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The specialist in highly technical, market-driven Private Equity training

Private Equity CoursesAll courses can be presented In-House or via Live Webinar

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Advanced Negotiation Issues in M&ADate:

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PUBLIC COURSES

• Private Equity and MBO• Advanced Private Equity and Leveraged Buy-Outs• Advanced Private Equity and Leveraged Buy-Outs - A

5-Day Masterclass• Advanced LBO Modelling• Advanced Negotiation Issues in M&A• Modelling for Mergers & Acquisitions• Advanced Negotiation Issues in Financial Covenants• Structuring & Negotiating Mezzanine, PIK, Second Lien

and Unitranche• Unitranche & Alternative / Direct Lending• Valuing Start Ups and Pre IPO Companies• Bank Valuation• Intercreditor (&AAL) Issues in Leveraged, Real Estate and

ABL Transactions• European Term Loan “B”• Leveraged Loans in Private Equity and Corporate

Transactions• Modelling for Stressed and Distressed Companies• Modelling for Disposals• Due Diligence in Corporate Finance Transactions• Negotiating Heads of Terms (LOI/MOU) & Related Issues• Mergers & Acquisitions• Negotiating & Issuing High Yield Bonds• Tax Issues Affecting MBOs

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Advanced Negotiation Issues in M&ADate:

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IN-HOUSE COURSES

• Leveraged Buyouts - The LBO course for Lawyers• Syndicated (Leveraged) TLB &Yankee Loans• Warranties, Indemnities, Guarantees, Representations

Entire Agreement Clauses & Distinctions• Venture Capital• Private Equity Funds• Valuing Commodity Companies and Sectors• Senior Syndicated Leveraged Loans; Neogtiating Issues &

Trends• Public to Private Takeovers• Due Diligence - A Two Day Course with Asia Pacfic Specfic

Case Studies• Valuing Emerging Market Companies• Real Estate Investment & Management - South Africa• Real Estate Investment & Management - Hong Kong• Real Estate Investment & Management - UAE• Real Estate Valuation - South Africa• Real Estate Valuation - Hong Kong• Real Estate Valuation - UAE• Agribusiness Investment Modelling



Corporate Membership Scheme

Our Corporate Membership Schemes are not valid on any courses held on an in-house basis and are in line with our standard Terms & Conditions

If you would like to enquire about one of our Corporate Membership Schemes then please call or email us for more information.

Email: [email protected] Tel: +44 (0) 20 7387 4484

Our Corporate Membership Scheme gives clients the benefit of discounted course places with absolutely no

restrictions.

Clients pay an annual subscription fee of £595 + VAT to receive 20% discount on all public course and conference

bookings irrespective of the numbers booked.

You Corporate Membership Scheme can be used once payment is received and will be valid for one year.

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Private Equity & Management Buy-OutsDate:18 May 2018, 25 Oct 2018

Location: London Standard Price: £625 + VATMembership: £500 +VAT

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The sale of companies to management teams backed by Private Equity investors, using a leveraged financing of the acquisition, has become an increasingly common feature of the corporate scene. Whilst appearing simple to arrange, there are complex elements to a successful transaction.

This 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.

The Growth of Private Equity and Leveraged Buyouts ■ The academic rationale for the use of lever-

age• Modigliani/Miller theory • Michael Milken’s research

■ Growth of shareholder activism• Reviving 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 ■ Reducing debt to drive equity value ■ Operational improvements

• Building “need to have”• Incentivisation of management

■ Getting 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 ■ Assessing the return appropriate to the risk

• Assessing debt capacity ■ Forecasting future cash generation

• Senior / mezzanine debt mix ■ Judging asset values

• Forecasting exit values ■ Consideration of non-bank finance

• High-yield bonds ■ Terms and size of issue

• Second lien debt ■ Too much debt?

• PIK finance

■ Saint or sinner? • Vendor loan notes

■ Making 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

■ Investor protection• New Memo & Arts

■ Incorporating P.E. control elements • Tag along and drag along clauses

■ Control of the exit • Veto rights for private equity

■ Control of management ■ Management

• Jensen and Meckling agency theory ■ Why buyouts work

• The envy ratio ■ Management incentivisation

• Agreeing the ratchet ■ Carrot and stick

• Good leaver / bad leaver provisions ■ Covering 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 fi-nancing

■ Due diligence• Investigation and verification

■ Tie-in with contract terms

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■ 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”

http://redcliffetraining.com/training/corporate-finance-training-courses/private-equity-and-mbo-course/


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Advanced Private Equity & Leveraged Buy-outsDate: 25-27 Jun 2018, 12-14 Nov 2018

Location: London Standard Price: £1,800 + VATMembership Price: £1,440 + VAT

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Course Overview

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

This programme provides participants with a comprehensive view of private equity, particularly the various types of buy-outs (e.g. LBOs, MBOS). The programme takes participants through all the major stages of the deal; from entry, through the operational phase to exit (liquidity events). In doing this the course provides insight into how the PE firm can add value to the process at each of the three major stages. To do this it approaches PE from the respective perspective of all the main protagonists; Private equity professionals, lenders and other providers of debt financing; the various professional advisers (lawyers, accountants in due diligence or audit), corporate finance advisors and management teams looking to enter or exit the market. It will also appeal to investors who may wish to invest directly (co-invest) or indirectly (via funds) in different parts of the debt or equity capital structure, such as pension funds, insurance companies, private family offices and corporates who are trying to understand the radically different business model of their PE competitors

Whilst simple in theory private equity, the highly competitive nature of the PE market means that adding value can no longer be achieved by leverage and reliance on rising markets. The course covers the three key stages of PE value creation. Stage 1; the acquisition, where it is vital to structure the transaction in the optimal fashion in terms of both the Offer to minimize risk. Disastrous mistakes can be made ab initio by failing to understand the main risk areas of the equity bridge (i.e. the value traps from enterprise value to equity value) or in the completion method (e.g. locked box rather than completion accounts). Developing the optimal capital structure is a critical as it is essential to use both the correct level of debt for and the most appropriate type of debt that will allow the company to achieve its business plan (e.g. organic growth or buy and build).

The second stage requires the PE firm to add value during the operational phase and here there is much the PE firm can do in terms focusing on operation improvements. These do not occur in a vacuum and require the best management team. Top quartile PE firms have large in-house teams to assist them in the process but smaller firms can achieve the same results through different “operating partner” models. In the current seller friendly environment, deal origination is another key point of differentiation between top quartile teams and the course reviews various ways of approaching this issue

Day 1

Introduction to Private Equity: The PE value creation model; PE fund structures

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 appro-priate financial structure (overview)• Percentage senior, junior and equity in debt

capital structure


https://redcliffetraining.com/training/corporate-finance-training-courses/private-equity-training/


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Advanced Private Equity & Leveraged Buy-outsContinued

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• EBITDA multiples• Target returns for Private Equity & mez-

zanine funds ■ Deriving the funding structure

• Funding uses • Funding sources

Structure and key terms and trends for PE funds ■ Review of typical (Luxco) fund structure ■ Key terms & conditions ■ Investment period (how long) ■ Preferred return (rate, calculation) ■ Carry (European vs US approach) ■ How Private Equity fund structures optimise

value ■ Hot topics for LPs & GPs

Generating and originating deal flow ■ Why proprietary origination matters ■ Deal sourcing strategies ■ What makes a good originator ■ What motivates intermediaries ■ What motivates target’s / sellers ■ How the “right type” of specialisation can

boost returns ■ Three ways to use networks ■ Identifying “exit signals” from various

sources ■ Why & how social media matters

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: adding value & reducing risk at entry

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 each• How it can affect value• Risk in Locked box

Day 2

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

Adding value during the operational stage

Selecting the right investment - the 5 critical issues to sponsors ■ Portfolio fit ■ The business model ■ Management - what PEs approach ■ Approach to generating value/returns ■ Exits – hard vs. soft ■ How to avoid the value trap

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

Adding value: operating partner models ■ The new value-creation model – 4 key areas ■ Operational improvements – 6 aspects ■ 7 Methods PE can add value via teaming up

with executives ■ The operating partner model (3 approaches) ■ The operating partner model in practice –

“typical” role

Liquidity events ■ Hard exits vs soft exits ■ Exit strategies – using dual or triple track to

enhance value ■ IPOs

• The key ingredients for IPO• 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• Refinancings & recaps• Other ways of extracting value• 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

Negotiating the deal with management team:

Key issues for Sponsors ■ Structuring the equity

• Structure - loans, preference shares• Typical returns

■ Structuring the payment waterfall• Isses for management• Differences in primary and secondary deals

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

stepped vs. linear




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Key issues for Management ■ 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

Financing options for PEs

Introduction & overview of the funding spectrum ■ The spectrum of financing options for bor-

rowers ■ Review of typical debt structures in the mar-

ket for all deals sizes ■ Senior only ■ Senior/ junior structures ■ Pari loan bond structures ■ Loans vs Bonds – whats the difference

(maintenance vs incurrence covenants)

Senior loans: key facilities & issues ■ “Typical” terms ■ The main facilities ■ RCFs – why they matter & typical pitfalls ■ Capex facilities ■ Margin ratchets

Mezzanine key terms ■ Is there still a market for mezzanine ■ Pros and cons ■ Use an application ■ Rationale of warranted vs. warrant-less ■ “Typical” terms

Unitranche / direct lending financing ■ Review of the various market structures ■ “Typical” terms ■ Pros and cons ■ Use and application – where they work and

where they don’t

Second lien loans ■ “Typical” terms ■ Pros and cons ■ Use and application

PIK loans (making a comeback) ■ “Typical” terms ■ Why has the PIK market spring to life ■ Pros and cons for sponsors ■ Use and application

Day 3

High Yield Notes

■ Spectrum of instruments ■ Pros & cons of high yield and why they ap-

peal to borrowers ■ Use and application ■ Loans vs bonds compared

• Loans’ maintenance covenants vs Bonds’ Incurrence covenants

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

Negotiating the optimum debt package - Lender’s vs Borrowers

Negoiating the debt package - The lender’s approach ■ The Lender’s approach to credit decision

• measuring debt capacity• security over assets• exit routes

■ Different types of lenders: Banks vs Alter-native lenders• Whats the difference• How and where it matters

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

guarantors)

Negoiating the debt package - The borrower’s approach ■ The four deal scenarios and the role of due

diligence ■ The key financial ratios / covenants

• Cash flow cover• Leverage• Interest cover• Capex

■ Selecting the appropriate covenant for the deal; borrowers v lenders• Do covenants really matter - if so how,

when & where ■ Step 1: How to identify the borrower’s ob-

jective ■ Step 2: Identifying the key requirements for

the borrower ■ Step 3: Deciding on which type of debt &

lender is most approriate• Loans v bonds

■ When and where to use junior debt ■ Step 4: Strategies for negotiating with lend-

ers ■ Step 5: Getting what you paid for ■ Inter-creditor issues – review of key issues





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Advanced Private Equity & Leverage Buy-Outs: A 5-Day Master-ClassDate: 25-29 Jun 2018, 12-16 Nov 2018

Location: London Standard Price: £3,000 + VAT Membership Price:£2,400 + VAT

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Course Overview


This programme provides participants with a comprehensive view of private equity, particularly the various types of buy-outs (e.g. LBOs, MBOS). The programme takes participants through all the major stages of the deal; from entry, through the operational phase to exit (liquidity events). In doing this the course provides insight into how the PE firm can add value to the process at each of the three major stages. To do this it approaches PE from the respective perspective of all the main protagonists; Private equity professionals, lenders and other providers of debt financing; the various professional advisers (lawyers, accountants in due diligence or audit), corporate finance advisors and management teams looking to enter or exit the market. It will also appeal to investors who may wish to invest directly (co-invest) or indirectly (via funds) in different parts of the debt or equity capital structure, such as pension funds, insurance companies, private family offices and corporates who are trying to understand the radically different business model of their PE competitors

Whilst simple in theory private equity, the highly competitive nature of the PE market means that adding value can no longer be achieved by leverage and reliance on rising markets. The course covers the three key stages of PE value creation. Stage 1; the acquisition, where it is vital to structure the transaction in the optimal fashion in terms of both the Offer to minimize risk. Disastrous mistakes can be made ab initio by failing to understand the main risk areas of the equity bridge (i.e. the value traps from enterprise value to equity value) or in the completion method (e.g. locked box rather than completion accounts). Developing the optimal capital structure is a critical as it is essential to use both the correct level of debt for and the most appropriate type of debt that will allow the company to achieve its business plan (e.g. organic growth or buy and build).

