M&A and LBO Modelling and Analysis (2 Days)

Day 1 - Full Merger Modeling

During this session, participants learn how to build a full-blown merger model which combines two fully integrated financial statement forecasts. Practical consolidation issues are addressed, and the analysis undertaken in the previous day is greatly expanded. The deal analysis focuses on the financing structure, pricing, earnings and credit impact and value creation.

Key topics:

• The advantages of a full-blown merger model
• Preparing the stand-alone data for acquirer and target
• Preparing key deal data
• Building a flexible funding structure using a sources and uses of funds table
• Calculating goodwill
• Dealing with fair value adjustments to the target's net assets
• Dealing with refinancing of target's debt
• Modeling fees (advisory, debt-issuance and equity-issuance)
• Consolidating the financial statements of acquirer and target
• Synergies
• Earnings accretion/dilution and relative P/E analysis
• Assessing the value creation potential of the deal using Return on Invested Capital analysis
• Contribution analysis
• Analysis at Various Prices
• Net present value of synergies versus control premium
• Identifying the maximum offer price and a suitable financing mix

Day 2 - Leveraged Buy-Out Modeling

Participants learn how to build a full-blown LBO model. The specific complexities of LBO modeling are addressed, particularly in relation to the financial structure of the deal. Cash flow available for debt servicing is calculated and a cash-sweep mechanism is incorporated into the model. IRR returns to equity holders and to mezzanine holders are calculated, and credit ratios are analyzed. Finally, the financial merits of the transaction are discussed on the basis of the output of the model.

Key topics:

• Understanding the key value drivers in an LBO
• Complex capital structures
  • Term A, B, and C
  • Second lien
  • Mezzanine and high yield
  • Preference shares, shareholder loans and vendor loans
  • Ordinary equity
• Cost assumptions for the different financial instruments
• Understanding the sources and uses of funds, and the related multiples
• Building the pro-forma balance sheet
• Building a cash sweep
• Calculating the returns to the providers of finance
  • IRR for the equity and mezzanine holders
  • Money multiples for the equity holders
• Using sensitivity analysis