 15:30 – Coffee

15:30 – 17:00 – Drawing conclusions and making reality checks on present value

  • Reality checks and sensitivity analysis
  • What usually goes wrong?
  • Case-study: reviewing results of DCF valuation, selecting and adjusting key variables to carry out sensitivity analysis, and recommending a "target‟ price range

17:00 – Close

Day 3 - Acquisitions

09:00 - 10:30 – Strategy

  • Choice between acquisition, organic growth and strategic alliances.
  • Acquisition objectives, checklist and screening
  • Is there a need for advisers?
  • Case-study: choice of growth strategy for a UK company

10:30 - 10:45 – Coffee

10:45 - 11:50 –Process

  • Key differences between the acquisition of quoted and private companies.
  • Merits and demerits of an auction
  • Issues that arise in hostile bids.
  • Due diligence
  • Case-study: motivations of the parties involved in the process.

11:50 - 12:30 - Valuing the target

  • Distinguishing stand alone value from value to the buyer.
  • Synergies and costs of achieving them.
  • Risk areas and sensitivity analysis.
  • What cost of capital to use.
  • Control premium, private company discount and other factors influencing price.

12:30 - 13:30 – Lunch

13:30 - 14:15 – Valuation

  • Case-study: building synergies into acquisition valuation for a UK company and contrasting stand alone value versus value to buyer.

14:15 - 15:00 –  Structuring the acquisition

  • Buying shares or assets.
  • Paying with cash or shares.
  • Deciding on the appropriate level of debt financing.
  • Additional analysis required for highly leveraged deals.
  • Earn outs.
  • Case-study: how do UK finance managers decide on how much debt is appropriate?

15:00 - 15:20 – Coffee

15:20 - 16:20 – Structuring the acquisition case-studies

  • Case-study: significance of choice of debt or equity for Earnings Per Share (EPS)
  • Case-study: reviewing financing choices for an acquisition by a UK company

16:20 – 17:00 – Making it work

  • When do acquisitions work?
  • Communicating the deal to the market.
  • Where does post-deal integration go wrong?
  • Case-study: developing a post-deal checklist

17:00 Summary and close