The second stage requires the PE firm to add value during the operational phase and here there is much the PE firm can do in terms focusing on operation improvements. These do not occur in a vacuum and require the best management team. Top quartile PE firms have large in-house teams to assist them in the process but smaller firms can achieve the same results through different “operating partner” models. In the current seller friendly environment, deal origination is another key point of differentiation between top quartile teams and the course reviews various ways of approaching this issue.

The third and final stage relates to liquidity events however PEs have the luxury in the current market of opting for soft as well as hard exits to generate value for LPs.

The programme adopts a pan-European approach to the topic but the presenter has experience of PE in other jurisdictions including, USA, Asia Pacific and Africa. 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. Post the course participants will receive a number of other PE related models (e.g. how to calculate warrants and ratchets) as well as current review of debt trends in the debt market.


https://redcliffetraining.com/training/financial-modelling-courses/advanced-lbo-and-private-equity-masterclass/


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

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Course Content

Day 1

Introduction to Private Equity: The PE value creation model; PE fund structuresIntroduction & 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 Private Equity & mez-

zanine funds ■ Deriving the funding structure

• Funding uses • Funding sources

Structure and key terms and trends for Private Equity funds ■ Review of typical (Luxco) fund structure ■ Key terms & conditions ■ Investment period (how long) ■ Preferred return (rate, calculation) ■ Carry (European vs US approach) ■ How Private Equity fund structures optimise

value ■ Hot topics for LPs & GPs

Generating and originating deal flow ■ Why proprietary origination matters ■ Deal sourcing strategies ■ What makes a good originator ■ What motivates intermediaries ■ What motivates target’s / sellers ■ How the “right type” of specialisation

can boost returns ■ Three ways to use networks ■ Identifying “exit signals” from various

sources ■ Why & how social media matters

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: adding value & reducing risk at entry

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• How it can affect value• Risk in Locked box

Day 2

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

Adding value during the operational stage

Selecting the right investment - the 5 critical issues to sponsors ■ Portfolio fit ■ The business model ■ Management - what PEs approach ■ Approach to generating value/returns ■ Exits – hard vs. soft ■ How to avoid the value trap


Adding value: operating partner models




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

Continued BOOK NOW

Course Content

■ The new value-creation model – 4 key areas ■ Operational improvements – 6 aspects ■ 7 Methods PE can add value via teaming up

with executives ■ The operating partner model (3 approaches) ■ The operating partner model in practice –

“typical” role

Liquidity events ■ Hard exits vs soft exits ■ Exit strategies – using dual or triple track to

enhance value ■ IPOs

• The key ingredients for IPO• 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• Refinancings & recaps• Other ways of extracting value• 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

Negotiating the deal with management team:

Key issues for Sponsors ■ Structuring the equity

• Structure - loans, preference shares• Typical returns

■ Structuring the payment waterfall• Isses for management• Differences in primary and secondary

deals ■ Equity ratchets

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

stepped vs. linear

Key issues for Management ■ Multifaceted role and duties of management

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

Financing options for PEs

Introduction & overview of the funding spectrum ■ The spectrum of financing options for borrow-

ers ■ Review of typical debt structures in the mar-

ket for all deals sizes ■ Senior only ■ Senior/ junior structures ■ Pari loan bond structures ■ Loans vs Bonds – whats the difference (main-

tenance vs incurrence covenants)

Senior loans: key facilities & issues ■ “Typical” terms ■ The main facilities ■ RCFs – why they matter & typical pitfalls ■ Capex facilities ■ Margin ratchets

Mezzanine key terms ■ Is there still a market for mezzanine ■ Pros and cons ■ Use an application ■ Rationale of warranted vs. warrant-less ■ “Typical” terms

Unitranche / direct lending financing ■ Review of the various market structures ■ “Typical” terms ■ Pros and cons ■ Use and application – where they work and

where they don’t

Second lien loans ■ “Typical” terms ■ Pros and cons ■ Use and application

PIK loans (making a comeback) ■ “Typical” terms ■ Why has the PIK market spring to life ■ Pros and cons for sponsors ■ Use and application

Day 3

High Yield Notes ■ Spectrum of instruments ■ Pros & cons of high yield and why they appeal

to borrowers ■ Use and application ■ Loans vs bonds compared

• Loans’ maintenance covenants vs Bonds’ Incurrence covenants

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




Advanced Private Equity & Leverage Buy-

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Outs: A 5 day Masterclass

Negotiating the optimum debt package - Lender’s vs Borrowers

Negoiating the debt package - The lender’s approach ■ The Lender’s approach to credit decision

• measuring debt capacity• security over assets• exit routes

■ Different types of lenders: Banks vs Alter-native lenders• Whats the difference• How and where it matters

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

guarantors)

Negoiating the debt package - The borrower’s approach ■ The four deal scenarios and the role of due

diligence ■ The key financial ratios / covenants

• Cash flow cover• Leverage• Interest cover• Capex

■ Selecting the appropriate covenant for the deal; borrowers v lenders• Do covenants really matter - if so how,

when & where ■ Step 1: How to identify the borrower’s

objective ■ Step 2: Identifying the key requirements

for the borrower ■ Step 3: Deciding on which type of debt &

lender is most approriate• Loans v bonds• When and where to use junior debt

■ Step 4: Strategies for negotiating with lenders

■ Step 5: Getting what you paid for ■ Inter-creditor issues – review of key issues




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Advanced LBO Modelling - A Practical WorkshopDate: 28-29 Jun 2018, 15-16 Nov 2018

Location: London Standard Price: £1,300 +VATMembership Price: £1,040 + VAT

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Course Overview

This course covers 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, how they can be incorporated into an LBO structure 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 then 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 a 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 publically quoted and generic companies.

Leverage Overview ■ Background to the LBO market ■ Introductory theory - The effect of leverage

on firm value

Valuing the Target ■ Sourcing information – Historic and forecast

data ■ Analysing equity research

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

■ Building a DCF valuation using equity re-search

■ Modelling the stand alone valuation• DCF valuation• Use of multiples in valuation (EV/EBIT, EV/

EBITDA)

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 analy-sis

Case Study II: Participants use the stand alone valuation of the target to complete an 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

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

Capital providers and their typical characteristics ■ Institutional and management equity ■ Traditional/new lenders ■ Senior tranche profiles


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Advanced LBO Modelling - A Practical WorkshopContinued

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• A, B, C, RCF ■ Subordinated tranche profiles

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

■ More complex issues – warrants and options ■ Typical LBO transaction sensitivity analysis,

management, base and payout cases

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 environ-

ment ■ Incorporating APV analysis in an LBO trans-

action analysis

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


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Advanced Negotiation Issues in M&ADate: 24 May 2018, 17 Sept 2018, 29 Oct 2018

Location: London Standard Price: £795 + VATMembership Price: £636 + 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 more 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• How to differentiate your offer ... & close

the deal


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Advanced Negotiation Issues in M&AContinued

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• 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

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 differ-

ence & 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


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Modelling For Mergers & Acquisitions - A Practical 3-Day WorkshopDate: 25-27 Jun 2018, 12-14 Nov 2018

Location: London Standard Price: £1,800 +VAT Membership: £1,440 + VAT

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Course Overview

This course covers the key elements of an acquisition or merger, from the initial stand-alone valuation of the target to the more complex accounting and modelling issues to be considered and finally analysing and assessing the value created by synergy benefits and leverage.

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

The approach has been designed to equip participants to put key concepts into practical use immediately.Participants will be led through a comprehensive review of analysis practices, from initial principles through to more advanced techniques that are used in transaction analysis.

As part of their work on this course participants model transactions based on real-life companies and scenarios.

By the end of this course participants will understand: ■ Drivers on M&A ■ How to model integrated financial statements ■ How to use financial statements to value a business ■ How to model the balance sheet impact of transactions ■ How to incorporate synergies into modelling work ■ How to differentiate between financing and operating synergies ■ How acquisitions can be structured

Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse leveraged acquisitions: ■ Building up from partially-complete models ■ Working with integrated financial statements ■ Developing the acquisition structure and modelling instruments ■ Running scenarios, iterating and optimising

Each participant should bring a laptop with USB port to the course to facilitate modelling work.

Day 1

M&A model build up: the starting point

■ Modelling integrated financial statements ■ Model structure ■ Key forecast ratios ■ Sourcing and cleaning historic data ■ What makes a good model?

