highly technical, market-driven mergers and...

Highly Technical, Market-Driven Mergers and Acquisitions Courses

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Due DiligenceJoint VenturesAdvanced Takeover CodeTax Issues in M&A Sale & Purchase AgreementsIntroduction to the Takeover CodeFinancial Issues in Acquisition AgreementsAdvanced Private Equity & LBO Training Advanced Private Equity & LBO Training MasterclassBuying a CompanyAdvanced Negotiation issues in M&AAdvanced Negotiation issues in Financial CovenantsSelling a CompanyThe M&A Course

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Course Content

Due Diligence In Corporate Finance TransactionsDate: 9 March 2017, 10 Oct 2017

Location: London Price: £675 + VAT BOOK NOW

Course Overview

There are many definitions for Due Diligence in the context of corporate finance transactions. Out of all of them, the following one captures the essence of our course:

“A future-oriented super audit to help minimize the risks and maximize the shareholder value creation in an M&A transaction” (Business Due Diligence Strategies - Jeffrey Weiner)

All the words of the definition are important. It definitely needs to be future-oriented, because nobody would buy a business for what it did in the past. “Super audit” refers to the ample scope and depth required in the exercise. And, finally, let’s not forget the objectives of the exercise: “minimize the risks” - which could ultimately mean you should not do the deal at all - and “maximize shareholder value” - for instance through adapting the transaction structure, lowering price or seeking contractual protection against findings of the Due Diligence process.

Note that the definition was focused on an M&A transaction, while in our course the scope will be broader, including capital markets trades.

The course will provide an overview of the typical fields subject to Due Diligence - both in M&A and capital markets situations. It will also look at the different phases of the processes, and will explain how Due Diligence plays a role in each one of them. The course will describe the role that each party plays in the Due Diligence process and of the consequences of lack of accurateness or negligence for companies, managers, advisors and regulators.

Given that, for many reasons, the Due Diligence process is often not as complete as the buyer would want, we will also look at the more comprehensive protection that can be obtained through representations and warranties. The course will also look at the rest of the Share Purchase Agreement and other contractual matters around M&A transactions.

The course will follow a practical, not theoretical approach. Real life cases will be discussed in order to apprehend the main learning lessons they provide.

Learning Objective:This course is designed to provide a general overview of how to approach a due diligence process for advisory professionals and executives of corporations. It will highlight the main areas of focus, the key documents and the most frequent issues to be addressed.

In addition, the course will pay special attention to how to translate the findings into price, transaction conditions or contractual protection through reps and warranties. The course will also introduce case studies that will be helpful to relate all the theory to practical examples in actual M&A and capital markets transactions.

Learning Pre-requisites:There is no previous knowledge required to be able to follow the course successfully. The provided reading material will help to get up to speed with the main areas of discussion.

An Introduction to Due Diligence ■ What is Due Diligence? ■ How important is Due Diligence? ■ There are processes with and without Due

Diligence ■ Who Performs Due Diligence? ■ When do we perform Due Diligence? ■ A continuous process ■ The seller’s perspective ■ The output

M&A Case Study – Astra Bank

■ The C.P. Alstra Bank will highlight how the Due Diligence process will generate significant information and inputs that should be incor-porated to the final terms of the transaction through price adjustments, earn outs and/or contractual provisions.

Key Due Diligence Areas ■ Strategic

• Fit in strategy• Barriers of entry – acquisition vs. organic

growth or greenfield• SWOT • How has the industry changed over the last



Due Diligence In Corporate Finance TransactionsContinued

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Course Content

5 years? How will it changed in the next 5?

• Tech disruption threats ■ Commercial

• Market: size and growth• Competitive landscape• Products• Geographical breakdown• Brand• Distribution• Market share analysis• JVs and partnerships. Break up clauses

■ Customers and Suppliers analysis• Number of customers• Sales for top 5-10-25 customers• Length of customer relationships• Buying dynamics and key factors affecting

commercial success• Number of suppliers• Bargaining power of suppliers• Ability to pass price increases through to

the customers ■ Synergy potential analysis and estimate of

restructuring charges ■ Financial

• Macro trends • Quality of earnings• Current capital intensity and capital inten-

sity of future growth• Capital structure• Credit Ratings• Debt calendar• Working capital• Pending capex• Fixed costs and operating leverage

■ Legal• Corporate filings• Litigation• Patents• Environmental• Activities in complex geographies• Sanctions• Key contracts. Guaranteed contracts.

Break-up penalties ■ Risk Management ■ IT

• Sufficiency and suitability of platforms and software

• Network infrastructure• Cyber security• Back-up and recovery• Scalability• Capex plan• Compatibility, migration and costs associ-

ated ■ Property, plant and equipment ■ Tax

• Tax structure• Tax liabilities• Foreign earnings and cash abroad• Deferred tax assets

■ HR• Compensation: amount and structure• Top management contracts• Labour law and unions

■ Intellectual property

■ Regulators• Regulatory constraints affecting the busi-

ness• Correspondence with regulators• Regulatory approvals for the transaction• Ability to distribute dividends

■ Anti-trust analysis ■ Other aspects of the Transaction

M&A Case Study – Glencore´s acquisition of XstrataGlencore made its offer to acquire the shares of Xstrata that it did not own from a privileged situation. The level of information available was uneven. The process triggered an exceptional corporate governance mechanism to protect minority shareholders, and also significant investor scepticism.

M&A Case Study – Acquisition of TSB by Banco Sabadell ■ The C.P. TSB will highlight how Banco Sa-

badell detected relevant IT issues in its due diligence for TSB, and ended up negotiating with the controlling shareholder of TSB a transitional mechanism to upgrade and mi-grate the IT system of TSB in a satisfactory manner. The Case is particularly interesting because despite having a controlling share-holder (Lloyds Banking Group), TSB was list-ed, and hence there was a third stakeholder in the discussion, which were the minorities of TSB.

The Due Diligence Process in the context of a M&A Transaction ■ Transactions with No Due Diligence ■ Pre-transaction Due Diligence ■ The Due Diligence in the different phases of a

M&A Transaction ■ Information Memorandum prior to non bind-

ing offers ■ Data Room & virtual Data Room ■ Vendor Due Diligence Reports ■ Site visits ■ Management Due Diligence, Q&As and Break-

Out sessions ■ Contractual Warranties ■ Irrevocables ■ Role of external advisors ■ Incentives of the management team of the

asset being sold ■ From signing to closing ■ Confirmatory Due Diligence ■ Diligencing the minutes of the board ■ Incorporating conclusions of the Due Dili-

gence to the Final Terms of the Transaction ■ Clawbacks and earn outs ■ Specific aspects of due diligence for private

equity firms

M&A Due Diligence Horror Stories

Examples of transactions where due



Due Diligence In Corporate Finance TransactionsContinued

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Course Content

diligence process fails AOL-Time Warner – What did it fail?

M&A Case Study – Acquisition of HBOS by Lloyds TSB ■ The price offered for HBOS was based on a

number of assumptions that proved inaccu-rate. The case study will introduce several due diligence aspects that are worth discuss-ing.

Contract Negotiations, SPA, Reps & Warranties ■ Due Diligence exercise vs. Acquisition Agree-

ment ■ SPA ■ Examples of reps & warranties ■ Who is giving the reps & warranties ■ Misrepresentations ■ Claims ■ Extent of liabilities ■ Limitation period ■ Franchise ■ Remedies ■ Escrow ■ Due Diligence and Management Retention

schemes ■ Break-up fees ■ Regulatory approvals ■ MAC ■ Introducing warranties in a public tender

offer structure? ■ Contingent Value Rights (“CVR”)

Capital Markets Case Study – IPO of NetMedia plc ■ The C.P. IPO of NetMedia plc will describe the

complexity of financial DD in capital markets transactions, the price discovery mechanism, the process of setting the price range / de-ciding final pricing, and the risk of a drop in share price once the company is listed.

The Due Diligence Process in the context of a Capital Markets Transaction ■ Objectives. The Underwriter as the link be-

tween investors and issuers ■ Transaction Due Diligence ■ Prospectus / IOC ■ Forward looking statements ■ Access to US investors ■ Reg S / 144A / Fully registered offers. QIBs

and “Big Boys” letters ■ Legal Due Diligence ■ Corporate Governance ■ Publicity guidelines ■ 10b-5 ■ Analyst presentations and research ■ MD&A ■ Force Majeure ■ Role of auditors. Proformas. Comfort letter.

Tick and tie. ■ OFAC ■ Sanctions

■ Bring-down Due Diligence ■ Inclusion of retail investors ■ Regular information requirements ■ Regulatory swings

Capital Markets Due Diligence Horror Stories

Examples of transactions where due diligence process fails IPO Bankia – What did it fail?

Capital Markets Case Study – IPO of Betanzos Bank ■ The C.P. IPO of Betanzos Bank will develop the

different phases of Due Diligence during a cap-ital markets transaction, the responsibility of the company and its advisors, the reputational risks and the role of regulators.

Latest Trends in Transaction Due Diligence ■ Vendor Due Diligence ■ Paying for buyers‘ Due Diligence ■ Second phase consortiums and pooling Due

Diligence inputs ■ Marking up SPA ahead of binding offers ■ Escrows ■ Hostile activity ■ Key areas of “Soft Due Diligence”

• Strategy• Culture• Quality of information• Technical differences and interpretation• Integration and synergies

■ Big/recent fiascos in M&A Due Diligence ■ Increased number of withdrawn transactions ■ Due diligence of disruptive and tech related

business models Wrap-up and Key Conclusions



Course Content

Joint VenturesDate: 3 Feb 2017, 12 Sep 2017

Location: London Price: £695+VAT

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Course Overview

Joint ventures are an important option for businesses in their home country or internationally. Along with acquisitions it is a model for corporate growth.

The course looks at the reasons for joint ventures including the commercial reasons and how they are reflected in the legal structure and documents.

