Course Outline

Mergers & Acquisitions Course 3 Days

Overview
This course equips participants for analysing, valuing and modelling complicated transactions such
as mergers, acquisitions or LBOs (leveraged buyouts). It improves participants understanding of the
attractions and risks of mergers, acquisitions and levered structures, as used by corporate and
private equity firms.

Objectives for the merger & acquisition course

By the end of this course, participants will understand:

Drivers on M&As (mergers and acquisitions)

How to model integrated financial statements
How to clean and adjust source data
How to use financial statements to value a business
How to model the balance sheet impact of acquisitions, spin-offs and demergers and prepare
pro-forma acquisition accounts
How to analyse and differentiate between financing and operating synergies
How to model and present the impact of changes in deal structure, financing mix and capital
structure, together with the impact on value
How acquisition debt facilities can be structured and modelled
Drivers on debt capacity and the interests of debt holders
The impact of the choice of financial instrument such as equity, debt or hybrid
Risks and rewards to different parties.

Methodology for the merger & acquisition course

Much of the course work involves Excel modelling and analysis, equipping participants with the tools
to analyse leveraged acquisitions and mergers:

Building up from partially-complete models

Working with integrated financial statements
Developing the acquisition structure and modelling instruments
Running scenarios, iterating and optimising.

This course is run in an interactive, participative format, where participants learn by doing. The key
concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and
modelling work.

Course case study work

As part of their work on this course delegates model transactions based on real-life mergers
and acquisitions.
The approach has been designed to equip participants to put key concepts into practical use
immediately. Delegates will be led through a comprehensive review of analysis practices,
from initial principles through to more advanced techniques that are used in transaction
analysis.
Each participant should have a lap top with USB port to facilitate practical modelling work on
the course.

Course day 1 the starting point for merger and acquisition

analysis
On day one delegates quickly work to develop key linkages within financial statements, and
produce key calculations in their financial model. Participants work in groups, sharing their
experiences with each other and the course tutor. Just like they might be required to in their
jobs, delegates make rapid progress towards building up a core financial model for the case
business from scratch. As the course progresses into days two and three course delegates
continue to practise and improve their skills, considering more advanced financial modelling
topics.

Merger model build up: the starting point

Modelling integrated financial statements

Model structure
Key forecast ratios
Sourcing and cleaning historic data
What makes a good model?
Do we really need integrated financial statements in M&A modelling?

Modelling mergers & acquisitions integrating financial statements: participants

complete a partially-developed financial model for the merger case study which
integrates P&L, balance sheet and cash flow. This model is used to analyse an
acquisition by the business.

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Modelling stand-alone pre-merger valuation

Overview of valuation methodologies

What do investment banks do?
What methodologies could we use?
How should we define firm value? Equity vs. enterprise value
Calculating free cash flow before financing
Understanding and calculating WACC
Discussion calculating WACC
Conducting a DCF valuation

Modelling mergers & acquisitions valuation: participants calculate the cost of

capital and complete a DCF valuation ahead of a planned acquisition.

Financing mergers and acquisitions: debt structuring

Clear, simple and concise explanation of different debt instruments

Senior debt
High-yield debt
Mezzanine
Payment-in-Kind
Understanding the nature of different financial instruments and risk profiles
Modelling waterfall structures
Estimating and optimising debt capacity

Modelling mergers & acquisitions debt structure: participants develop a debt

structure for the merger case study and start to flex the structure within given
constraints. How much debt could the business support? How big a target could it
contemplate acquiring? What impact does changing the debt structure have on
debt capacity?

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Course day 2 modelling a new deal; merger modelling case study

Developing a structure for the new deal sources & uses of funds
in a merger or acquisition

Developing a first cut debt structure

Calculating refinancing needs
The role of working capital and extra cap ex requirements
Typical financing and transaction fees
Determining the equity gap

Modelling mergers & acquisitions delegates develop their own deal structure for a
transaction conducted by the merger case.

Acquisition modelling consolidating accounts

Key adjustments
Working from the post-acquisition balance sheet
How to model and consolidate accounts
Modelling pro-forma accounts post acquisition

Modelling mergers & acquisitions consolidated accounts: participants incorporate

the new deal structure into their merger model and analyse its impact.

Merger modelling case study

Completing a merger model

Getting to DCF valuation for the combined business
Valuing operating synergies
Valuing financing synergies
Analysing the results
Sense-checking the output
Drawing the right conclusion

Modelling mergers & acquisitions post acquisition valuation: participants

complete a merger model for a case business after it has completed its acquisition.

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Course day 3 merger vs. LBO modelling

Making money in private equity

How private equity works

How investors make money
Drivers on gains
The rationale for leveraged finance
Review of the market for private equity
Private equity fundamentals
How private equity players make their money
Private equity life cycle
Jargon-busting

Financing alternatives: equity

The nature of equity instruments

The different risks and rewards accruing to different parties
The impact of loan stock & preference shares
Iterating to optimise rewards to key participants
Key drivers for equity investors
Exits: the good, the bad & the ugly

Modelling finalising a buy out model: participants modify their model, providing an
opportunity to understand the likely impact of key adjustments to assumptions and
analyse the risks and opportunities the transaction will face. Participants model
returns to the various parties and iterate to optimise returns. At the end of this
session participants will have a simple and working buy out model that is structured
clearly.

Course conclusion: best practice in merger and acquisition

analysis

Participants who have improved their understanding of and have had experience of
modelling a merger and leveraged acquisitions/LBO
Simple and clear reference Excel models providing participants with a platform for
future internal modelling efforts and aiding decision making
Participants who, at the end of the course, understand the drivers on transactions
and how transactions can be modified to suit the various parties.

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