Modelling – integrating financial statements: participants complete a partially-developed financial model for a public quoted company which integrates P&L, balance sheet and cash flow. This company will be the target company used in the merger analysis

Modelling stand-alone valuation ■ Overview of valuation methodologies ■ What do investment banks do? ■ What methodologies could we use? ■ How should we define firm value? Equity v.s. en-

terprise value ■ Calculating free cash flow before financing ■ Understanding and calculating WACC ■ Discussion – calculating WACC ■ Key issues with a two stage DCF valuation – WACC

and terminal value assumptions Modelling - valuation: participants calculate the cost of capital and complete a DCF valuation for the target company, producing a stand-alone valuation as a cross check to the acquisition price Day 2


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Modelling For Mergers & Acquisitions - A Practical 3-Day Workshop

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Accounting for corporate transactions ■ Different types of transaction and how they

are modeled in practice ■ Consolidation accounting under the current

IFRS 3 an IAS 27 ■ Change of control triggers ■ Accounting for non-controlling interests

(“NCI”) ■ Accounting for disposals ■ Partial disposals – creating a NCI ■ Partial disposal – loss of control ■ Recent changes to acquisition accounting

under IFRS ■ Definition of control ■ Calculation of goodwill

Modelling: delegates complete a variety of transaction models incorporating all types of corporate transaction and calculate the effect of a transaction on a set of consolidated accounts in preparation to perform a merger analysis with the target business and an acquirer

Acquisition finance ■ Types of transactions and synergies ■ Availability of synergies and problems in

achieving them ■ Methods available for valuing synergies ■ Key differences between public vs. private

deals, recommended vs. hostile bids ■ Choices for growth: acquisition vs. organic

vs. joint venture ■ Defence strategies for target companies

resisting a hostile bid Case study: Participants calculate synergies for a case company

Day 3Structuring acquisition finance ■ Once price has been agreed, how is it

paid? Cash vs. Shares ■ Financing choices for raising cash for an

acquisition: Debt vs. Equity ■ Calculating the success of a deal, accretion

vs value creation ■ The nature of equity instruments ■ The different risks and rewards accruing to

different parties ■ The impact of loan stock, convertibles and

preference shares on WACC ■ Calculating returns to key participants

Case study: Calculating accretion/dilution and the effect of hybrids on cost of capita

Merger modelling case study

■ Completing a merger model ■ Getting to DCF valuation for the combined busi-

ness ■ Combined WACC ■ Valuing operating synergies ■ Valuing financing synergies ■ Accretion/dilution analysis vs wealth creation ■ Sense-checking the output and adjusting the

capital structure

Modelling – bringing it all together: participants complete a complex merger model for an acquisition of the target business incorporating synergy analysis and varying capital structure. The transaction is analysed on an accretion/dilution analysis and a wealth creation/return on capital analysis

At the end of this session participants will have a working acquisition model incorporating a variety of different forms of transaction analysis

Course conclusion: best practice in transaction analysis ■ Participants will have improved their understand-

ing of and have had experience of modelling mergers and acquisitions from first principles

■ Simple and clear reference Excel models - provid-ing participants with a platform for future internal modelling efforts and aiding decision making

■ Participants who, at the end of the course, under-stand the drivers on transactions and how trans-actions can be modified to suit the various parties

What our clients are saying about the course

“Methodical and clear. Liked how it went through whole process of linking up

financial statements”


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Advanced Negotiation issues in Financial CovenantsDate: 12 Jun 2018, 24 Sep 2018

Location: London Standard Price: £725 + VAT Membership Price: £580 + VAT

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The loan market in Europe has bifurcated into two main approaches to loan documentation; smaller club and bilateral deals on the one hand, which broadly follow the more lender-friendly LMA approach, and larger syndicated TLB-style deals on the other hand which are increasingly influenced by high yield bonds and invariably are structured on a cov-loose or cov-lite basis. These larger deals also include a far more eclectic approach to the key definitions comprising the ratios with many add-backs taken copied from high yield bonds.

This programme covers financial covenants in leveraged loans and real estate deals and includes specific reference and analysis of the covenants, terms and definitions in the LMA Senior Facilities Agreement for Leveraged transactions and LMA Real Estate precedents. The programme uses information from the Debt Explained database, to review the current trends in the market in the larger syndicated (TLB-style) deals which so often include springing leverage covenants and high-yield-bond style covenant packages.

The larger syndicated TLBs also vary in approach depending on whether they apply English law or NY law (for example, the latter do not usually permit overcures or require prepayment of loans from equity cure cash). Direct lenders, which typically use the LMA leverage precedent as a starting point, 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 negotiating issues that really matter, for example they view the financial covenants in isolation rather than appreciating that they must be seen in the context of the particular capital structure. Secondly, too much time is spent on which covenants apply rather than focusing on the key constituents of the key terms in the financial covenant. Finally, many parties fail to appreciate that, even in cov-lite deals, the financial covenants and/or the components of those covenants play an important role as they also affect a wide range of other critical matters in the loan. This usually includes the various “permitted” actions such as debt incurrence (security and guarantees), sponsor payments, cash sweeps, guarantor coverage and grower, scalable and/or builder baskets where these appear.

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. It 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 Debt Explained loan database which tracks key terms in the larger syndicated TLB market.

Participants will gain an in-depth view of which covenants should be used 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.

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 and Cash accounting. It is emphasised that participants DO NOT require an understanding of IFRS or GAAP.

A short module summarising the key differences between P&L /Accrual Accounting and Cash Accounting is available on request prior to the programme.

The programme will review the draft ECB guidance on leveraged transactions published in November 2016. The course will examine which type of transactions are covered, which lenders are affected, the approach to EBITDA and the potential implications for players in the debt markets.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.


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

cial covenants ■ What is the purpose of financial covenants ■ Relevance of Capital Structure on Financial

Covenants• Bullet loans• Impact of PIK

■ How the lenders and borrwers approach setting the Financial Covenants

Key financial ratios used by Lenders and typical LMA ratios in leveraged deals ■ 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• LMA vs Market approach• Carry forward / carry back amounts -

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

Calculation of EBITDA and Cash flow ■ EBITDA

• Simplistic calculation of EBITDA• Consistency of application (Accounting

changes under IFRS, GAAP etc)• Exceptional items – LMA approach, UK

GAAP vs IFRS• Discontinued Operations – LMA, different

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

GAAP vs IFRS• Pension Items - UK GAAP vs IFRS

■ Current trends affacting EBITDA (aggressive add-backs)• Anticipated synergies and cost reductions• What are the “typical” requirments for

“anticipated synergies”• Business optimisation expenses• Run-rate EBITDA – how is this calculated

■ Definition of “Cash flow”• Typical adjustments• Sponsor friendly adjustments• Potential problems with “cash-flow”

Calculation of Debt and Borrowings and

Finance Charges ■ “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” • Vendor Loans – do they matter• Impact of Debt Buybacks and impact on

“Debt”• Treatment of “trapped” cash on Debt • What does “senior” only exclude?• What about PIK loans – should they be in-

cluded in Total Debt? ■ “Borrowings”

• Treatment of receivables• Redeemable shares• “Sweeper” clause

■ Finance charges & Net Finance Charges• Impact of “PIK” • Hedging impact

Finance Leases v Operating Leases – problem areas ■ Current approach ■ Impact of proposed changes to IFRS ■ Which sectors will be affacted by the changes ■ Potential problem areas (& solutions) with the

new regieme ■ Sectors posing particlar problems with operat-

ing leases

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

smaller deals ■ Cov-lose

• Use and application• Typical ratios

■ Cov-lite• Use and application• Typical ratios

■ Springing Leverage covenants• When should the ratio spring• Calculating the constituents of the cove-

nants• When is the covenant tested• Potential problem areas

Application and compliance with the Financial Covenants ■ 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



Advanced Negotiation issues in Financial CovenantsContinued...

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ratios be tested • Historic TTM/LTM, forecast, both (quarter-

ly, monthly)• 2 options per LMA

■ What level of “Headroom” is appropriate• What’s market• When and why does headroom matter

■ Impact of Clean-ups ■ The Compliance Certificate

• Typical requirements per LMA Sch 9 • Current commercial requirements• Traps for borrwers• 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, Cashflow,

Debt) ■ Treatment of “overcures” ■ Is the cure EBITDA? And if yes what effect

will this have ■ How should the cash be used? (Why repay-

ment of debt is not appropriate) ■ Deemed cures – what are they and are they

worth having? ■ Review of recent lessons from Ideal Stand-

ard

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

Impact of the Financial Covenants on other aspects of the loan facility ■ Aspects of the loan affected by Leverage

test• Margin ratchets• Cash sweeps• Debt incurrence (Incremental/Accordion

facilities) ■ Aspects of the loan affected by the defintion

of EBITDA• Material subsidiaries and their relvance• Guarantor coverage test

■ Impact and relevance on Grower, Sclable and Builder baskets

• Key differences• Impact on and relevance to the loan facility

Draft ECB Guidance on Leveraged Transactions ■ Which lenders are affected ■ Which deals are affected ■ EBITDA calculation ■ Ramifications for market players

Appendices (Not covered in the course but included in an appendix the materials)

Overview of ratios used in Project finance / Infrastructure ■ Annual Debt Service Coverage ratio (“AD-

SCR”) ■ Loan/Bond Life cover ■ Project Life cover ■ Using the Buffer test



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Structuring & Negotiating Mezzanine, PIK, Second Lien And Unitranche

Date: 10 Jul 2018, 27 Nov 2018 Location: London Standard Price: £725 + VAT

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Course Overview

Credit markets continue to provide copious amounts of liquidity across the funding spectrum from senior debt through second lien, mezzanine and PIK-style instruments driven by traditional funding sources and a significant increase in capital formation from alternative lenders. Although unitranche continues to comprise the most popular offering from alternative lenders, these funds adopt an eclectic approach to credit and are willing to provide established junior products such as mezzanine and PIK either in conjunction with senior debt or to complement their unitranche offering.

The Second Lien market experienced a resurrection in July 2014 (after a nascent period post 2007) but, according to S&P, is expected to experience a renaissance in 2017, for a number of reasons. The appeal to borrowers is first, the ability to increase leverage from 2L to fund higher purchase price multiples; second, reduced public disclosure and need for credit ratings; third, lower pricing than senior/ mezzanine structures and finally, is easier to restructure in distress than high yield bonds. Lenders are keen to take the product as it provides higher margins than senior debt, includes some level of call protection, provides additional investment opportunities (given the relative dearth of senior paper) and is structured differently to first generation deals, so providing greater protection in distress.

Mezzanine continues to face pressure from other cheaper products (2L in larger deals and unitranche in smaller deals), Despite this, global mezzanine funds have raised very large amounts of capital over the last year (GSO, Highbridge, Prudential and Crescent together raised nearly $20 billion). Competition from competing forms of capital means it is less likely these funds will be deployed in entirely conventional structures so these lenders have had to evolve new strategies to deploy their funds although there remains demand for the traditional senior / mezzanine structure. Despite the decline in mezzanine issuance, mezzanine continues to exert a strong influence on other junior debt products as many direct lenders had their roots in mezzanine and have been willing to apply the practices in that market to direct lending (e.g. the use of PIK and warrants)

PIK itself continues to find a place in the sun for a wide range of purposes including LBOs and the €3.6 billion Schaeffler multi-tranche PIK in late 2016 (up-scaled from €2.5 billion) evidenced strong demand for that product notwithstanding the miserly pricing (275bps on the 5 year Euro). Many of these deals now tend to be issued in note, rather than loan, form. In current market conditions, PIK is expected to remain popular as lenders chase returns up the risk/reward curve.

European direct lending funds reportedly have c $17 billion of capital to deploy. Unitranche continues to be the most dynamic product in that market however the offering has splintered from the original-classical structures to more structured bespoke products embracing a wider range of more complex structures including dual unitranche, first-in/ first-out. Banks, unwilling to be left on the sidelines, have also proved willing to fund both the bank-led facilities as well as some of the unitranche itself. The recent £475 million unitranche financing Bridgepoint’s acquisition of Zenith illustrates that direct lending can compete with head-on high yield bonds whilst the recent redemption of Soho Houses’ high yield bonds, with a £275 million unitranche, reinforces that notion. The large amounts of dry powder available to funds coupled with stiff competition from the traditional senior/junior loans has compressed pricing so lenders have had to find innovative/alternative ways of deploying their funds. Despite this, the recent ECB leverage guidance is expected to hamper banks and boost direct lending in general.