Looking at negotiations it focuses on the general aspect of negotiations as well as critical areas for joint venture negotiations.

The course recognises the commercial and legal problems that regularly arise during the life cycle of a joint venture. It covers the often thorny issue of pre contract documents including the differences in common and civil law.

It goes on to look at the different options of legal structures that can be selected depending on the commercial objectives and addresses the advantages and disadvantages of each option including limited companies, partnerships and contractual joint ventures.

It then looks at challenges of decision making in a joint venture where parties are working to a common end but have different ultimate interests. This leads to differences, ways to resolve them are looked at and what happens if the joint venture partner are unable to reach a decision. , including deadlock and options such as ‘Russian Roulette’ and Texas Shoot Out’. How and to whom parties may transfer shares , minority shareholders.

Coming to the end of the life cycle the programme focuses on exit, termination and change of control.During the course participants will look at case studies, look at sample documents and receive checklists to assist them with dealing with joint ventures a following the course.

Introduction ■ What is a Joint Venture? ■ Why enter into a Joint Venture? ■ Reasons for Joint Ventures ■ Choosing a legal structure ■ Key legal considerations ■ Information you need to decide on the

legal structure ■ Key success factors

Negotiating – General Guidelines ■ Objectives in negotiations ■ Strategy ■ BATNA ■ Zone of Possible Agreement ■ Price versus value ■ Creating and sustaining value ■ [10] areas where joint venture negotia-

tions can establish successful sustainable joint ventures

Pre Contract Documents – Heads of Terms/MoU with Sample Document ■ Pros and cons ■ Types of pre-contract documents ■ Duty of good faith ■ Letters of intent ■ Memorandum of Understanding ■ ‘Subject to contract’ ■ Governing law – choice and impact ■ Advice to negotiators – Checklist

Selecting the Legal Structure that Reflects Commercial Objectives – Key Determinants ■ Relevant laws ■ International joint ventures ■ Questions to address ■ Restrictions



Joint VenturesContinued

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Course Content

Main Joint Venture Structures – Advantages & Disadvantages ■ Limited Liability Company ■ Limited Liability Partnership ■ Partnership ■ Contractual Joint Venture ■ Contentious areas

Decision Making ■ Directors ■ Votes ■ Quorum ■ Reserved Matters ■ Conflicts of Interest

Deadlock & Default ■ Default ■ Casting Vote ■ Winding – up ■ Put and Call Options ■ Sale ■ ‘Texas Shoot Out’ ■ ‘Dutch Auction’ ■ ‘Russian Roulette’

Transfer of Shares ■ Pre – emption rights ■ Right of first offer ■ Right of first refusal ■ Pre – emption problem areas ■ Permitted transfers ■ Change of control ■ ‘Drag and Tag’ Rights

Exit, Termination and Change ■ Importance and Key Issues ■ Fixed term/joint renewal ■ Termination for convenience ■ Termination for Cause ■ Consequences of Exit/Termination ■ Winding –up

Case studies

Sample documents and checklists



Course Content

Advanced Takeover CodeDate: 24 Feb 2017, 13 Jul 2017, 9 Nov 2017

Location: London Price: £695 + VAT

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Course Overview

This course covers key rules in the Takeover Code regulating takeovers and the bid strategies and tactics that are used in the current marketplace.

Following the extensive Code Review in 2011, the tactical advantage that possible bidders have had in takeovers has changed and the course examines the numerous effects this has had on bidder and target strategies.

Participants will learn how takeovers are conducted from the initial stages to the completion or lapsing of the bid and will gain an understanding of which strategies and tactics have and which have not worked, with examples from many recent deals.

The Takeover Code: Conduct of Offer ■ The UK takeover framework ■ Legal, UKLA and Code provisions

Key rules for the conduct of public bids ■ Announcements

• When possible/firm offer announcements are required

• Advisers’ responsibilities for announce-ments

• What is an untoward share price move-ment?

• Disclosures following announcements• Naming and Put Up or Shut Up• Contents of firm offer

■ Conditions/pre-conditions• When can they be subjective?• When can they be invoked?• What pre-conditions are possible in firm

offer announcements? ■ Minimum consideration following market

purchases ■ Restrictions

• No special deals • Management incentivisation in PTPs• Frustrating actions and exceptions

■ Squeeze out requirements ■ Overview of recent changes to rules ■ Types of takeover

• Offer statistics• Contractual offer timetable• How hostile offers are played out• Timetables in competitive situations• Development of Schemes of Arrange-

ment• The rules for Schemes and timetable• Mandatory offer and whitewash require-

ments and uses• Partial and tender offers – rules and

when they are useful

Public Takeovers: Strategies and Tactics ■ Changes in marketplace which have affect-

ed takeovers

Bidder Strategies and Tactics ■ Buying share stakes in Target

• Advantages of buying share stakes before and during bid

• Risks of buying stakes• Restrictions on stake-buying and regulatory

requirements • Methods of acquiring stakes• Is it worth holding a large minority stake?

■ Irrevocable undertakings• Advantages of holding irrevocables• Attitude of shareholders• Hard and soft irrevocables• Non-binding letters of intent

■ Impact of Code changes• Return to traditional bid approach• Effect of 28 day PUSU and naming• Work which needs to be done before ap-

proach• Friendly negotiations or hostile offer?• Possible offers and bear hugs

■ Timing considerations of firm offer announce-ments and bid Issues if US shareholders are present

■ Structure: Scheme of Arrangements or Offer• Advantages and disadvantages compared to

contractual offer• Examples of Schemes/offers meeting share-

holder opposition• Examples of Schemes in competitive situa-

tions ■ Cash or share offer?

• Advantages/disadvantages of cash and shares

• Different mixes of consideration• Cash alternative structures• Other financing structures• Means of using foreign shares

■ Care with statements• Price and other future actions

■ Concluding the offer• When to increase offer• Are no increase / no extension statements

useful?



Advanced Takeover CodeContinued

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Course Content

Target Strategies and Tactics ■ Basic arguments for defence ■ Directors and advisers’ responsibilities

in accepting/rejecting an offer ■ Measures before a bid

• Keeping close to market• Identification of stakes• Position of pension fund

■ Negotiate, open books or make possible offer announcement?• Effects of a possible offer announcement

and timing• Advantages of an auction• When should Target refuse to talk?• When to open up books?

■ Forecasts and undertakings• Profit/dividend forecasts

• Restructuring and valuations• Share buy-backs and special dividends• What works best?

■ Pleadings ■ Anti-trust ■ White knight/squire ■ Bolster the board ■ “Get them before they get you”

Both Sides’ Strategies and Tactics ■ Conflicts of interest ■ Examining documents/statements ■ Financial and managerial arguments ■ Direct approach to shareholders/analysts



Course Content

Tax Issues in M&ADate: 24 Jan 2017, 25 May 2017, 6 Oct 2017


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Course Overview

This seminar considers the taxation implications of buying and selling businesses. The viewpoints of the purchasers and vendors are both considered in depth, with the relevant taxes being covered with worked examples and a case study. The seminar also covers the tax treatment of managers’ shares and tax issues relating to venture capital.

Advising the Purchasers ■ Purchase of shares or assets? ■ Tax relief for goodwill and intangibles ■ Capital allowances considerations, particu-

larly fixtures in buildings ■ Taking advantage of trading losses in target ■ Capital gains de-grouping charge ■ Financing the transaction – tax relief for

interest costs ■ Stamp Duty and Stamp Duty Land Tax con-

siderations Advising Individual Vendors ■ Pre-sale planning ■ Sale of shares or sale of assets? ■ Maximising CGT entrepreneurs’ relief ■ The importance of “trading company” sta-

tus ■ Tax treatment of consideration – cash,

shares, loan notes and earn-outs ■ QCBs or Non-QCB loan notes?

Advising Corporate Vendors ■ Pre-sale planning ■ Form of consideration – cash, shares, loan

notes and earn-outs ■ Securing the substantial shareholdings

exemption ■ Definition of “trading company” for sub-

stantial shareholdings exemption

Inland Revenue Clearances, in particular ■ Section 138 TCGA 1992 re capital gains ■ Section 701 ITA 2007 re tax advantages

Tax Issues affecting employee shares ■ Taxation of employee shares including re-

stricted securities ■ Impact on “earn outs” and MBOs ■ The use of share options to attract and

retain key staff ■ Availability of CGT entrepreneurs’ relief

for the management team

Tax Issues relating to Venture Capital ■ An overview of the Enterprise Investment

Scheme (EIS) and Seed EIS ■ Qualifying companies and excluded activ-

ities ■ Conditions for the individual investor ■ Significance of being “connected” with

the company ■ The “Business Angel” rule ■ Venture Capital Trusts

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Course Content

Sale & Purchase Agreements - The Commercial IssuesDate: 6 Feb 2017, 24 Feb 2017, 26 Apr 2017, 7 Jul 2017, 29 Nov 2017


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Course Overview

A simplistic view of an acquisition is that the actual price paid is paramount but experienced practitioners recognise that price is but one aspect of the deal and that there is the potential for significant value leakage in arriving at the actual price and also from claims arising after completion.

The “price” paid may seem a simple concept but, in practice, requires an understanding of how this is derived. Most private acquisitions are based on a “cash-free, debt-free basis” with adjustments for working capital or net assets. Buyers typically develop an enterprise value which is then adjusted to derive an equity value by adjusting for cash, debt and working capital all of which needs to be captured in the Sale & Purchase Agreement (“SPA”). When the consideration is to be paid in a foreign currency, a range of issues can intervene to create problems for both parties.

English law is widely used for many contracts and the recent decision in Arnold v Britton has clarified decisions in earlier judgements and clarified the how the courts and parties will approach this in the future. The course reviews these and the differing approach to this in the USA.

Negotiating and documenting these items is not as straightforward as one might expect; for example, does “cash” include “trapped cash”, what does debt include, what is wrong with using “average” working capital and how can parties minimise subsequent disputes? Additionally, the choice of the completion mechanism (completion accounts or locked box) creates further opportunity for further value transfer. Even after completion the seller may find further value erosion through claims arising under the warranties and indemnities.

