Enhanced Core

Public & Acquisition Comparables and Discounted Cash Flow Analysis

Overview of valuation methodologies and fundamental concepts
Public Comparables Analysis:

• Choosing the appropriate peer group
• Gathering public information
• Calculating market and enterprise value
• Normalizing for non-recurring items
• Calculating latest twelve months (LTM)
• Calculating relevant multiples
• Deriving an implied valuation range
• Analyzing multiples and a comparables universe
• Exercise: “Spreading public comparables” for the case company

Overview of Acquisition Comparables Analysis:

• Choosing the appropriate deal list
• How control premiums and synergies impact multiples
• Sources of public information

Discounted Cash Flow Analysis:

• Strengths and considerations of a DCF analysis
• Deriving a weighted average cost of capital (WACC)
• Discounting unlevered free cash flows
• Estimating the terminal value (exit multiple vs. perpetuity growth rate approach)
• Determining the valuation range based on DCF analysis
• Exercise: Adding DCF output to a 3-statement model for the case company

Analyzing Results:

• Imputing valuation ranges
• Analyzing a “Football field” for the case company based on different valuation methodologies

Excel, Financial Modeling & Advanced Sensitivity Analysis

Mastery Quiz: Comparables and DCF
Overview and introduction to financial modeling
Excel Best Practices and Efficiencies
Construction and Application of:

• Core statements
• Working capital schedule
• Depreciation schedule
• Amortization schedule
• Other long-term items schedule
• Equity schedule
• Debt and interest schedule

Troubleshooting the Model:

• Understanding and controlling for circular references
• Balancing the model
• Making the model “deal ready”

Utilizing the Finished Product:

• Data tables

Advanced Sensitivity Analysis:

• Adding scenarios to the model
• Creating a toggle for cases and naming cells

Merger Consequences Analysis

Mastery Quiz: Financial Modeling

• Concept of affordability analysis
• Purchase accounting overview
• Creation of goodwill and write-ups, including possible incremental D&A
• Opening balance sheet and purchase accounting adjustments
• Pro forma income statement
• Accretion/dilution analysis
• Credit rating considerations
• M&A transaction considerations(stock vs. cash, social issues, etc)
• Asset vs. stock purchase
• Tax deductibility of goodwill
• Section 338 election
• Exercise: Building an M&A model for a potential acquisition of the case company

Leveraged Buyout Analysis

Mastery quiz: Merger consequences

• What makes a good LBO candidate?
• Concept of value creation via de-leveraging, operational improvements and “multiple expansion”
• Sources of funding for an LBO
• Differing viewpoints for LBO constituents
• Purchase price determination
• Debt capacity and financing options (Pro rata facilities, institutional facilities, mezzanine capital)
• Sponsors equity and internal rate of return (IRR)
• Fundamentals of “recapitalization accounting”
• Mechanics of constructing an LBO model
• Exercise: Constructing an LBO model for the case company