Whilst junior debt offers attractive returns, this is not without risk and the lesson from the credit crisis is that these providers invariably ended up receiving little or nothing in distress (e.g. Imo Carwash, Stabilus). Against this background, junior lenders have sought ways to mitigate these risks and have been assisted by an updated LMA Intercreditor (2012). However, many, more sophisticated providers have sought other ways to improve their position, for example through the appointment of their own Facility and even Security Agents, although this is not without controversy.

This programme examines the range of junior debt loan products available in the market, their use and application, the typical terms and conditions, market pricing and returns. The program also considers the various techniques junior lenders can adopt to structure their credit ab initio (via Intercreditor issues), how they can monitor their credit thereafter (and have advanced warning of impending distress) and finally how they can maximise recovery in distress. The course is highly practical and interactive and will include case studies which will first, require participants to devise appropriate junior debt structures and second, to consider the various Intercreditor and other matters which can protect their position in distress.


A model will be provided in advance of the programme and participants will be required to bring a laptop to the course with that model loaded.


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Course Content

Introduction to the junior debt spectrum ■ Overview of the market ■ The role of direct lenders ■ Review of the various products

• Mezzanine• PIK, PIYC & Toggles• Second Lien• Unitranche

Structuring parameters – how much senior and how much junior debt ■ Typical approaches to gauging debt capacity

/ capital structure ■ What are the key criteria to consider

• Multiples vs Capital approach • Key ratios (covenants where relevant)

used to right-size the debt ■ How Jurisdiction can affect debt capacity

(and how to mitigate)

Types of Mezzanine: use and key issues ■ Main features of the mezzanine ■ European vs US vs Asian mezzanine ■ Warrantless mezzanine – return structure

• Fixed vs floating rate• Cash pay• PIK• Redemption premia – stepped vs linear

■ Other tools for achieving the target IRR• OID to enhance returns• Using Libor/Euribor floors• Fees• Call protection - hard vs soft call protec-

tion ■ Key issues for warranted mezzanine

• Key issues & pitfalls for warrantless mezz• Dealing with recaps & refinancing• The order of priority vis-a-vis PE loan

notes ■ Other variants of mezzanine

• Senior mezzanine• Junior mezzanine• Hybrid mezzanine

Second Lien ■ Use and application ■ Market trends / recent deals ■ Documenting the 2nd Lien - composite or

separate facility agreement ■ “Typical” terms, leverage, pricing and call

protection ■ Pros and cons of 2L vs unitranche, high yield

bonds ■ Other tools for achieving the target IRR

PIK (PIYC, PIYW, Toggles) ■ Pay-in-Kind (PIK) generally ■ Different types PIK

• PIYW• Toggle • PIYC

■ “Typical” terms, leverage and pricing ■ Call protection - hard vs soft call protection ■ Market trends / recent deals

Unitranche & direct lending products

■ The onward march of direct lenders in Europe • Market trends• Recent developments

■ Where and how its used ■ Review of different “unitranche” structures

• Classic product• Clubbed • Dual tranche • Structured • First out / last out

■ Interaction with bank led finance & impact on bank lenders

■ “Typical” terms & leverage ■ “Typical” pricing

• Cash coupon• PIK• Warrants

■ Other tools for achieving the target IRR ■ Leverage – how much and impact on returns ■ Call protection

• Why it matters to lenders• Hard vs soft call protection

■ Pros & cons vs other types of products• Senior / junior (mezz/2L)• High Yield Bonds

Intercreditor issues & Agreement Among Lenders (“AAL”) ■ Typical inter-creditor issues for junior debt

• Enforcement standstills• Turnover – why and where this matters• Option to purchase - Practical issues

■ Key issues in distress• Information rights• Why going on the Board may not help• Costs in distress• Valuation in distress (q.v. IMO Carwash)• Release of collateral (q.v. European Directo-

ries) ■ The role of the Agents - how and why it mat-

ters in distress• Appointing a separate Facility Agent• Appointing a separate Security Agent – key

issues to consider

Draft ECB Guidance on Leveraged Transactions ■ Which lenders are affected ■ Which deals are affected ■ EBITDA calculation ■ Ramifications for market players

Structuring & Negotiating Mezzanine, PIK, Second Lien And Unitranche


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Unitranche & Alternative / Direct LendingDate: 19 June 2018 & 09 Nov 2018

Location: London Standard Price: £725 +VAT Membership Price: £580 + VAT

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Direct lending in general, and unitranche in particular, continues to make significant inroads across Europe. The offering has received a further boost from the relaxation on direct lending in France, Germany and Italy whilst the ECB guidance on leveraged transactions, which is expected to come into effect mid 2017, will hamper bank lending providing further impetus to direct lenders.

Initially unitranche structures competed mainly with traditional senior/junior structures; however, the ability and willingness of direct lenders to lend increasingly larger amounts means the offering now competes with the high yield bond market as evidenced by the recent £475m unitranche backing Bridgepoint’s acquisition of Zenith. At the smaller end, direct lenders are providing increasingly smaller tranches with Beechbrook’s €7.1m unitranche and equity co-invest indicating that all but the smallest deals are now within reach.

Geographically, direct lending continues its advance inside the three main markets (UK, France and Germany) while Scandanavia, Italy, Spain and Ireland are all seeing strong growth and demand for the product. Unitranche recently appeared on the radar in Asia in the shape of the $480m unitranche backing Carlyle’s bid for Australian based pharma company, iNova, so the product seems set to grow in those markets too.

Unitranche continues to evolve as a highly bespoke product offered in a wide variety of forms including; clubbed, bifurcated, “dual-tranche” and even junior unitranche, all of which seem to beg the question of whether the term ‘unitranche’ adequately describes these various structures. Direct lenders are being forced to develop a wider range of strategies and products in an effort to differentiate their offering from other providers and some are increasingly willing to offer undrawn facilities as part of the financing (q.v. the £50 million undrawn capex line provided by Goldmans as part of unitranche financing for Zenith).

Some funds have elected to ride the risk curve in search of higher yields whilst others have gone back to their roots in the mezz market and are using equity to enhance returns; a few are creating mezz funds through the back door. Traditional bank lenders, initially slow to recognise the challenge from thise new providers, have developed various strategies to partner up with direct lenders and are willing and able to provide the “first out” portion of unitranche.

Documentation continues to adapt to the myriad of structures in the market but liquidity in high yield bond market and the syndicated loan market is also having an impact on terms in the mid-to-larger unitranche-style deals.

The complex nature of these structures means that Intercreditor issues have become a key negotiating area for lenders and borrowers, however, the evolution of US-style clubbed (and syndicated?) deals has introduced a further complication via the introduction of the Agreement Amongst Lenders between the parties in some deals although some practitioners question whether these AALs are necessary.

Last, direct lender’s hurdle rates have prevented them from targetting more traditional, unleverage credits leaving a funding gap in the 400–550 bps space. With this in mind, capital formation is taking place to address this, hitherto, neglected sector of the market although providers are having to find other, traditional ways of meeting their target returns; such as warrants.

On the restructuring front, Unitranche has avoided the landmines so far. However the volume of issuance over the past few years means that defaults have occurred with ICG’s investment in Courtepaille the most high-profile restructuring to date but market chatter suggests other deals are already experiencing distress. The course considers how the market has and will address these issues.

Participants will receive various models (including a professionally designed LBO model which measures debt capacity and exit returns) along with a market report from Debt Explained on trends in the loan market.

The programme will review the impact of the draft ECB guidance on leveraged transactions and its potential impact on direct lending


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Unitranche & Alternative / Direct LendingContinued...

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Direct Lending – review of lenders and the market ■ Introduction to direct lending & unitranche ■ Overview of the basic unitranche product ■ The direct lending market in Europe –

where does it fit in? ■ Reviw of direct lending fundraising ■ The changing landscape of direct lending

providers ■ Review of market trends and developments

in direct lending ■ Impact of the ECB guidance on leveraged

transactions

Direct lending vs other forms of financing ■ Direct lenders approach to the unitranche

• Are all lenders the same• What do they want• General approach pricing & terms

■ The borrower’s perspective ■ Direct lending vs traditional bank-led fi-

nance ■ Unitranche vs Senior / junior structures

(mezz/2L)• Pros and cons

■ Direct lending vs High Yield Bonds ■ Pros and cons ■ Review of Zenith

How are traditional bank lenders respond-ing? ■ Can traditional bank lenders work with

funds ■ Banks and direct lenders – creating a sym-

biotic relationship ■ Three ways banks can stuucture their rela-

tionships with direct lenders• Formal JV - pros and cons• Framework agreements - - pros and

cons• Ad-hoc - - pros and cons

■ Other stratagies banks can adopt to retain market share

Review of Unitranche and direct lending structures – past, present, future? ■ Overview of direct lending spectrum ■ “Original” Unitranche – the US product ■ European Unitranche - The “classic” struc-

ture ■ “Structured” unitranche

• Review of recent deal structures• Bifurcated unitranche• “Dual” tranche unitranche • Parallel unitranche

• “Junior” unitranche• JV structures• Syndicated unitranche

■ Bilateral vs. Clubbed unitranche ■ Unitranche vs Senior+Mezz/2L vs SSHYB ■ Bond structure

• Rationale, use and application in other EU jurisdictions

■ Interaction with the bank-led facilities - RCF, Acquisition, Capex

Facility size and leverage ■ Facility size and application – how small or

large can it go? ■ Leverage ratios

• Is there a typical range?• Comparison with separate senior/junior

facilities - senior/mezz and senior /2L ■ Tenor – what’s market ■ Bullets vs amortising – impact on the deal

Role play: Traditional senior / mezz vs Uni-tranche structure

Margins & Call protection ■ Where’s the market now - current trends ■ Approach to margin ratchets - ■ Other margin protection measure – OID and

floors ■ Structuring the coupon

• Cash vs PIK & Warrants ■ Warrants – which investors want these and

why?• Why these matter to investors• Key issues for lenders (information, rep-

resentation)• Issues for borrowers

■ Hard vs. soft call-protection • Why it matters• “Typical” terms

Terms where unitranche differs from “stand-ard” LMA terms ■ Permitted actions

• M&A• Additional borrowing, security & guarantees• Permitted payments (to equity)

■ Cash sweeps • Approach of the funds• What about the banks

■ Covenants generally• Guarantor coverage

■ Financial maintenance covenants• Standard LMA?• Cov-lite vs cov-loose• Springing covenants





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• Aggressive borrower-friendly terms - EBITDA add-backs

Use and application for non-sponsored corporate deals ■ Review of the US market examples ■ European examples – deals we have seen ■ A viable option for corporate deals – what’s

changed ■ Pros and cons of using unitranche in corpo-

rate deals ■ “Typical” use and application for European

corporates

Documentation ■ Overview of the loan structure ■ MA precedents as a point of departure ■ Documenting bifurcated deals: who is the

lender of record? – various approaches ■ Hedging facilities

• Who provides this• Ranking (always first?)• Handling large RCFs

■ Voting issues & thresholds• The traditional LMA approach • Will it work in clubbed or dual tranche

deals• Is it time for a change?