There is no right or wrong answer to many of these questions and the ultimate position will be dictated by the negotiating strength of the respective buyer and seller. Despite that, a sound grasp of the key commercial and legal issues can minimise value loss for parties.

This programme focuses on transactions involving the purchase of shares but also covers areas of specific relevance to asset purchases. It provides a step by step template to the basics but also covers the critical legal and commercial aspects in the transaction from the perspective of both buyer and seller. Reference is made to recent or relevant leading cases.

Please note that this course covers material that is also covered on the Advanced Negotiation Issues in M&A course.

SPA structure & Interpretation issues ■ The skeleton structure of a contract: over-

view ■ General approach to interpretation of con-

tracts• UK vs USA vs Europe• Influence of Arnold v Britton case

■ Interpretation – Forex issues re price / cur-rency (avoiding the traps)

■ Implied terms & “duty to negotiate in good faith”• Position in the UK • Position in the USA• Position in Europe / civil law - Traps for

the unwary ■ The spectrum of “endeavours/ efforts” –Best

vs Reasonable other variants ■ Force majeure –

• Doctrine of Frustration

• Problems in English law ■ Dispute Resolution ■ Jurisdiction & choice of law

Ancillary agreements ■ Confidentiality letters ■ Exclusivity agreements ■ Heads of agreement / letter of Intent

• Checklist of key issues• Drafting guidelines• Migrating the terms to the SPA• Pros & cons

■ Side letters• What’s in a name

The purchase price: reconciling enterprise to equity value ■ Common purchase price protections

• Cash free/ debt free (What should be in-



Sale & Purchase Agreements - The Commercial IssuesContinued

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Course Content

cluded in Debt)• Cash vs trapped cash?• Equity / NAV adjustments• Capex issues• Debt – what is included?

■ Adjustments for working capital• Receivables• Inventory• WIP – problem areas• Normalised working capital

Other adjustments to the price – warranties & indemnity claims Completion mechanisms & non-simultaneous exchange & completionHow this can affect the deal, source of value

lossLocked box vs completion accounts

Key differencesCompletion accounts

Pros & consProblem areas – access post completion

Locked boxPros & consLeakage vs permitted leakageOther areas of potential dispute

Issues with the “accounts” Impact & role in the deal – why they matterWhich accounts? Consolidated vs individual,

statutory, audited, managementIssues to consider when exchange & comple-

tion not simultaneous Conditions to completionMatters between exchange & completionOther matters – warranties, costs, breach

by seller

Representations & misrepresentations ■ Representations vs warranties vs indemni-

ties• Representations vs “term” (of contract)

■ Critical negotiating issues (buyer vs seller friendly)• Financial statements “fair presentation”

representation• “No undisclosed liabilities” representation• “Full disclosure” representation

■ Manner of misrepresentations• Statements of opinion vs statements of

law ■ Types of misrepresentations & their reme-

dies• Fraudulent vs negligent vs innocent mis-

representations ■ Accuracy of representations

• When must representation to be accurate – agreement vs closing date

• Accuracy of representations - in all vs material respects vs MAE qualification

Warranties ■ Warranties – rationale ■ Warranties and interaction with disclosure ■ Purpose of warranties

• Retrospective price adjustment ■ The common areas of warranty protection ■ The information warranty (on the target)

• Quality of information – information is “true, accurate, complete and not mis-leading”

• Accuracy of information in the disclosure letter / bundle

• The “full disclosure / sweeper” warranty ■ Who provides the warranties

• Issues with multiple sellers, limits on lia-bility

• Sales of subsidiaries• Sales by trustees• What about the directors?• Private equity issues - managers (not

owners)

Disclosure ■ Why & how it matters ■ General vs specific disclosure ■ The disclosure letter & disclosure bundle ■ When should disclosure be made? ■ Seller’s vs buyer’s approach to disclosure ■ What is disclosed – the data room? ■ How full & complete must disclosure be ■ What is fair disclosure?

Indemnities ■ Purpose of & rationale for Indemnities ■ Key issues

• Sandbagging (buyer’s ability to seek re-dress despite prior knowledge)

• Indemnification as the exclusive remedy (carve-outs)

■ Main areas of Indemnity coverage• Environmental• Product liability• Litigation (esp IPR)

Limitations on liability under the warranties & indemnities ■ Awareness carve-outs ■ Time limits ■ Financial limits

• De minimis limits• Threshold for aggregate claims• Overall cap

■ Other limits ■ Security for breach of warranty

• Retentions & escrow accounts• Set-off• Bank guarantees

■ Warranty & Indemnity insurance – a viable solution?• Buyer vs seller policies – key differences

Tax; what‘s best covenant, warranty, indemnity? ■ Why is a tax covenant needed - rationale

• Benefits vis-à-vis the tax warranties• Scope of the covenant• Why & when is a tax warranty also re-

quired?• Impact of the Zim Properties case



Course Content

Introduction to the Takeover CodeDate: 2 Mar 2017, 18 Oct 2017


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Course Overview

On this introduction to the Takeover Code course, participants will learn about how the Takeover Panel operates in practice and how to apply the six general principles.

The course will cover the issues involved in approaching target companies, making announcements, giving independent advice and complying with share dealing restrictions. Participants will also gain a strong understanding of voluntary, mandatory and partial offers as well as the principles of the bid timetable and the conduct of the parties during an offer period.

The course will examine the circumstances when the Takeover Code is applicable, the relevance of the key rules of the Takeover Code, the application of the Code in practice and the documentation requirements of the Panel.

Introduction to the Takeover Code ■ How the Takeover Panel operates ■ Companies, transactions and persons subject

to the Code ■ Enforcement of the Code

The Six General Principles and their application

Key Code definitions

The approach, announcements and independent advice (Rules 1-3) ■ Secrecy ■ When announcements are required ■ Announcements of possible offers and nam-

ing ■ Terms and pre-conditions in possible offers ■ Automatic 28 day PUSU ■ Firm offer announcements (Rule 2.7) ■ Consequences of statement of intention not

to make offer ■ Irrevocable commitments ■ Independent advice

Dealing restrictions, discloures and share purchases ■ Prohibited dealings ( Rule 4) ■ Consideration to be offered (Rules 6 and 11) ■ Consequences of certain dealings (Rule 7) ■ Disclosure requirements in offer period

(Rules 8 and 38) ■ Timing restrictions on acquisition of shares

and exceptions (Rule 5) Mandatory offers (Rule 9) ■ When required ■ Conditions which are possible ■ Price payable ■ Whitewash procedure ■ Purchase of own shares (Rule 37)

Voluntary offers ■ The acceptance condition (Rule 10) ■ The CMA and the European Commission

(Rule 12)

■ Pre-conditions and conditions in firm offers (Rule 13)

■ Partial offer requirements (Rule 36)

Provisions applicable to all offers ■ Multiple classes of share capital (Rule 14) ■ Convertibles and warrants (Rule 15) ■ Special deals with favourable conditions (Rule

16) ■ Announcement of acceptance levels (Rule 17) ■ Restrictions following offers and partial offers

(Rule 35)

Conduct during the offer ■ Standards of care for Information (Rule 19) ■ Responsibility for information ■ Unacceptable statements ■ Post-offer undertakings and statements of in-

tention ■ Equality of information (Rule 20) ■ Restrictions on frustrating action (Rule 21)

Profit forecasts, QFBS and asset valuations (Rules 28 and 29) ■ Different types of profit forecast ■ Reporting requirements ■ Disclosures for Quantified Financial Benefit

Statements ■ Consensus forecasts ■ Asset valuation reporting requirements

Outline timetables (Rules 31 to 34 and Appendix 7) ■ Contractual offers ■ Schemes of arrangements

http://redcliffetraining.co.uk/training/corporate-finance-training-courses/takeover-code-course/


Course Content

Financial Issues In Acquisition AgreementsDate: 21 Feb 2017, 10 Jul 2017, 30 Oct 2017

Location: London Price: £550 +VAT

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Course Overview

This course is designed to help participants understand and deal effectively with the financial issues arising from sale and purchase agreements. It will help them prepare for discussions and negotia-tions around working capital and completion accounts. Cash free debt free transactions, earn out agreements and the option to apply locked box provisions.

The course will also consider some of the key current issues such as the impact of the transition to new UKGAAP from 2014, the new IFRS on revenue recognition and the full impact of fair value accounting on sale and purchase negotiations. The course will help participants to add value to the transaction.

The course is designed to be highly practical and will include case studies that will reflect the actual sale and purchase process including the most common contentious areas.

The initial steps ■ Setting the target Net Asset Value and un-

derstanding the main influences on price ■ The importance of the statutory accounts and

transactions in the critical window to comple-tion

■ Completion accounts – why they are neces-sary and what they can and should achieve

■ What pricing options work best? Based on completion values or using a locked box structure

■ Policies, estimates and uncertainties – under-standing the positives and the negatives

Case study – assessment of typical accounting and financial policies and consideration of what could be used to your advantage and disadvantage. The case study will consider contentious issues such as contingencies and provisions, financial instruments and impairments.

Debt free cash free ■ What is meant by debt free cash free and

why it is important ■ Reconciling the net proceeds amount ■ What is meant by cash, cash equivalents and

debt? ■ Cash v non-cash transactions – how and why

to tell the apart ■ Some contentious matters – invoice financ-

ing and the increasing use of fair values (net present values)

Case study – examination of a typical balance sheet and consideration of what should be included as debt and what should not. This exercise will introduce issues such as invoice financing arrangements, non-controlling interests, preferred stock and compound financial arrangements (convertibles)

Working capital ■ What is meant by working capital ■ What should be included and when is it signifi-

cant – what types of business and industry ■ Calculating working capital needs ■ Cash movement restrictions ■ Timing the transaction to maximise the advan-

tage – the window dressing opportunities Case study – calculating working capital requirements and identifying the fundamental uncertainties – how could these be used for or against you?