Collateral & Security ■ Collateral in the UK & Europe ■ Financial assistance ■ Separate Facility agents – are they neces-

sary? ■ Separate Security Agents – why and how

Transferability, Assignment and Portabil-ity ■ Transferring / selling post completion

• Who is the Lender of Record – does it matter

■ Methods of selling down - impact• Assignment• Sub-participation• Other structure methods

■ What borrower controls might apply Role play: Borrower vs lenders – negoti-ating selected aspects in the term sheet

Inter-creditor issues and Agreements Among Lenders (“AAL”) ■ Who are the Lenders of Record – pre and

post sell-down? ■ Who are the parties to the ICA ■ Who are the key parties to the AAL

• Should the Borrower be a party to the AAL - Pros and cons

■ What is the “typical” ranking ■ Hedge facilities – are they always super sen-

ior? ■ Deciding which aspects go in the ICA or the

AAL ■ Amendments and Waivers

• What is controlled and by whom• Dual consent structures – a viable solution?

■ Enforcement and Standstill issues • Who is the “Instructing Group” – what hap-

pens in dispute• Reconciling the unitranche and the RCF

tensions• Reconciling tensions in split unitranche • Standstill periods

■ The concept and application of “Material Events of Default” • What does it cover• When does it matter• Are there other solutions

■ Problems when things go wrong• How will dual or bifurcated structures affect

Schemes of Arrangement• Potential problems with “class” where lend-

ers are in both RCF and unitranche• When unanimous consent is no longer

unanimous




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Valuing Start Up And Pre IPO CompaniesDate: 22-23 Mar 2018, 07-08 Nov 2018

Location: London Standard Price: £1,350+ VAT Membership Price: £1,080 +VAT

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Course Overview

This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value companies which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the development stage at which the company operates.

The course covers companies at the early growth and start up stage, such as technology, biotechnology and any early funding stage business. The key challenges associated with such companies are discussed and the best valuation approach considered.

The course also covers pre IPO companies at the rapidly growing phase of development which, depending on the geographic location, may cover a wide variety of sectors. As well as discussing some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches such as decisions trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken. Examples are provided to illustrate each issue. Participants will be required to bring a laptop to the course.

Overview of valuation approaches ■ Intrinsic valuation – traditional cash flow

techniques ■ Relative valuation – multiple based analysis ■ Probabilistic valuation – scenario analysis,

decision trees and simulations ■ Real options valuation – additional value

created through optionality Other valuation issues ■ Assessing risk – the risky risk free rate and

other current valuation issues ■ The economic cycle – incorporating mac-

ro-economic factors into a valuation

Valuing early stage and start-up companies and sectors ■ A life cycle view of start-up companies

• Start-up companies in context ■ Characteristics of young companies and

sectors• The key challenges with start-up compa-

nies• Visibility – a key valuation challenge

■ Valuation issues – intrinsic value• How to value existing assets in a start-up• Cash burn and the effect on existing as-

sets• The future of the business – high growth

& growth phases• Assessing growth rates - the key compo-

nent of value• Adjusting risk for small fast growing busi-

nesses• Discount rates for pure equity financed

businesses• When to calculate terminal value• Reducing the dependence on terminal

value• Value of equity claims

ӹAssessing equity claims in a early stage business

■ Valuation issues – relative valuation• Problems with start-up multiple analysis• Determining the starting point – revenue

multiples vs profitability multiples• Which year? – Determining stability for

multiple calculation and techniques for “normalising” multiples vs the sector

Valuing a start-up or early stage business in practice ■ Main errors made in valuing early stage busi-

nesses • Macro vs micro analysis• Product success and market share• Bottom up approach to a valuation

ӹCapacity capability• Estimating and using different discount

rates ӹThe use of phased discount rates


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ӹDiscount rates as maturity approaches • Ensuring consistency in a valuation• Private and public multiples• Option to expand valuation

ӹHow optionality affects valuation

Valuing pre IPO companies ■ A life cycle view of pre IPO rapid growth

companies• The rapid growth company in context

■ Characteristics of growth companies and sectors• How are growth companies different?

■ Valuation issues – intrinsic value• How historic numbers are misleading• How asset life may develop in the high

growth phase• How existing assets differ in a rapid

growth business• Where the bulk of value is created by

a rapid growth company – the growth phase

• Capital intensity and the rapid growth business

• The development of risk during the growth phase

• The stage at which a terminal value should be calculated for a rapid growth business – the path to IPO

■ Value of equity claims• The differing equity claims in a rapid

growth business• Participation by different equity holders

■ Valuation issues – relative valuationPeer groups – private vs public companies• Finding similar growth businesses – differ-

ent sectors?• Risk measures – adapting a multiple analy-

sis for risk ■ Valuing a growth business in practice

• Main errors made in valuing growth busi-nesses

• Dealing with immature markets• Assessing product cycles• Ability to execute – the key driver

■ Valuing the operating assets through the growth phase• How operating asset lives develop in the

high growth phase• Ensuring consistency in a valuation• Reinvestment and growth• Assessing investment requirements – the

returns and reinvestment equation• Completing the valuation – combining re-

turns and risk in a model

Valuing Start Up And Pre IPO Companies


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Bank ValuationDate: 18-19 June 2018, 25-26 Oct 2018


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Course Objectives

This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to:

Review the accounting and valuation of banks’ financial statements including the loan book, financial instruments and deriva-tives used for hedging purposes;

Further advance participants’ understanding of the latest Basel III developments including MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR);

Understanding the key metrics to value a bank, including performing all the steps of a Dividend Discount Model (DDM) and Multiples Analysis using Excel.

Course Overview

Day 1

Session 1

The aim of this session is to provide participants with an understanding of the financial statements of a bank. The focus is on the banking book and financial instruments. The reporting and valuation of derivatives is also discussed. ■ Banks’ financial statements overview ■ Accounting for loans

• Non-performing loans • Understanding impairments vs. write-off • Incurred losses (IAS 39) has been re-

placed by expected losses (IFRS 9) ■ Accounting for financial instruments

• Lastest IFRS 9 implications: Amortised cost, FVTPL and FVTOCI

• Level 1, 2 and 3 valuations • Impairments of financial instruments

■ Accounting for derivatives • Hedge accounting: fair value, cash flow

and net investment • Netting derivative assets and liabilities

Case study: Barclays Financial Statements

Session 2 Fundamentals of Regulatory Capital Throughout this module, participants review the current regulatory requirements, in particular Tier I and Tier II capital ratios and understand detailed computations. ■ Overview of regulatory framework ■ Overview of Basel I, II and III and latest

Basel IV updates ■ Overview of calculating available and re-

quired capital• Common Equity Tier 1 (CET1), Tier 1,

Tier 2 and Total capital• Key reconciliation items from IFRS Book

Equity to CET1: minority interests, deferred tax, changes to investment portfolio, etc.

■ Overview of calculating risk weighted assets (RWAs): credit risk RWA, counterparty risk, market risk and operating risk with the latest Basel IV requirements

- Standardised floor of 72.5% based on standardized approach - Simultaneous reduction in standardised risk weights for low risk mortgage loans ■ Overview of key capital, liquidity and funding

ratios• Tier 1 and total capital ratios• Leverage ratios• Liquidity coverage ratios (LCR) and Net

stable funding ratios (NSFR)

Case study: Barclays Regulatory Ratios Review

Day Two Session 3 Forecasting and Modelling Banks Based on the financial statements and publicly available regulatory information of Barclays, participants forecast its financial performance based on its historical statements. ■ Modelling and forecasting the balance sheet:

deposit or loan-driven? ■ The loan and trading book ■ Funing requirements and mix: deposit vs.

wholesale funding ■ Growth in funds under management ■ Modelling and forecasting the income state-

ment

This training allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to: ■ Review the accounting and valuation of banks’ financial statements including the loan book,

financial instruments and derivatives used for hedging purposes; ■ Further advance participants’ understanding of the latest Basel III developments including

MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR); ■ Understanding the key metrics to value a bank, including performing all the steps of a Dividend

Discount Model (DDM) and Multiples Analysis using Excel.


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Bank ValuationContinued

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■ Understanding the income statement drivers ■ Net interest income and margin ■ Non-interest income ■ Forecasting loan impairment through the

credit cycle ■ Operating costs ■ Tax ■ Modelling and forecasting regulatory capital ■ Risk weighted assets ■ Required and available capital under Basel I,

II or III ■ Liquidity requirements and stable funding

requirements ■ Forecasting dividends (payout ratio and/or

minimum capital requirement) ■ Ratio analysis and key performance ratios

Case study: Financial Modelling of Barclays on Excel

Session 4 Bank Valuation Following the forecasting of the bank’s performance, this session focuses on the Dividend Discount Model (“DDM”) and key multiples of Barclays. ■ Free cash flow to equity mode ■ Present value of future dividends ■ Cost of equity for banks ■ Terminal value: review of potential ap-

proaches (key parameters or RoE) ■ Sensitivity analysis ■ Banking trading multiple

• P/BV and adjustment to BV explained• P/E, dividend yield

Case study: DDM and Multiples of Barclays on Excel


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Intercreditor (& AAL) Issues In Leveraged, Real Estate and ABL Transactions

Date: 18 Jun 2018, 01 Oct 2018, 30 Nov 2018Location: London Standard Price: £695 + VAT

Membership : £556 + VAT BOOK NOW

Course Overview

Intercreditor Agreements come to the fore in distress and restructurings. In essence their aim to provide lenders with the tools to implement an orderly restructuring by mimicking some (but not all) of the features available under Chapter 11. In particular, ranking/priority available under the “Absolute Priority rule (recently reaffirmed in the Jevic case), enforcement standstills (especially junior lenders), payment stop notices, turnover process and the ability to sell assets free of collateral (the so-called “intercreditor release mechanism which featured in the European Directories case). The course reviews the key aspects of typical Intercreditor agreements, especially the various LMA precedents for leverage loans, pari-loan/bond deals and real estate transactions. However, as the LMA acknowledges, their precedents are simply a point of departure so the programme also reviews other approaches found in the market. Moreover the LMA does not yet boast a precedents for transactions which include ABL or Unitranche deals (although the latter is in the works at present). Dovetailing ABL with other forms of debt has proved problematical outside the EU so the course calls on the presenter’s expertise to consider some solutions to this issue. This course will provide participants with an understanding of the role of the key intercreditor and how these tools are used in practice. The course also covers related aspects of topical issue of value and price which was central in both the IMO Carwash and the Stabilus cases. The role and importance of the Facility And Security Agents is also considered.

Introduction to Ranking and Subordination techniques ■ Summary of key terms of relevant Junior

debt instruments • Mezzanine • Second Lien Loans & Notes • Subordinated/Unsecured Notes • PIK Loans & Notes

■ Methods of creating ranking/subordination • Taking collateral / security • Contractual • Structural

■ Temporal • Equitable subordination (US, Germany,

Spain, France, Italy)

Relevant LMA precedents and market documentation ■ 2012 Leveraged precedent ■ SSRCF 2013 version for pari Loan Bond

structures ■ The Real Estate intercreditor precedents –

Structural & Contractural ■ The LMA ICA as a point of departure for

negotiations ■ Agreement Amongst Lenders (“AAL”) – no

standard approach!