Locked box agreements ■ What is a locked box provision and how does it

work? ■ Why such agreements exist compared to the

traditional structures used ■ What are the likely problem areas and what

protections should be put in place? Case study – comparing a transaction applying a locked box provision to a traditional arrangement with a balance due based on values in completion accounts.

Earn outs ■ Why used and when are these best used? ■ Typical performance indicators and measures

Case study – consideration of a typical earn out agreement identifying the issues which could arise and how they should be dealt with. This example will look at revenue targets, profits and earnings measures and impact on overall value (or share price).

Structured business arrangements ■ Understanding key trading arrangements and

structures involving the entity for sale• Group companies and other related parties

– associates and joint arrangements• Inter-company transactions, asset transfers

and other barter arrangements• Service concessions, operating leases and

possible ‘off balance sheet’ arrangements

http://redcliffetraining.co.uk/training/deal-documentation-training-courses/financial-issues-in-acquisition-agreements-course/


Course Content

Advanced Private Equity & Leveraged Buy-outsDate: 20-22 Feb 2017, 26-28 Jun 2017, 16-18 Oct 2017

Location: London Price: £1,800 + VAT

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Course Overview

The programme will review the impact of the draft ECB guidance on leveraged transactions.

This program is designed to provide participants with a comprehensive view of private equity from the perspective of all the main participants. These include the providers of loan and bond finance, the private equity firms, the various professional advisers and the management team. The focus is largely on development capital (i.e. for firms with debt capacity) but also touches on matters relevant to venture capital.

The course covers the three key stages of the deal transaction from entry to exit. It provides an insight into the main value drivers in the process and the main areas of risk, the major structural issues that need to be considered and the structure and parameters used to gauge the optimum amount of debt/equity in the capital structure.

Participants will acquire a thorough understanding of the various types of debt that are available, including both senior and junior loans and the various types of bonds which are being used increasingly by private equity firms and corporates, as well as the key issues for the providers of both loans and bonds.

The programme covers critical issues from the perspective of the PE firm and an understanding of how their funds are structured as this means they approach transactions from a different perspective to corporates. Finally, the varied roles of management, key issues that arise for them and their interaction with the PE investors are also covered as these aspects are vital to ensure management remain properly incentivised to create value.

The programme will benefit those involved in private equity whether directly (e.g. investor, manager or lender) or indirectly, typically as a professional advisor. It adopts a pan-European approach to the topic but the presenter is able to discuss issues relevant in the USA and Asia in view of his exposure to those markets if participants require. Reference will be made to current trends and data in the markets across Europe.

Participants will be provided with numerous case studies to reinforce the various aspects and will also be provided with an LBO model which will be used to structure a transaction.

DAY 1

Introduction & background ■ Overview of the PE market

• Venture capital• PE / leveraged deals

■ The three stages of the deal• Entry, operations & exit

■ The traditional PE value creation model – the 3 key value drivers

■ Techniques for enhancing returns• Capital structure’s impact on value• Using soft exits recaps / refinancings • Equity bridges, Leveraging the fund

Structuring issues & structuring parameters ■ Structuring issues

• Taking security / collateral generally

• Security contrasted: UK vs Europe vs USA

• Financial assistance • Ranking & priority of senior vs junior

debt & pari passu loan/bond structures• Tax issues - group tax relief & thin cap• Squeeze-outs

■ Spectrum of financing instruments in LBOs - overview

■ Structuring parameters - creating an ap-propriate financial structure (overview)• Percentage senior, junior and equity in

debt capital structure• EBITDA multiples• Target returns for PE & mezzanine

funds

Case Study: Calculating the entry and exit value, the funding sources, the basic approach to deriving the equity



Advanced Private Equity & Leveraged Buy-outsContinued

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Course Content

split between PE and management on entry and exit and introduction to estimating the correct capital structure

The acquisition - offer structure ■ Offer structure – cash free, debt free

with normalised working capital/net asset value etc

■ Risk matrix - analysis of the five key value drivers / areas for due diligence • Cash & trapped cash• Debt – what’s included?• Working capital (key to the deal?)• Capex, EBITDA (the good news &

bad) • Establishing the run rate

■ Value matrix – techniques for mitigating the risks and identifying value

■ SPA structuring - locked box vs comple-tion accounts• Pros & cons of each

Case Study: Identifying problematic items in reconciling equity value to enterprise value and the correct approach to calculating the correct level of working capital

DAY 2

Financing Instruments – loans: key commercial terms & current trends ■ Senior loans; key facilities & issues

• Typical terms• RCFs – avoiding typical pitfalls• Capex facilities• Cash sweeps - typical, terms struc-

ture & issues• Margin ratchets

■ Mezzanine and junior mezzanine• Rationale of warranted vs. war-

rant-less • Key issues for the warrant-holder• Key issues in warrant-less deals

■ Other forms of junior loans (note: both 2nd lien and PIK loans have been nas-cent in Europe since 2007)• Second lien loans• PIK loans

■ Asset based lending• Application & use• Typical terms & conditions

Case Study: Reviewing a capital structure and how different instruments can be used to optimise the capital structure, provide more head room and handle

capex

Financing instruments – high yield notes: key commercial terms & current trends ■ High yield notes ■ Market trends ■ Pros & cons of high yield and why it has

been so successful ■ Summary of the typical terms applicable

to notes• Covenant structure• Call protection

■ Review of the bond covenant package ■ Loans vs bonds compared

• Loans’ maintenance covenants vs Bonds’ Incurrence covenants

• Other differences ■ Senior secured (first lien) notes ■ Second lien notes ■ Senior (unsecured) notes ■ PIK notes, “pay if you want” (“PIYW” or

“Toggles”), “pay if you can” (“PIYC”) ■ Fixed vs FRNs

The lender’s perspective ■ Lender’s approach to credit decision

(Loans)• measuring debt capacity• security over assets• exit routes

■ Overview of loan documentation and im-pact on deal/restructuring• Loan as a radar system• Typical structure• Key parties (obligors, borrowers and

guarantors) ■ Key financial ratios / covenants

• Limitations / interaction of the annual debt service coverage ratio (“ADSCR”), total debt/EBITDA, interest cover

• Selecting the appropriate ratio for the deal

■ The four deal scenarios and the role of due diligence

■ Inter-creditor issues• The key issues for senior vs junior debt• Key issues for pari loan / bond struc-

tures

Case Study: Review a detailed term sheet for a senior loan, identify the key commercial aspects and how and where it should be amended to make it borrower / lender friendly



Advanced Private Equity & Leveraged Buy-outsContinued

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Course Content

DAY 3

Sponsor’s perspective ■ Structuring the equity

• Structure - loans, preference shares• Typical returns

■ Equity ratchets • Rationale, structure • Pros and cons of positive vs. negative,

stepped vs. linear ■ Structure and key terms for PE funds

(and impact of the deal)• Investment period (how long)• Preferred return (rate, calculation)• Carry (European vs US approach)

■ The 5 critical issues to sponsors• Portfolio fit• The business model• Management - what PEs approach• Approach to generating value/returns• Exits – hard vs. soft

Case Study: Calculate the exit value and discuss how structuring the PE equity can affect the returns of management

Exits - hard & soft ■ Hard exits vs soft exits

• Review of market trends ■ Exit strategy – duel, triple track - Pros &

cons ■ IPOs

• The key ingredients for IPO• Partial vs complete exit• What about the management – problem

areas ■ Sale of equity – partial vs complete sale

• Problem areas – trade vs secondary PE deals

■ Soft exits – a useful way of enhancing re-turns• Recaps, refis• Management and other fees

Case Study: Discuss the pros and cons of a dual/triple track exit strategy and the key issues to both the PE and management

Management issues ■ Multifaceted role and duties of management

• Issues vis-à-vis role as director, employ-ee, shareholder, warrantor

■ Key documents & terms• Shareholders’ agreement vs articles/

statues (pros & cons) ■ Critical issues in the investment agreement

• Good vs. bad leaver• Management warranties• Equity – valuation issues pre exit (why

“fair value” is dangerous)• Transfer issues – drag, tag-along rights

■ Critical issues in the service agreement• Restraints• Termination

Case Study: Review and discuss the key terms in the management agreement and how they should be structured in a “management friendly” manner



Advanced Private Equity & Leverage Buy-Outs: A 5-Day Master-Class

Date: 20-24 Feb 2017, 26-30 Jun 2017, 16-20 Oct 2017

Location: London Price: £3,000 +VAT

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Course Overview


This program is designed to provide participants with a comprehensive view of private equity from the perspective of all the main participants. These include the providers of loan and bond finance, the private equity firms, the various professional advisers and the management team. The focus is largely on development capital (i.e. for firms with debt capacity) but also touches on matters relevant to venture capital.

The first, second and third day of the course covers the three key stages of the deal transaction from entry to exit. It provides an insight into the main value drivers in the process and the main areas of risk, the major structural issues that need to be considered and the structure and parameters used to gauge the optimum amount of debt/equity in the capital structure.

Participants will acquire a thorough understanding of the various types of debt that are available, including both senior and junior loans and the various types of bonds which are being used increasingly by private equity firms and corporates, as well as the key issues for the providers of both loans and bonds.

The programme covers critical issues from the perspective of the PE firm and an understanding of how their funds are structured as this means they approach transactions from a different perspective to corporates. Finally, the varied roles of management, key issues that arise for them and their interaction with the PE investors are also covered as these aspects are vital to ensure management remain properly incentivised to create value.

The programme will benefit those involved in private equity whether directly (e.g. investor, manager or lender) or indirectly, typically as a professional advisor. It adopts a pan-European approach to the topic but the presenter is able to discuss issues relevant in the USA and Asia in view of his exposure to those markets if participants require. Reference will be made to current trends and data in the markets across Europe.