Review of relevant deal structures ■ “Traditional” senior loan vs. mezzanine,

shareholder loans ■ Legacy deals - senior, 2nd lien loans, mezza-

nine, shareholder loans ■ Pari-Senior Loan/Bond structures (“Loan and

Note”) ■ Real Estate transactions ■ Unitranche / direct lending structures ■ Asset Based Lending structures

Ranking & the Payment Waterfall: general approach ■ Who should be a party to the ICA ■ Problems with Shareholder Loans ■ Ranking of the various “layers” of debt

• Typical ranking • Position of hedge liabilities • Dealing with intra-Group & parent liabilities • Issues arising in re Loan notes, Equity sub-

stitutes, Vendor loans • Rationale for inclusion as parties to the

Intercreditor • Rationale for exclusion as parties in the

Intercreditor ■ Position in pari Loan / Bond structures ■ Ranking as to Payment

• Permitted Payments on Hedge Liabilities • Permitted payments & restrictions on Mez-

zanine


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Course Content


• Mezzanine Payment “Stop Notice” • Potential abuse and cure • Mezzanine Debt purchase by sponsor

■ Ranking as to Proceeds of Enforcement of Transaction Security

■ Senior Facility Liabilities - Restrictions and Permissions

■ Security and guarantees/indemnities - Sen-ior Lenders

Enforcement of Security ■ Who can Enforce – importance of the “In-

structing Group” • Instructing Group in Senior loan v Mezz

structures • Instructing Group in pari Loan / Bond

Structures • Role of the “Security Agent”

■ Timing of Enforcement standstills • Enforcement standstills • Senior loans vs. mezz • pari Loan / Bond structures • When can Mezz and other junior lenders

Enforce? ■ Problem areas re Enforcement

• Timing, manner of Enforcement • Role of the Security Agent in Enforce-

ment • Lessons from Saltri v MD Mezzanine

(Stabilus) case

Non-Distressed disposals ■ Application and scope – “Non-Distressed”

defined ■ Interaction with the Senior Facilities Agree-

ment ■ Interaction with the Mezzanine Agreement ■ Release of Security ■ Waterfall of “Disposal Proceeds” ■ Position in pari Loan / Bond structures

• Covenants in High Yield Bonds affecting Disposals

• Reconciling conflicts in pari Loan / Bond structures

Distressed Disposals ■ Release of Guarantees and Security

• What can be released? • Circumstances in which the junior lend-

er’s claims can be “discharged” • Lessons from the European Directories

case ■ Valuation issues – Price vs Value

• Lessons from IMO Carwash case – what went wrong (and how to fix it)

• A closer look at Stabilus – is this more instructive?

• Valuation approach – going concern vs. liquidation

• Valuation method - problems with “tradi-tional approaches” in distress

• “Fair value” defined • Approaches per the 2012 LMA ICA • Potential problems with “Fair Value” (why

“fair” may not be “fair”) • What is a “Competitive Sales Process”? • Solutions for Junior lenders re “Fair Value”

■ Form of consideration; cash vs. non cash con-sideration

■ Credit bidding • Is it available under the Intercreditor • The Stabilus position • Credit bidding in action • Potential pitfalls

Interaction of cross-default vs. cross-acceleration between senior & junior ■ Implications for EoD under the SFA on the

Mezzanine ■ Trigger options for Mezz EoD

• SFA EoD, Default or Acceleration ■ Limit to specific Events / covenants

• Typical carve-outs ■ Position in pari Loan / Bond structures

• Potential solutions

Issues with Hedging & Hedge parties ■ Definitions relevant to Hedging

• “Close-out Netting” • “Senior Credit Participation”

■ Voting pre-close out – key issues ■ Post close out - inclusion in “Majority Senior

Lenders”

Option to Purchase & Turnover ■ Key terms ■ How effective is this remedy: Examples in

practice • Lessons from IMO Car Wash • Does Stabilus change things

■ Approach in pari-Loan/Bond structures • Is it workable solution?

■ Current market trends / wish-list for Mezza-nine

■ Turnover per and post enforcement

Key differences between the Leveraged and Real Estate Intercreditor ■ Differences in deal structure and ramifications ■ Approach to security ■ Issues with the Security Agent ■ Dealing with Hedging ■ Acquisition of shares in the mezzanine bor






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■ rower ■ Cure rights – a different approach ■ Release of security and disposals

Intercreditor issues in Asset Based Lending structures ■ Key concerns of ABL lenders ■ Key concerns of the other finance parties

(high yield, unitranche, Loans) ■ Interaction with ABL Facilities (Algeco Scots-

man) ■ Intercreditor issues in ABL

• Standstills • Enforcement • Dealing with “pools” of collateral

■ Possible solutions in the European context

Issues in Agreement Amongst Lenders ■ Use and application (lessons from America?) ■ Intercreditor vs AAL ■ Issues in the AAL ■ Problems for borrowers

Inter-creditor issue re additional debt ■ Should the new debt be subject to an inter-

creditor ■ Issues with Secured Debt ■ Accordions vs Incremental Equivalent Debt ■ Issues with Unsecured debt ■ Documentary options – upfront ICA or de-

ferred?

Intercreditor issues arising from US parties / security ■ Terms to include in LMA / European Inter-

creditor • Bankruptcy waiver • Automatic Acceleration • Separate security

■ EU terms to include in NY style Intercreditor • Release / Assignment of claims on sale or

enforcement • Payment subordination





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European Term Loan “B”Date: 26 Sep 2018

Location: London Standard Price: £725 +VAT Membership : £580 +VAT

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■ ■

The European leveraged loan market saw issuance rise to €135 billion (an 85% increase vs the corresponding prior period) significantly outpacing high yield bond issuance of €86.8 billion. This trend is expected to gather pace in 2017 as issuers, particularly PE sponsors, appear set to prefer loans over bonds for a number of reasons. First, loans are currently enjoying lower spreads (E+350 + 0% Floor) than bonds (c. 6.6% all in); second, loans offer greater flexibility to sponsors in terms of the ability to both refinance (q.v. Flint Group, Cooper, B&B Hotels) and reprice existing facilities (q.v. Douglas €1.37 Term Loan “B”) whilst offering sponsors enhanced flexibility (and lower cost) in terms of their exit options.

Most, if not all, of the syndicated loans and many of the larger club deals (e.g. Independent Vetcare’s £180m Term Loan “B”) bear little resemblance to the traditional LMA precedents and include many features imported from high yield bonds or New York-style credit agreements (e.g. grower and builder baskets which apply inter alia to; debt incurrence, liens/collateral, restricted payments). The high yield bond and leveraged loan markets have been converging for some years (indeed the trend in Europe stared before the credit crisis with the arrival of the first cov-lite deals) but this convergence accelerated in 2016 in the face of the continuing benign conditions in credit markets caused by an imbalance of demand and supply and magnified by QE as well as the preference for increasingly influential U.S. lenders and sponsors for (more familiar) U.S. style documentation.

Whilst these Term Loan “B”s share many common features there are significant and subtle variations between them such that European Term Loan “B” market has fragmented into four different “styles”; first, English law cov-lite Term Loan “B” (typically for larger and better credits); secondly, English law covenanted Term Loan “B”s (typically or smaller or less attractive credits); thirdly, New York cov-lite Term Loan “B” and finally, High Yield style Senior Secured Term Loan “B”s generally used for very large transactions. The course will refer to current trends in the market by referring to the DebtXplained Loan Database which tracks the key terms in these Term Loan “B”s; including restrictions on transferability, MFN and sunset periods, equity cures.

The programme will appeal to practitioners involved in larger leveraged loan market such as lawyers, bankers in lending, PE professionals, corporate financiers, M&A advisors, debt advisors and restructuring. Investors in larger loans and direct lending will also benefit from an understanding of these topics since some of these features have begun to appear in much smaller deals (e.g. grower baskets in deals sub €50m).

Course Overview

■ ■


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European Term Loan “B”Continued...

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Key concepts ■ Different variations of European Term Loan

“B”• English law Term Loan “B”• New York law Term Loan “B”• European “high-yield” style Term Loan

“B” ■ The Restricted Group

• Inclusions and exclusions• Approach used in high yield bonds &

why it matters• Re-designation of subsidiaries to and

from the Restricted Group• Typical requirements

■ Material subsidiaries• What constitutes at material subsidiary

– market approach to the threshold %• The various tests: EBITDA and other

approaches• Relevance and application in the SFA• Date and manner of determination-

Certificate (LMA vs market approach) ■ Information and financial reporting ■ Term Loan “B” vs LMA approach

• Treatment of unrestricted group• Presentations• Access rights•

A word about baskets ■ Use and application ■ Key variables and their ramifications

• Lender vs Borrower friendly ■ Fixed baskets

• Life time vs annual limit• Carry forward and back

■ Grower• Application • Key variables

■ Application • Key variables • Scalable

■ Builder• Application • Key variables

■ Are baskets refillable, can amounts be split, restrictions

Case: review of use and application of different types of baskets

Voting thresholds, Amendments & Waivers ■ LMA / EUK thresholds vs NY style thresh-

olds ■ Majority lenders ■ Super-majority

• Thresholds • Typical matters

■ Entrenched rights

• “Unanimous” consent? - Typical matters ■ Facility change / Structural adjustments

(or equivalent)• Approval Requirements• Major vs minor vs payables• Matters affected

■ Snooze you lose – timing ■ Yank the bank

• Required consent threshold• Non-consenting trigger• Can non-consenting lenders be prepaid

or bought at par• Required ource of funds

■ Debt buy-backs• Permitted• Cap on amount• Disenfranchisement

Yield / Margins, Ratchets & Call protection & Hedging ■ Trends in LIBOR/Euribor floors

• Differences in NY law vs English law• Matters affecting the Floor

■ OID – market trends ■ Margin ratchets

• Incidence – Application to facilities & step downs

■ Commitments fees on RCFs etc ■ Call protection

• Application & Scope - Repricing Events• Specific carve-outs (Specifc Asset Sales

or Significant Acquisitions, CoC, IPO, EBITDA increase, other)

• Basis of calculation of the Call protec-tion (effective yield)

■ Hedging required

Permitted Acquisitions & Investments ■ Structure of ‘Permitted” acquisitions ■ Permitted Acquisitions – LMA vs Term Loan

“B” approach ■ Ability to acquire Majority interests & ap-

plicable requirements/ conditions• Type and structure of basket lifetime or

annual limit • Typical tests & thresholds• Similar or complemetary business• Leverage test applicable to Target• Due diligence requirement - Third party

/ Independent certification





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• Other restrictions (jurisdiction) ■ Treatment of pro-forma synergies

• Can management add synergies to the test

• What synergies qualify, time limits? ■ Limits on non-guarantor entities ■ Must target accede to the collateral pack-

age ■ Ability to acquire minority stakes

• Applicable requirements/ conditions

Permitted Asset Sales ■ Requirements for assets sales ■ Threshold amount ■ Nature of the consideration received ■ Other requirements ■ Fair market value – certificates? ■ Payment waterfall & de minimis amounts

Debt incurrence ■ Incremental / additional debt generally

• “Accordion–style” facilities• Permitted Alternative debt

■ Structure of incremental debt basket• Ratio debt vs hard vs soft caps• Grower cap• Ratio & hard cap• Hard and grower caps• High Yield Bond style

■ Accordion facilities • Terms and conditions

■ Intercreditor accession ■ Types of debt baskets

• Free and clear baskets• General basket • Acquired debt basket• Acquisition debt basket• Contribution debt basket

Case: review of use and application of different approaches to incremental (and accordion) debt

MFN & Sunset provisions that relate to Incremental Facilities ■ MFN provisions – scope

• Incidence in deals• Scope – application to specific facilities• Method – margin cap vs all-in-yield

cap• Other requirements and exclusions • Structuring the yield cap to avoid be-

ing gamed by borrowers• Issues for lenders

■ Sunset provisions• Incidence • Duration• Effective date?