Participants will be provided with numerous case studies to reinforce the various aspects and will also be provided with an LBO model which will be used to structure a transaction.

The fourth and fifth day of the course will cover the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model.

The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.

The participants will then cover more complex LBO instruments such as warrants and PIKs and how to calculate returns to each of the equity and debt providers.

Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.

The participants will undertake an adjusted present value (“APV”) analysis to determine where value has been created in the LBO transaction, using an APV model and finally look at recovery analysis for a failed LBO transaction.

Case Study: The participants will use a variety of case studies and exercises during the two days, based on publicly quoted and generic businesses.




Continued BOOK NOW

Course Content

DAY 1

Introduction & background ■ Overview of the PE market

• Venture capital• PE / leveraged deals

■ The three stages of the deal• Entry, operations & exit

■ The traditional PE value creation model – the 3 key value drivers

■ Techniques for enhancing returns• Capital structure’s impact on value• Using soft exits recaps / refinancings • Equity bridges• Leveraging the fund

Structuring issues & structuring parameters ■ Structuring issues

• Taking security / collateral generally• Security contrasted: UK vs Europe vs

USA• Financial assistance • Ranking & priority of senior vs junior

debt & pari passu loan/bond structures• Tax issues - group tax relief & thin cap• Squeeze-outs• Spectrum of financing instruments in

LBOs - overview ■ Structuring parameters - creating an ap-

propriate financial structure (overview)• Percentage senior, junior and equity in

debt capital structure• EBITDA multiples• Target returns for PE & mezzanine funds

Case Study: Calculating the entry and exit value, the funding sources, the basic approach to deriving the equity split between PE and management on entry and exit and introduction to estimating the correct capital structure

The acquisition - offer structure ■ Offer structure – cash free, debt free with

normalised working capital/net asset value etc

■ Risk matrix - analysis of the five key value drivers / areas for due diligence • Cash & trapped cash• Debt – what’s included?• Working capital (key to the deal?)• Capex• EBITDA (the good news & bad) • Establishing the run rate

■ Value matrix – techniques for mitigating the risks and identifying value

■ SPA structuring - locked box vs completion accounts

• Pros & cons of eachCase Study: Identifying problematic items in reconciling equity value to enterprise value and the correct approach to calculating the correct level of working capital

DAY 2

Financing Instruments – loans: key commer-cial terms & current trends ■ Senior loans; key facilities & issues

• Typical terms• RCFs – avoiding typical pitfalls• Capex facilities• Cash sweeps - typical, terms structure &

issues• Margin ratchets

■ Mezzanine and junior mezzanine• Rationale of warranted vs. warrant-less • Key issues for the warrant-holder• Key issues in warrant-less deals

■ Other forms of junior loans (note: both 2nd lien and PIK loans have been nascent in Eu-rope since 2007)• Second lien loans• PIK loans

■ Asset based lending• Application & use• Typical terms & conditions

Case Study: Reviewing a capital structure and how different instruments can be used to optimise the capital structure, provide more head room and handle capex

Financing instruments – high yield notes: key commercial terms & current trends

■ High yield notes ■ Market trends ■ Pros & cons of high yield and why it has been

so successful ■ Summary of the typical terms applicable to

notes• Covenant structure• Call protection

■ Review of the bond covenant package ■ Loans vs bonds compared

• Loans’ maintenance covenants vs Bonds’ Incurrence covenants

• Other differences ■ Senior secured (first lien) notes ■ Second lien notes ■ Senior (unsecured) notes ■ PIK notes, “pay if you want” (“PIYW” or “Tog-

gles”), “pay if you can” (“PIYC”) ■ Fixed vs FRNs

Case Study: Identifying problematic items in reconciling equity value to enterprise value and the correct approach to calculating the




Continued BOOK NOW

Course Content

correct level of working capital

■ The lender’s perspective Lender’s approach to credit decision (Loans)• measuring debt capacity• security over assets• exit routes

■ Overview of loan documentation and impact on deal/restructuring• Loan as a radar system• Typical structure• Key parties (obligors, borrowers and guar-

antors) ■ Key financial ratios / covenants

• Limitations / interaction of the annual debt service coverage ratio (“ADSCR”), total debt/EBITDA, interest cover

• Selecting the appropriate ratio for the deal ■ The four deal scenarios and the role of due

diligence ■ Inter-creditor issues

• The key issues for senior vs junior debt• Key issues for pari loan / bond structures

Case Study: Review a detailed term sheet for a senior loan, identify the key commercial aspects and how and where it should be amended to make it borrower / lender friendly

DAY 3

Sponsor’s perspective ■ Structuring the equity

• Structure - loans, preference shares• Typical returns

Equity ratchets • Rationale, structure • Pros and cons of positive vs. negative,

stepped vs. linear ■ Structure and key terms for PE funds (and

impact of the deal)• Investment period (how long)• Preferred return (rate, calculation)• Carry (European vs US approach)

■ The 5 critical issues to sponsors• Portfolio fit• The business model• Management - what PEs approach• Approach to generating value/returns• Exits – hard vs. soft

Case Study: Calculate the exit value and discuss how structuring the PE equity can affect the returns of management

Exits - hard & soft ■ Hard exits vs soft exits

• Review of market trends

■ Exit strategy – duel, triple track - Pros & cons ■ IPOs

• The key ingredients for IPO• Partial vs complete exit• What about the management – problem

areas ■ Sale of equity – partial vs complete sale

• Problem areas – trade vs secondary PE deals

■ Soft exits – a useful way of enhancing returns• Recaps, refis• Management and other fees

Case Study: Discuss the pros and cons of a dual/triple track exit strategy and the key issues to both the PE and management Management issues ■ Multifaceted role and duties of management

• Issues vis-à-vis role as director, employee, shareholder, warrantor

■ Key documents & terms• Shareholders’ agreement vs articles/ stat-

ues (pros & cons) ■ Critical issues in the investment agreement

• Good vs. bad leaver• Management warranties• Equity – valuation issues pre exit (why “fair

value” is dangerous)• Transfer issues – drag, tag-along rights

■ Critical issues in the service agreement• Restraints• Termination


DAY 4 & 5

Leverage Overview ■ Background to the LBO market

• Why do LBOs happen?• The agency effect• Main parties to a deal and their roles

■ Basic theory - The effect of leverage on firm value• Levered vs unlevered businesses• The value of the tax shield• Bringing in bankruptcy costs

The LBO process ■ Stand-alone value of the target – what price to

pay? ■ Modeling an LBO deal – does the deal meet our

returns? ■ Further analysis – assessing the debt capacity ■ Determining the capital structure ■ Assessing the value creation




Continued BOOK NOW

Course Content

Valuing the target ■ Sourcing information – Historic and forecast

date ■ Analysing equity research

• Key attributes of broker analysis• Pluses and minuses of equity research

■ Building a DCF valuation using equity re-search• Which elements of research to use• Cross checking the research• Identifying errors in assumptions

■ Modelling the stand alone valuation• Which WACC to use• Underlying assumptions in a DCF• Different approaches to terminal value• The value driver approach – producing a

more realistic terminal value ■ Comparing and contrasting DCF and LBO

model structure

Case Study I: Participants model the stand alone valuation of the target using historic data and equity research

LBO Modelling Overview ■ Key elements of an LBO model

• Comparing and contrasting DCF and LBO models

• Sources and uses of funds• Key drivers in an LBO model

■ From stand alone valuation to LBO analysis ■ The debt waterfall and initial capital struc-

ture ■ Assessing the IRR and initial optimisation of

the capital structure

Case Study II: Participants use the stand alone valuation of the target to complete and LBO model

Assessing debt capacity for LBO financing ■ Financial interdependencies ■ Financing growth ■ Sustainable debt ■ Target debt capacity assumed in a WACC

calculation, debt capacity and interest cover ■ Debt capacity in LBOs ■ Debt capacity multiples in practice and credit

analysis• The rating agency ratios• Additional constraints in practice• “Max out” calculation – optimising the

structure with further constraints

Case Study III: Modelling the debt capacity of the target using multiple and credit analysis

Capital providers and their typical

characteristics ■ Background to the capital markets and key

providers of finance ■ Current market conditions and ability to finance

• The high yield market• Mezzanine finance• Deal multiples and exit conditions

■ Institutional and management equity ■ Traditional/new lenders ■ Senior tranche profiles

A, B, C, RCF ■ Subordinated tranche profiles

• Second lien• Mezzanine (with/without warrants)• PIK• High yield bonds

■ More complex issues – warrants and options

Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR for each of the capital providers

Assessing value creation in LBO transactions – APV analysis

■ Key components of an APV valuation• Unlevered value• Value of the tax shield• Direct and indirect cost of leverage

■ APV valuation and DCF valuation ■ APV valuation in a steady state ■ Calculating AP in a steady growth environment ■ Incorporating APV analysis in an LBO transac-

tion analysis

Case Study V: Where has value been created, modelling APV analysis for an LBO transaction




Course Content

Buying a Company - A Practitioner’s GuideDate: 16 Jan 2017, 9 May 2017, 2 Oct 2017


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Course Overview

Creating shareholder value through the pursuit of a successful M + A strategy has been shown to be a far from risk-free activity. Buyers overpaying or using inappropriate financing methods can lead to destruction of value and in some cases financial distress.

The course covers topics of risk and return, process, investigation and integration as a practical guide to identifying and negotiating acquisitions.

The Drivers of Growth ■ Shareholder value ■ The company life cycle

• The importance of directors recognising the value curve

■ Risk and return• Relating risk to the life cycle phase of the

company / target ■ Product market growth and decline

• Evaluating niches, substitutes, value in innovation

REVIEW: Comparison and contrast of the lifecycle of three different companies, highlighting how success or failure with acquisitions has determined their fate

■ ICI ■ Debenhams ■ GKN

Growth through Acquisition ■ Assessing the alternatives

• Investment• JV• Acquisition•

DISCUSION: Advantages and disadvantages of each approach

Determining the acquisition• Market objectives

ӹConsolidating a fragmented market ӹBuilding the value proposition

• Management issues ӹAssessing cultural fit

• Price parameters ӹKnowledge of comparative deals

Opportunity cost ӹ Is it a “now or never” deal

REVIEW: The Ansoff Matrix, a handy way to categorise potential risks in acquisition strategies

■ Pitfalls to avoid • Realism of synergies

ӹRisks of prediction, cost and achievement• Accounting standards

ӹWho is the auditor, what principles are followed

• Judging forecasts ■ Scepticism rules

Commercial factors • Target’s history• Recurring revenue• Intellectual property• Customer list

CASE STUDY: Reviewing company information to arrive at a value, taking into account qualitative and strategic factors

The Acquisition Process ■ Establishing acquisition criteria

• Target size and affordability • Potential synergies• Market / competitor impact• Regulatory factors• Shareholder impact

■ Due Diligence • Investigation prior to offer

ӹPublic sources ӹPrivate sources

■ Verification• Contracts• Accounts• Pensions• Employee disputes• Litigation

CASE STUDY: Reviewing summary information on a company to determine which areas need investigation and who should have responsibility for the task

■ Structuring the deal • Earn-out / deferred consideration• Non-compete undertakings • Warranties and indemnities • Disclosure letters

Acquisition Integration ■ Success / failure factors ■ The importance of the integration team ■ Earn outs and accounting issues ■ Incentivising key managers ■ Establishing clear reporting lines

http://redcliffetraining.co.uk/training/corporate-finance-training-courses/buying-a-company-course/


Course Content

Advanced Negotiation Issues in M&ADate: 9 Jan 2017, 27 Feb 2017, 26 May 2017, 18 Sep 2017, 7 Nov 2017

Location: London Price: £850 +VAT

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Course Overview

This programme is aimed at those with a working knowledge of the M&A process. It focuses on negotiating the key commercial aspects of the transaction which impact value for both buyer and seller and on creating the right framework and strategy for enhancing value to the seller or retaining value for the buyer.

The simplistic view of M&A is that it is a bilateral process between buyers and sellers. Experienced practitioners understand it is an organic process, which involves multilateral negotiations between buyers/sellers on the one hand, and their respective advisers on the other hand. Additionally, there are critical negotiating issues that arise, in parallel, between the parties, their own advisers and between the advisors themselves (e.g. accountants debating the completion accounts, lawyers debating warranties in the SPA).

To complicate matters, there are significant differences in approach between different types of sellers and buyers. For example corporates have a different agenda to PE firms whilst owner/managers, who invariably lack experience in M&A, often represent the biggest challenge. Last, the seller’s management can also have a malign influence on the sale process which requires delicate handling.

The programme is divided into two parts. The first part focuses on the soft negotiating issues which are common to smaller deals but less relevant in larger auctions. The second part focuses on the technical or commercial aspects where the real value can be gained or lost. These include the completion mechanisms (completion accounts and locked box), the offer structure (e.g. cash free-debt free and working capital adjustment), structuring the consideration, handling management and value leakage through the warranties, disclosure and indemnities.

Finally, warranty insurance, long seen as an expensive and cosmetic solution, is experiencing rapid acceptance in Europe and, increasingly, has emerged as a powerful negotiating tool. Last, the programme reviews various solutions to closing the “value gap” between the parties and the pros and cons of the various methods of achieving this.

Please note that this course covers some aspects that are also covered on the Sale & Purchase Agreements course although the focus in this programme is on commercial aspects as opposed to a more3 legalistic approach in the SPA course.

General guidelines for effective negotiating ■ 5 Key issues everyone should remember in

negotiating M&A ■ Why price isn’t everything (10 aspects af-

fecting the value) ■ The value matrix – building blocks of the

price ■ Reconciling price vs. value (strategy) –

what to look for ■ Three step approach to focus the negotia-

tions & avoid being side-tracked ■ The art of making concessions … how and

why they can help ■ 8 common mistakes in negotiating the deal

(& how to avoid them)

Tactics for managing the advisors in the deal ■ Managing and choosing your advisors

■ Tips for handling your lawyers (and theirs) ■ Getting the best from the accountants ■ Managing the other party’s advisors

Managing the buyer and the sellers ■ Key differences in approach between corporate

buyers and PE firms ■ The “duty to negotiate in good faith”

• What it means in Europe and civil jurisdic-tions

• Key risk areas & how to mitigate them• Position in the UK (it’s not a liar’s charter)

■ Buying from corporate sellers • The agency cost issue & how it affects the

deal• Who is really running the deal?

■ Dealing with owner/ managers• The psychology of buying from owner/man-

agers • How to overcome problems with (inexperi-

enced) advisors/lawyers



Advanced Negotiation Issues in M&AContinued

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Course Content

• How to differentiate your offer ... & close the deal

• Dealing with multiple sellers• Specific problems when buying minori-

ty/majority stakes

Managing conflicts with managers (who are not the owners) ■ Identifying the two major potential areas

of conflict and value erosion ■ Hijacking or sabotaging the deal – the 3

scenarios and strategies for managing them• Sweetheart deals - “typical” terms• Problem areas and how to mitigate

them (in advance)• Other strategies for handing recalcitrant

management ■ Managing the flow of information

• Interaction with seller liability?• Reverse warranties & side letters – do

they work?• Tactics for minimising seller’s risk

Negotiating – the Initial stages (pre-signing the SPA) ■ Heads of terms as a negotiating tool

• Pros & cons of using heads• Guidelines for negotiating heads• Legal issues in re the heads (enforcea-

bility) ■ Negotiating aspects re the exclusivity

agreements• How to retain control & keep buyers

honest ■ Using break fees as a negotiating tool ■ The confidentiality agreement

• Their real purpose (its not confidential-ity)

• How to manage really confidential is-sues (e.g. formula for Coca Cola?)

Structuring the Offer – impact on value & price ■ The basic Offer structure – cash free, debt

free & working capital/net asset value ad-justment

■ Analysis of the five key value drivers / are-as for due diligence & value• Cash, debt, working capital, capex and

EBITDA/cash run rate ■ Problematic areas and how to extract value

• The “trapped cash” problem• What is “debt”?• “Working capital” – why and how it

matters• Two different approaches to completion:

Locked box vs Completion Accounts• How they can add / destroy value• When to use them and when to avoid

them – decision tree• Key areas for negotiation

CASE: Identifying the key aspects affecting the reconciliation from Enterprise to Equity Value; techniques for estimating average and normalised working capital

Value Leakage: Reps, Warranties, Disclosure & Indemnities ■ Reps and warranties – what’s the difference &

why it matters? ■ Warranties - what are the main areas of risk ■ Disclosure – general tactics

• Dangers of too aggressive disclosure• Using disclosure to identify / mitigate risk

■ Indemnities - caps and collars ■ Tactics for limiting liability and value leakage

• Survival / time to assert claims & carve-outs

• Liability caps / baskets, de minimis & de maximis

Warranty Insurance … a powerful negotiating tool ■ Rapid evolution of the market in Europe ■ Seller vs buyer policies – key differences, pric-

ing and typical terms ■ Interaction with the warranties ■ How buy-side policies can help the seller ■ Where sell-side policies can provide leverage

Bridging the “Value Gap” on price ■ Cash - how much cash is too much? ■ Shares (listed)

• Use and application• Problems areas: market price, caps & col-

lars• Other pitfalls & how to avoid them

■ Vendor loans• Use and application• Pros and cons for sellers and buyers

■ Contingent value rights … undervalued tool ■ Stub equity – when to use it and why ■ Anti-embarrassment ... what is reasonable? ■ Consultancy agreements - Where and how

they can help ■ Earn-outs – a tool for value arbitrage

• Anatomy of an earn-out• Key negotiation issues• Typical pitfalls for buyer• Typical pitfalls for seller

CASE: Identifying the key issues in a tricky disposal, discussing how best to negotiate these with the other side and deriving the optimum deal structure in order to resolve the key issues to the benefit of both buyer & seller



Advanced Negotiation issues in Financial CovenantsDate: 8 Feb 2017, 18 May 2017, 22 Sep 2017


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Course Overview


This programme covers financial covenants in Loan Agreements and includes specific reference and analysis of the terms and definitions as used in the LMA Senior Facilities Agreement for Leveraged transactions and covenants which appear in the LMA Real Estate precedents but consideration will also be given to current developments in the market particularly the larger syndicated (TLB-style) deals which no often include Springing Leverage covenants. The programme will also cover the typical covenants encountered in Infrastructure and Project Finance transactions

The loan market in Europe is bifurcating into two main approaches to loan documentation; smaller club and bilateral deals which broadly follow the more lender-friendly LMA approach and larger syndicated TLB-style deals which, increasingly, are being influenced by the high yield bond market and adopt a Cov-loose or Cov-lite approach where some deals now have only one or two financial covenants and occasionally none at all.

The larger syndicated TLBs also vary in approach with 2 slightly different approaches depending on whether they are English law or NY law (for example, the latter do not usually permit overcures or require prepayment of loans from equity cure cash). Direct-alternative lenders also tend to adopt a more borrower-friendly approach to the terms in the loan and the financial covenants.

Financial covenants are arguably one of the most heavily negotiated aspects of the Loan Agreement. Too often some parties fail to understand the key issues that really matter, for example, they view the financial covenants in isolation rather than appreciating they must be seen in the context of each particular capital structure. A second pitfall is to spend too much time on which covenants apply rather than focusing on the key constituents of the key terms in the financial covenant.

This course provides a detailed look at commercial aspects of financial covenants and looks under the bonnet at the critical issues that arise in practice. This course provides an in-depth look at the covenants as set out in the Loan Market Association precedent together with other covenants that might be used in practice. Reference is made to the Debtxplained loan Database which tracks key terms in the larger syndicated deals.