• Differences in NY law vs English law

Case: review of approach to MFNs and sunset provisions

Restricted payments (Distributions) ■ Permitted / Restricted Payments General

Basket(s)• Hard vs soft caps• “Source of funds” condition• “Builder basket” approach

■ Investor Payments Leverage Basket• Typical range

■ Available Amount (“AA”) / Cumulative Credit (“CC”) - Leverage compliance test

■ Investor payments - Leverage Basket Fund-ing Sources (other than AA/CC)

■ Other conditions for Investor Payments Lev-erage Basket (other than AA/CC)

Sponsor fees & Sub-debt payments ■ Types of fees and their caps

• Holding Co / Admin fees• Sponsor / Monitoring fees• Advisory fees• Other material fees• Parent Debt Servicing / Fees/ Expenses

■ Aggregate of hard capped equity and sub debt related payments• Equity repurchases• Employee benefits

Negative Pledge, Permitted liens / security ■ Can incremental debt be secured & if so

what assets are available• Existng collateral• No colateral assets• Non-Guarantor Restricted Subsidiaries• Restrictions on securing incremental debt

■ Availability of general and other baskets ■ Hard vs soft “grower” permitted lien baskets ■ Intrecrediotr accession

Mandatory prepayments (Cash sweeps) ■ Excess cash

• Opening percentage• Step down • Step down mechanism – linear or stepped

■ IPO• Applicable repayment percentage





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■ [Available amount vs Cumulative Credit basket]

■ The five main basket combinations ■ CNI and “out of the box” amount ■ Build up basket start date – when does

this start? ■ Ratio test

• Leverage• FCCR• Other

■ Change of control• Is this treated as an EoD or mandatory

prepayment• Six approaches – automatic exit, Lender

has option etc

Transferability & Portability ■ Transferability

• Whitelists • Approved lenders• Blacklist / Disqualified Institutions List

present• Specific affected parties

■ Industry competitors ■ Loan to own investors

• Consent, Demmed consent & “Resona-blnesss requirement

• Consultation • Carve-outs• Minimum transfer & hold sizes – inter-

action with Related/ Exisiting lenders ■ Matters affceting the RCF ■ Portability

• Ratings test• Ratio - Leverage or Enterprise value

ratio ■ Timing periods/limits & Frequency ■ Additional requirements

Financial maintenance covenants & covenant suspension

■ Financial covenant package type ■ Review of current market approach: Tradi-

tional vs Cov-lose vs Cov-lite ■ “Springing” leverage covenants

• What are they• Typical terms

■ Aggressive add-backs to EBITDA• Synergies and other add-backs• Por-forma ajustments - Scope• •dditional requirements and time limits

■ Equity cures • Current market approach – what can be

cured; how often, over-cures?• Deemed cures – what are they and are

they widely used ■ Deal outliers

• Introduction of minimum EBITDA cove-

nant• Maintenance covenants tested at great-

er intervals ■ Covenant suspension

• Trigger• Availability and scope

Case: review of Equity cures

Guarantor coverage ■ Incidence of guarantor coverage ■ GCT percentage (where present) ■ Exclusion of Material subsidiaries & mate-

riality threshold ■ Other market exclusions ■

Events of Default ■ LMA EoDs and typical market exclusions ■ Clean-up period ■ Cross-default or cross-acceleration ■ Right to accelerate ■ Grace periods

• Non-payment• Other obligations• Commencement of grace period

■ MAC• Review of market variations




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Leveraged Loans in Private Equity and Corporate Transactions

Date: 04 Oct 2018

Location: London Standard Price: £695 +VAT Membership : £556 +VAT

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This programme focuses on club and syndicated leveraged loans provided to both corporate and PE borrowers (i.e. typically this covers loans > 2.0x Debt/EBITDA for most sectors). Loan markets have experienced significant changes over the last few years on a number of fronts; first, larger, syndicated and club deals have seen the importation of terms from the bond markets (e.g. grower baskets and cov-lite, cov-loose packages). Many of these larger deals have also imported N.Y. style language, which is more familiar to U.S. borrowers and lenders. At the same time direct/alternative lending had made significant inroads into the lending market bringing with them a more eclectic approach to lending (e.g. a preference for bullet, as opposed to amortising facilities).

Whilst there are subtle differences between the objectives of corporate and PE borrowers, both share a common objective of seeking to obtain the optimum terms, pricing and flexibility which will allow them to execute their strategic objectives. Clearly the larger deals, where borrowers have the option of accessing the high yield bond market, offer borrowers greater flexibility however smaller facilities have also benefitted from stiff competition from direct lenders (which reaches well below that threshold - in some cases 15 million) which has forced banks and other lenders to offer borrowers better terms and pricing (e.g. grower baskets have been seen in facilities below 30 million).

The topics aim to provide participants with an understanding of the trends and key issues affecting loan facilities in both club deals syndicated deals and also provides borrowers and lenders with a template of how to approach the negotiations. The programme is aimed at borrowers and lenders as well as lawyers, accountants, debt and corporate advisory and other professionals involved in these transactions. Whilst there are subtle differences between objectives of corporate borrowers on the one hand and PE borrowers on the other; there is a high degree of overlap across.

Overview of the market trends affecting corporates and PE borrowers ■ Bifurcation of the leverage loan market ■ Trends larger syndicated deals ■ Trends in club loans ■ Influence of high yield bond market

trends ■ Impact of New York style documentation ■ Corporates vs PE – what’s the difference

Key negotiating strategies – the Borrower’s view ■ Criteria for selecting the most appropriate

lender - Banks vs Direct lenders ■ Key differences in approach between

banks and direct lenders ■ Pros and cons of Banks vs Direct lenders ■ Some banks (and branches) are different ■ Can direct lending applicable for corpo-

rate borrowers? ■ Strategies for negotiating the key com-

mercial terms

■ How to approach the term sheet• Hard or soft terms?• Focus on everything or only a few “criti-

cal” issues ■ Do debt advisors offer value for money -

Getting the best from your advisors ■ What about the fees ■ A Checklist for borrowers

The Lender’s perspective ■ Beware Commitment letters – reflections

post Novus Aviation ■ The role of the information covenants – do

they really matter ■ If financial covenants don’t matter, what

does? ■ What to focus on in the collateral package ■ Problems with non-guarantor restricted sub-

sidiaries


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Scope of the Loan ■ Concept and composition of the “Cove-

nant (Restricted) Group” ■ Matters affecting Material subsidiaries ■ Matters affecting Immaterial subsidiaries ■ Dormant subsidiaries – why they matter ■ Issues re Joint Ventures & Equity

Changes to the Lenders ■ Transferring a loan – methods, pros and

cons• Novation• Assignment – legal and equitable• Sub-participation

■ Ability to transfer - Consent vs Consulta-tion• Trends in the leveraged market• Why transferability is important for

lenders• Potential problems for borrowers

■ Restrictions on Transferability ■ White / approved lists vs disqualified

lenders

Voting thresholds ■ Key voting thresholds & why they matter ■ Different problems for PE and corporate

lenders ■ Different approaches in syndicated vs

club loans• Majority lenders• Unanimous consent• Super-Majority lenders – “typical”

scope & thresholds ■ Potential pitfalls for lenders ■ Impact of Yank the Bank ■ Role of Snooze & Lose ■ Treatment of Hedge counter-parties

A word about baskets – how and why they matter ■ Role and application of baskets in the

loan market ■ Types of baskets, structure use and ap-

plication• Grower baskets• Builder baskets• Scalable baskets

■ Reclassification and splitting between baskets

“Permitted” definitions – how & why they matter ■ Role and relevance of the “Permitted”

definitions ■ Synchronising the “Permitted” baskets ■ Permitted Acquisitions

• Typical carve-outs- hard vs soft bas-kets

• Additional restrictions ■ Permitted Financial Indebtedness / Security /

Guarantees• Scope – Financial Indebtedness defined

(typical exclusions)• Incremental debt- scope and coverage• Accordion facilities

ӹTypical terms & conditions ӹPricing - MFN & sunset periods – what’s market

• General & other debt-related baskets ■ Permitted Payments - typical carve-outs

• What payments are permitted• Basket carve outs – amounts, caps, carry

forward/back• Subordinated debt, equity & equity substi-

tutes• Management/monitoring fees

■ Permitted Disposals• Scope & typical conditions

Debt Service ■ Differences between banks and direct lenders

to amortisation ■ Interest and default interest periods ■ Libor/Euribor floors ■ Original issue discount (OID) – use in the

deal, market trends ■ Margin and margin ratchets ■ Increased costs & gross up clauses

Specific issues for Revolving Credit Facilities (“RCFs”) ■ Clean-downs re RCFs ■ Cashless rollovers – why they matter ■ Problems with Headroom

Mandatory prepayments (Cash sweeps) ■ Excess Cashflow defined ■ Excess Cashflow – typical deductions ■ De minimis basket ■ Cash sweep – step downs (PE vs Corporate) ■ Use and Application of Retained Excess Cash

flow

Mandatory prepayments (Disposal proceeds) ■ What is a “Disposal” ■ Baskets to sale proceeds ■ Annual – individual deal amount ■ Annual basket carve-out ■ Excluded Disposal proceeds / Reinvested

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Other mandatory prepayments - overview ■ Acquisition Proceeds - overview

• What are “Acquisition Proceeds”• Excluded Acquisition proceeds

■ Insurance Proceeds• Excluded Insurance Proceeds• Basket – annual or per deal• Retention periods

■ Listing Proceeds & change of control

Covenants & Undertakings generally ■ Covenants generally – three categories ■ Information covenants

• Why and how they matters• Issues for lenders issues for borrowers• LMA v Market approach

■ General undertakings• Guarantor coverage – scope and issues

for borrowers• Core carve-outs for sponsors• Carve-outs for corporate borrowers

Financial covenants and Equity cures ■ The main covenants per the LMA & market

• Cash flow cover• Leverage• Interest cover• Capex limits• EBITDA limits (not LMA)• Springing covenants – use, application

and triggers• Other matters – starting headroom

■ Market trends• Number of covenants• Headroom

■ Equity cures• What do they apply to EBITDA, leverage,

cash flow?• Terms - How many, consecutive, over-

cures, application of the funds• Cures in practice

■ Covenant Suspension/ Loosening• Use and application• Typical triggers• Scope of covenants affected

Default and Events of Default ■ Default vs Event of Default ■ What are the key EoDs ■ Grace periods ■ Borrower-friendly exclusions ■ What about cross-default ■ MAC / MAE clause

• Do they still matter posy recent cases?• Different formulations – LMA vs market

(what is reasonable) ■ Problems with “Sanctions” clauses

• How to mitigate conflict between U.S. and EU regulations




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Modelling for Stressed and Distressed CompaniesDate: 25-26 Sep 2018


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This course focuses on modelling restructuring for stressed and distressed companies.