Participants will gain an in-depth view of which covenants should be used and why together with a detailed analysis of the constituents of the covenants and the sponsor friendly add-backs and other sponsor friendly techniques used by borrowers to manipulate the covenants.

Following the release of the LMA precedent on Real Estate investment transactions, the course now includes a section on financial covenants in real estate deals. On close examination there are some significant differences between of the interest cover ratio in real estate deals and in leveraged transactions.

The programme will appeal to practitioners involved in leverage, real estate and infrastructure, such as Lawyers, Private Equity professionals, Bankers in Lending (all departments), Corporate financiers, M&A advisors, Debt advisory and Restructuring. Accounting professionals looking to expand their knowledge of this topic will also benefit as many of the issues embrace legal /documentary considerations. The programme adopts a pan-European approach to the topic but the presenter is able to discuss issues relevant in the USA in view of his exposure to those markets.

To derive full benefit from the programme, it is essential that attendees have a basic understanding of the main / headline elements of a Profit and Loss account (Sales, EBITDA, EBIT etc) and a basic understanding of the differences between P&L /Accrual Accounting on the one hand and Cash accounting on the other. A short module summarising the key differences of these two approaches is available on request prior to the programme. It is to be emphasised that participants DO NOT require an understanding of IFRS or GAAP as the programme is designed to enable attendees to have enough basic knowledge to identify the key commercial issues.

Case Study: Participants will be required to:- (a) calculate how to derive the key elements of the various covenants (b) identify some of the more problematic components in the covenants (c) calculate the various covenants and (d) explain the pros and cons of each of the covenants and why they may be appropriate for one deal but not another. The calculations are relatively simple and are designed to explain the basic principles and reinforce learning. Accounting knowledge is not required but would be helpful.



Advanced Negotiation issues in Financial CovenantsContinued

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Course Content

Introduction - Interaction of capital structure & financial covenants ■ Types of instruments & impact on the finan-

cial covenants ■ Impact of Capital Structure on Financial

Covenants ■ Bullet loans

• Impact of PIK ■ Current market trends – Cov-lose and cov-

lite review Key financial ratios used by Lenders and typical LMA ratios ■ Market based financial ratios ■ The four LMA covenants in leveraged deals ■ Leverage ratios (Balance sheet and P&L

ratios)• Total Debt / EBITDA• Senior Debt/ EBITDA

■ Interest coverage ratios• EBITDA / Total interest • EBITDA / Senior Interest• EBITDA / Cash interest• [EBITDA – Maintenance Capex] / Cash

Interest • [EBITDA – Capex] / Cash Interest

■ Cash flow cover (DSCR)• CADS / Total Debt Service • CADS / Senior Debt service

■ Capex covenant• Baskets - LMA vs Market approach• Carry forward / carry back amounts -

LMA vs Market approach• Add-backs – LMA vs Market

A closer look at the key constituents of the ratios per LMA and market approach ■ EBITDA (note: is a defined term in the Loan

Agreement, it is not a GAAP or IFRS term)• Simplistic calculation of EBITDA• Consistency of application (dealing with

Accounting changes under IFRS, GAAP etc)

• Exceptional items – LMA approach, UK GAAP vs IFRS

• Sponsor friendly add-backs • Discontinued Operations – LMA, different

approaches of UK GAAP vs IFRS• Derivative & Financial Instruments - UK

GAAP vs IFRS• Pension Items - UK GAAP vs IFRS

■ Total [Net] Debt and Senior Total [Net] Debt• “Borrowings” per the LMA• Simplistic calculation of Net Debt• Example of net debt items

• Treatment of PE “Debt” and Vendor Loans• Impact of Debt Buybacks and impact on

“Debt”• Treatment of “Trapped” cash on Debt

■ Finance charges & Net Finance Charges • Tricky issues

■ Financial Indebtedness & impact on the cove-nants

■ Topical matters affecting the covenants ■ Impact of Leasing on EBITDA (Operating vs

Finance Leases)• Forthcoming changes in IFRS & impact on

covenants• Capitalising costs• Forex gains/losses on Intra-group transac-

tions• Debt buy-back gains & impact on EBITDA• Restructuring costs• Exceptional, extraordinary items & other

“one-off”, non-recurring items• Related party income

Current market trends ■ Key differences between large vs mid cap vs

smaller deals ■ Cov-lose –

• What it covers• typical ratios used

■ Cov-lite• What it covers,• typical ratios used

■ Springing Leverage covenants• When should the ratio spring• Calculating the constituents• When is the covenant tested• Problem areas

Other considerations ■ How many covenants are needed ■ Which companies should be included

• Definition of “Group” • Adjusted EBITDA (effect of acquisitions &

disposals) ■ Dealing with “Short” periods (i.e. Less than

12 months post the deal)• Periods shorter than 12 months• Typical pitfalls to avoid

■ Frequency of application: When should the ratios be tested • Historic TTM/LTM, forecast, both (quarterly,

monthly)• 2 options per LMA• What level of “Headroom” is appropriate• Impact of Clean-ups

■ Additional role of the financial covenants on the Deal



Advanced Negotiation issues in Financial CovenantsContinued

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Course Content

• Margin ratchets• Guarantor Coverage Test• Cash sweeps re distributions and dispos-

als ■ The Compliance Certificate

• Requirements per LMA Sch 9 • Current commercial requirements• When does the breach occur• Ramifications of the breach for Lender

(traps to avoid) ■ Equity cures

• Equity cures - What are they, good or bad

• What should be cured (EBITDA, Cash-flow, Debt)

• Treatment of “overcures” • Is the cure EBITDA? And if yes what ef-

fect will this have• How should the cash be used? (Why re-

payment of debt is not appropriate)• Deemed cures – what are they and are

they worth having?• Review of recent topical case law lessons

from Ideal Standard

Covenants used in Real Estate deals ■ The LMA financial covenants ■ Interest cover – constituents, pros and cons

• Historical • Projected

■ Key differences from the leveraged ratio• Calculation periods• “Passing Rental” – what is included and

what is excluded• Difficult / contentious aspects - break

clauses, non-rental income, costs/ex-penses

• “Finance costs” – treatment of hedging ■ Loan to Value – constituents, pros and cons

• Items to be netted off ■ Loan to Cost - constituents, pros and cons

Project finance / Infrastructure ■ Annual Debt Service Coverage ratio (“AD-

SCR”)• Historic vs projected test• Definition of cash• Definition of Debt service• Typical ratios in key sectors for covenant

breach• Treatment of accruals/forward sales/op-

tions/hedging• Use and application of the ADSCR

> Distribution lockup thresholds, drawLoan/Bond Life cover ■ Definition of CADS

■ Treatment of cash balances (what about swaps)

■ Treatment of reserve accounts ■ Using the correct Discount rate ■ Dealing with multiple types of debt ■ Typical ratios in key sectors ■ Pros and cons ■ Project Life cover

• Differences to Loan life cover• Tricky issues

■ Using the Buffer test



Course Content

Selling a Company - A Practitioner’s GuideDate: 18 Jan 2017, 11 May 2017, 4 Oct 2017

Location: London Price: £595+ VAT

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Course Overview

Selling a company to achieve a vendor’s target price is frequently a time-consuming and complex process. In addition to the legal and accounting considerations there are issues of presentation, timing and tactics that are important elements of the campaign to close a successful sale.

The course covers the practical steps that are required to plan, negotiate, and close a successful sale. Valuing the business to be sold and the effective presentation of the commercial attractions of the business are key elements, as are choosing the appropriate advisers and running a competitive auction.

Overview of the Process ■ Motives and objectives of the vendor ■ Which outcome is preferred

• Cash only• “sale with honour”• Management buyout• IPO

■ Timescale

Preparing the Company for sale ■ optimising the operations

• removing skeletons, resolving relat-ed party conflicts

■ resolving accounting / audit issues• tightening up provisions, write offs,

stock obsolescence ■ clearing legal points

• employee issues • customer / supplier disputes• choosing advisers• tax considerations • the vendor’s position • company PAYE, corporation tax

Quiz: What are the top ten objective of a vendor Assessing the value of the business ■ traditional metrics

• net assets, comparative ratios, DCF, Enterprise Value

■ Other factors • IPR, Market share, Customer base,

Niche products• Strategic value to a buyer

Exercise: Calculating the value of a business using different metrics

Initiating the Process ■ Choosing advisers

• Investment bank, Merger brokers, Ac-countants, Other

Exercise: Reviewing the terms of a mandate letter. Attendees are given a draft to edit and criticise

■ Agreeing the mandate• Fees

ӹRetainer, success, no go• Exclusions

ӹCompanies and territories• Time limits• Indemnities

■ Preparing key documents • Information memorandum • Support material

ӹConfidentiality undertakings, product information

• Due diligence pack ӹReasons for, use of vital data rooms

■ Management preparation • Confidentiality• Conflicts of interest• The “sale team”• Presentation material

The Sale Process ■ The cost / risk / timescale issues in

• A trade sale• Buyout• IPO

■ Trade sale approaches • Public auction• Private auction• Bilateral negotiation

■ Organising an auction

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Selling a Company - A Practitioner’s GuideContinued

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Course Content

• Identifying the purchasers ӹTiering prospects into probables, possibles, maybe

• Defining the deadlines ӹThe importance of realism

• Contact and confidentiality ӹDealing with large company buyers

• Judging the offers > Will a “no price” offer work?

• Conducting the second stage discus-sions ӹCompany and management visits

• Preferred bidder and exclusivity ӹHow long for exclusivity?

CASE STUDY: Reviewing an information memorandum on a

company sale to assess: the value of the business, the most likely buyers

Sealing the deal ■ Earn-outs

• Bridging the valuation gap ■ Warranties, disclosure letter

• Buyer / vendor conflict• Time limits, caps• Completion accounts • Comfort letters

■ Alternative outcomes• IPO, timescale• MBO, management conflicts• Post “exit” lock-in• Ongoing relationship

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Course Content

Mergers & Acquisitions (M&A) CourseDate: 16-19 Jan 2017, 9-12 May 2017, 2-5 Oct 2017

Location: London Price: £2,260 +VAT

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Course Overview

This four day M&A course covers all aspects of buying, selling, valuing private companies and management buy-outs.

The first day of this mergers & acquisitions course covers creating shareholder value through the pursuit of a successful M + A strategy has been shown to be a far from risk-free activity. Buyers overpaying or using inappropriate financing methods can lead to destruction of value and in some cases financial distress.

The second day of this mergers & acquisitions course covers the topics of the financial ratios used in comparable company valuation, creative accounting, the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.

The third day of this mergers & acquisitions course covers the practical steps that are required to plan, negotiate, and close a successful sale. Valuing the business to be sold and the effective presentation of the commercial attractions of the business are key elements, as are choosing the appropriate advisers and running a competitive auction.

The fourth day of this mergers & acquisitions course covers the principles and practicalities involved in arranging and negotiating a management buyout. In addition to the legal issues to be addressed, the use of bank debt and other financial instruments is examined in the context of developing a workable structure for the deal.

Day 1: The Drivers of Growth

The Drivers of Growth ■ Shareholder value ■ The company life cycle

• The importance of directors recognising the value curve

■ Risk and return• Relating risk to the life cycle phase of the

company / target ■ Product market growth and decline

• Evaluating niches, substitutes, value in innovation

REVIEW: Comparison and contrast of the lifecycle of three different companies, highlighting how success or failure with acquisitions has determined their fate

• ICI• Debenhams• GKN

Growth through Acquisition ■ Assessing the alternatives

• Investment• JV• Acquisition

DISCUSION: Advantages and disadvantages of each approach

■ Determining the acquisition• Market objectives

ӹConsolidating a fragmented market ӹBuilding the value proposition

• Management issues ӹAssessing cultural fit

• Price parameters ӹKnowledge of comparative deals

• Opportunity cost ӹ Is it a “now or never” deal

REVIEW: The Ansoff Matrix, a handy way to categorise potential risks in acquisition strategies

■ Pitfalls to avoid • Realism of synergies

ӹRisks of prediction, cost and achievement• Accounting standards

ӹWho is the auditor, what principles are followed

• Judging forecasts ■ Scepticism rules

Commercial factors • Target’s history• Recurring revenue• Intellectual property• Customer list



Mergers & Acquisitions (M&A) CourseContinued

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Course Content

CASE STUDY: Reviewing company information to arrive at a value, taking into account qualitative and strategic factors

The Acquisition Process ■ Establishing acquisition criteria

• Target size and affordability • Potential synergies• Market / competitor impact• Regulatory factors• Shareholder impact

■ Due Diligence • Investigation prior to offer

ӹPublic sources ӹPrivate sources

■ Verification• Contracts• Accounts• Pensions• Employee disputes• Litigation

CASE STUDY: Reviewing summary information on a company to determine which areas need investigation and who should have responsibility for the task

Structuring the deal ■ Earn-out / deferred consideration ■ Non-compete undertakings ■ Warranties and indemnities ■ Disclosure letters

Acquisition Integration ■ Success / failure factors ■ The importance of the integration team ■ Earn outs and accounting issues ■ Incentivising key managers

• Establishing clear reporting lines tax considerations

• the vendor’s position • company PAYE, corporation tax

Day 2: Valuation Principles ■ Value to whom? ■ Price and intrinsic value ■ The risk / return trade off ■ Strategic risk

The Accounting Approach ■ Accounting measures of performance and

value ■ Problems of the accounting approach ■ Are profits relevant? ■ GAAP vs IFRS ■ Creative accounting ■ How to find it ■ Recent examples

Review: Was the near collapse of Quindell inevitable?

Accounting Valuation Metrics ■ Asset and net asset valuations ■ Dividend-based models ■ Dividend yield ■ Dividend discounting ■ Application and drawbacks of dividend mod-

els ■ Earnings-based ■ Price / earnings ratios ■ P/E strengths and weaknesses ■ PEG ratios ■ Enterprise value

Exercise: Valuation of a business using different metrics

Comparable Company Valuation Issues ■ Is the comparability achievable? ■ Accounting principles ■ Averages, medians, outlines ■ Listed vs private ■ Sustainability of earnings ■ Business model flexibility

Exercise: Project Oxford, using comparable company techniques to value a company for acquisition

Calculating the Cost of Capital ■ Assessing the cost of debt ■ Calculating the cost of equity ■ The risk free rate ■ Equity premium ■ Beta ■ The weighted average cost of capital ■ The flaws in the capital asset pricing model ■ Alternative approaches

Exercise: Calculating the cost of equity and the weighted average cost of capital

The Cash Flow Approach to Valuation ■ The time value of money ■ Calculating the discount rate ■ Forecasting free cash flow ■ Calculating FCF ■ Identifying value drivers ■ Terminal value

Exercise: Discounting free cash flow to arrive at a value per share Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target.




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Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target

Day 3:Overview of the Process ■ Motives and objectives of the vendor ■ Which outcome is preferred

• Cash only• “sale with honour”• Management buyout• IPO

■ Timescale

Preparing the Company for sale ■ optimising the operations

• removing skeletons, resolving related party conflicts

■ resolving accounting / audit issues• tightening up provisions, write offs,

stock obsolescence ■ clearing legal points

• employee issues • customer / supplier disputes

■ choosing advisers ■ tax considerations

• the vendor’s position • company PAYE, corporation tax

Quiz: What are the top ten objective of a vendor Assessing the value of the business ■ traditional metrics

• net assets, comparative ratios, DCF, En-terprise Value

■ Other factors • IPR, Market share, Customer base, Niche

products• Strategic value to a buyer

Exercise: Calculating the value of a business using different metrics

Initiating the Process ■ Choosing advisers

• Investment bank, Merger brokers, Ac-countants, Other

• Exercise: Reviewing the terms of a mandate letter. Attendees are given a draft to edit and criticise

■ Agreeing the mandate

• Fees ӹRetainer, success, no go

• Exclusions ӹCompanies and territories

• Time limits• Indemnities

■ Preparing key documents • Information memorandum • Support material

ӹConfidentiality undertakings, product information

• Due diligence pack ӹReasons for, use of vital data rooms

Management preparation • Confidentiality• Conflicts of interest• The “sale team”• Presentation material

The Sale Process ■ The cost / risk / timescale issues in

• A trade sale• Buyout• IPO

■ Trade sale approaches • Public auction• Private auction• Bilateral negotiation

■ Organising an auction • Identifying the purchasers

ӹTiering prospects into probables, possi-bles, maybe

• Defining the deadlines ӹThe importance of realism

• Contact and confidentiality ӹDealing with large company buyers

• Judging the offers ӹWill a “no price” offer work?

• Conducting the second stage discussions ӹCompany and management visits

• Preferred bidder and exclusivity ӹHow long for exclusivity?

CASE STUDY: Reviewing an information memorandum on a company sale to assess: the value of the business, the most likely buyers

■ Sealing the deal• Earn-outs

ӹBridging the valuation gap• Warranties, disclosure letter

ӹBuyer / vendor conflict• Time limits, caps• Completion accounts • Comfort letters

■ Alternative outcomes• IPO, timescale• MBO, management conflicts




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Course Content

• Post “exit” lock-in• Ongoing relationship

Day 4: The Growth of Private Equity and Leveraged Buyouts ■ Academic rationale for the use of leverage

• Modigliani/Miller theory • Michael Milken’s research• Growth of shareholder activism

ӹReviving under performers• Changes in company law• The development of the European high

yield bond and securitisation markets

The Principles of Leveraged Finance ■ The use of debt to drive equity values

• Cash flow management ӹReducing debt to drive equity value

• Operational improvements ӹBuilding “need to have”

• Incentivisation of management ӹGetting rich together

• Cash-capture clauses

Exercise: Good or Bad LBO?

Discussion of recent transactions to see which ones the attendees would do, and what lessons can be learned about elements of success or failure

Structuring the transaction • Target IRR

ӹAssessing the return appropriate to the risk

• Assessing debt capacity ӹForecasting future cash generation

• Senior / mezzanine debt mix ӹ Judging asset values

• Forecasting exit values ■ Consideration of non-bank finance

• High-yield bonds ӹTerms and size of issue

• Second lien debt > Too much debt?

• PIK finance ӹSaint or sinner?

• Vendor loan notes ӹMaking the deal look good

Case Study: Based on information provided attendees are tasked with structuring the finance for an MBO. Answers are discussed to identify the critical elements in the financing

■ Legal elements

• Warranties and indemnities ӹ Investor protection

• New Memo & Arts ӹ Incorporating P.E. control elements

• Tag along and drag along ӹControl of the exit

• Veto rights for private equity ӹControl of management

■ Management • Jensen and Meckling agency theory

ӹWhy buyouts work• The envy ratio

ӹManagement incentivisation• Agreeing the ratchet

ӹCarrot and stick• Good leaver / bad leaver provisions

ӹCovering under performance

Exercise: Agreeing the terms of the envy ratio

Identifying and Closing a Good Transaction ■ Ideal company characteristics

• The three golden rules ■ MBO / MBI

• Assessing management strength ■ Meeting vendors’ expectations

• Structuring the deal ■ Avoiding conflicts of interest

• Recognising the risks of multi-layered financing

■ Due diligence• Investigation and verification

■ Tie-in with contract terms ■ Structuring the debt appropriate to the busi-

ness

Discussion: How to finance the acquisition of Manchester United. The Man U accounts are reviewed with the object of deciding how to finance its acquisition. Answers are compared to the actual result.

Exit ■ Control by P.E. house ■ IPO ■ Second round financing ■ Trade sale ■ The “living dead”




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The specialist in highly technical, market-driven banking and corporate finance training

web: redliffetraining.co.uk email: [email protected] phone: +44 (0)20 7387 4484