First, we analyse stressed corporate from a credit analysis perspective and model the debt payment and key credit ratios. We then look at gone-concern scenarios and review distressed companies. We explore and model the steps facing distressed corporates, including debt restructuring packages, in-court and out-of-court settlements and liquidation. We look at the perspective of distressed corporates, debt holders and creditors.

At the end of the training, the participants will be able to: ■ Explain the differences between a stressed and a distressed company ■ Understand the valuation of a distressed company ■ Model the various options for the debt holders and creditors of a distressed company ■ Model the pecking order of debt repayment in a liquidation

DAY ONE

STRESSED COMPANIES

This module focuses on the analysis of companies that are solvent, but might become distressed should trading or financing circumstances deteriorate. We focus on operating cash flow dynamics (e.g. cash conversion), capital structure issues (e.g. understanding structural issues and assessing refinancing risk) and valuation implications.

Introduction ■ Definition and review of stressed companies ■ Introduction to Dominos Pizza stressed situ-

ation

Capital structure analysis ■ Using credit ratios to assess credit risk (e.g.

debt / EBITDA, EBITDA / interest) ■ Understanding structural issues

• Cash flow upstreaming issues and struc-tural subordiantion issue

• Intercompany debt guarantees, multiple borrowers with joint & several liability, intercompany loans, etc.

■ Assessing refinancing risk ■ Market data (credit “spread” to measure

credit risk, bond prices & bond yields, CDS and credit indices), sources and reliability of data

Financing issues ■ Different debt products and which compa-

nies realistically have access to them and what creditors look for in re-financing / new

financing ■ Debt terms & conditions including credit ratio

covenants and the potential to trigger early debt repayment

Case study I – Dominos Pizza – detailled modelling and full credit analysis

DISTRESSED COMPANIES

ObjectiveThis module focuses on the analysis of companies that have become distressed. We focus on reviewing the capital structures and model different alternatives, including liquidation and restruturing the debt package taking into acccunt the perspectives of the different equity and debt holders.

Insolvency and Valuation ■ Balance sheet involvency ■ Cash flow insolvency ■ Link between Entreprise Value and Equity

Value• Equity value is zero and debt trades below

book values

Subordination ■ Secured vs. unsecured ■ Contractual ■ Structural ■ Guarantees


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Strategic Options ■ Raising capital ■ Debt restructuring (out-of-courts) ■ Debt restructuring (in-court) ■ Asset sales ■ Sell the business ■ Liquidation

Valuation Methodologies ■ Liquidation vs. going concern ■ Liquidation value

• Recovery rate ■ Going concern

• EBITDA multiples

Valuation issues ■ Limited time for due diligence ■ Usefulness of historical record as a proxy

for the future ■ Management issues

DAY TWO

Recovery Values ■ Asset liquidation value usually estimated

as a % of book value ■ Most liquid assets (cash and marketable

securities): 100% recovery rate ■ For most assets only a fraction of book

value recoverable ■ Liquidation fees

Case Study II: Modelling of different recovery values of an industrial company

Priority Ranking ■ Contractual subordination

• Senior, subordinated, preferred and equity

■ Security ■ Structural subordination

• Borrowing entity• Maturity• Guarantees

Distressed Companies – Financial Modelling ■ Workout of Schefenacker, a German au-

to-parts manufactuer ■ Valuation of companies under different

options• Going concern, liquidation and restruc-

turing ■ Modelling of the debt under restructuring

scenarios• Debt forgiveness, payment extensions,

debt-equity swaps

Case study III – Detailed modelling of Schefenacker workout


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Modelling for DisposalsDate: 24 Sep 2018

Location: London Standard Price:£695 + VAT Membership Price: £556 + VAT

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Course Overview

This session covers the main divestiture options available to a firm as a going concern.

We focus on private market sale, Initial Public Offering (IPO), spin-off, split-off and equity carve-out. The motives, pros and cons of each structure are explained in detail in light of precedent transactions. We also discuss financial impact including balance sheet deconsolidation and EPS accretion (dilution). Spreadsheet work and real divestiture cases are used throughout the session.

Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse divestiture transactions:

■ Building up from partially-complete models on real case scenarios ■ Running scenarios, iterating and optimising

Each participant should bring a laptop to the course to facilitate modelling work

Introduction ■ Why do corporates divest or restructure

their assets? ■ Review of key considerations

• Strategic;• Liquidity;• Valuation;• Tax;• Regulatory and anti-competition;

■ Promoted by management, sometimes pushed for by shareholders

■ Types of divestitures• Private sale;• Initial Public Offering (IPO);• Spin-off/split-up;• Split-off;• Carve-out.

■ Financial analysis performed• Structural impact;• Balance sheet deconsolidation;• Earnings Per Share (EPS) accretion (dilu-

tion) and relative P/Es.

Private Market Sale ■ Structural considerations

• Pre-deal and post deal structures ■ Balance sheet deconsolidation ■ Tax impact of deconsolidation ■ EPS accretion (dilution) ■ Reinvesting the sales proceeds

Case study I – T-Mobile USA divestiture to AT&T

Subsidiary IPO ■ Minority vs. majority stake IPO ■ Size of the offering

■ Cost of listing and disclosure requirements ■ Trading multiples as main valuation bench-

mark ■ IPO discount pricing

Case study II – Citigroup listing of Primerica

Spin-Off & Split-Up ■ Definition, advantages & disadvantages

• Existing shareholders receive a new share in spun-off entity

■ Adjustment of capital structure prior to spin-off

■ Best executed with traded stock for valua-tion purposes

■ Ownership structure impact ■ Balance sheet impact - treatment as divi-

dend-in-kind ■ EPS accretion (dilution) ■ Split-up similar to spin-off except old parent

dissolved

Case study III – ITT three-way spin-off in Exelis, Xylem and “old” ITT

Split-Off ■ Definition, advantages & disadvantages

• Choice between keeping shares in parent company or swapping parent company shares for subsidiary shares

■ Different treatments in over vs. under sub-scription scenarios


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■ Split-off structure impact ■ Balance sheet impact treatment as own

shares repurchased ■ EPS accretion (dilution)

Case study IV – Kraft split-off of post cereals business

Carve-Out ■ Definition, advantages & disadvantages

• Usually initial step of a two-step spin-off and split-off

• IPO of subsidiary shares (primary/sec-ondary shares)

■ Financial structures typically adjusted prior to the offering

■ Carve-out structure impact ■ Balance sheet impact treatment and

non-controlling interests ■ EPS accretion (dilution)

Case study V – Mead Johnson separation from Bristol-Myers Squibb as a two-step process: equity carve-out followed by split-off

Conclusion Review of all strategic alternatives, structures, balance sheet and EPS impact to the course to facilitate modelling work


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Due Diligence In Corporate Finance TransactionsDate: 05 June 2018


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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


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• 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





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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





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Negotiating Heads of Terms (LOIMOU) & Related IssuesDate: 12 Oct 2018


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The Heads of Agreement (“Heads”) are perhaps even more important than the SPA since, if they are poorly drafted, they can fail to clarify the essential aspects of the deal adequately they can either delay its completion (or even scupper the transaction) whilst the parties revisit the original terms. Secondly, they can inadvertently create a binding obligation to conclude the deal on unfavourable terms if they omit suitable CPs; for example, not making the deal conditional on adequate due diligence or available financing or being unable to adjust the purchase price later when the assumptions on which the initial price was based, differ post due diligence and finally they could expose the parties to potential liability even if the deal does not proceed (e.g. the duty to negotiate in good faith).

Negotiating some cases, (e.g. dealing with unsophisticated sellers) failure to address contentious issues in the heads can mean the transaction doesn’t complete or takes much longer. The three areas which create the most friction are; First, which Accounts (and accounting policies) have been used by the seller as the basis for valuation (private owners rarely use IFRS/GAAP); secondly, what qualifies as debt (or cash) in the equity bridge and finally, if an earn-out is to be used, what-if scenarios must be considered to avoid disappointment and disputes later.

Whiles the Heads are vital, they often dovetail with other key aspects in the deal particularly the Confidentiality (the “NDA”) and the Exclusivity. Whilst these aspects are often included in separate documents they may also appear in the Heads themselves. They play important role in the deal in differing ways.

The NDA is often the first point of friction between the parties and thus sets the tone for the negotiations that follow. Its rationale is often misunderstood by many practitioners; whilst it is true that confidentiality is critical in deals with proprietorial IP, they offer other benefits to sellers and even the ultimate buyer too. Getting the terms of the Engagement letter right also matters; not only does it set the scope and fees for work but, as numerous clients have found out to their cost, Tailgunner fees can have a nasty sting in the tail (e.g. the Recap and Grandtop cases).

The programme also reviews other critical documents and elements of the M&A process which precede the SPA but which are inextricably linked with the final SPA. For example, Due diligence is inextricably linked with the warranties, disclosure and indemnities but it is vital to strike a balance which enable buyers to make an informed view on the target whilst protecting key commercial information on the target if the deal does not proceed. In this context, the data room (and data room rules) play an important part in this but also giving the seller insight into the buyer’s thinking.

The programme is aimed at those involved in M&A transactions and is designed to focus on the key legal and commercial issues of the deal. It will appeal to lawyers, corporate finance advisors, bankers and principals in the UK and Europe.

Part 1: Heads of Terms (“Heads”)

Tactical matters ■ What’s in a name & does it matter – Heads,

Term sheet, LOI, MOU etc. ■ Rationale & Purpose

• Are they always necessary?• 7 key advantages of using Heads• 4 disadvantages and how to mitigate them

■ Format of Heads • Detailed vs short• Who prepares them

Key legal issues to consider ■ Legally binding or not (q.v. RTS Flexible Sys-

tems case)• Clauses which should not be legally binding• Clauses which should be legally binding• Position in Europe / Civil law• Position in the UK• Impact of “Subject to Contract” (q.v. Global

Asset case)

■ Regulatory matters – Financial Promotion? (§21, Financial Services and Markets Act 2000)

■ The Duty to negotiate in Good Faith• UK vs Europe/ Civil law• Traps for the unwary

■ Agreements to Agree

Parties, deal structure, price & consideration ■ The Parties (and any guarantors) ■ Description of the proposed transaction

• Deal structure• Full title full title guarantee’ and ‘limited

title guarantee’ ■ Details of the Purchase Price

• Fixed price, a range or to be determined• Basis/Assumptions on which the price is

based (why this matters)• Valuation assumptions

The purchase price mechanism – Locked Box


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Negotiating Heads of Terms (LOIMOU) & Related IssuesContinued...

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v Completion Accounts ■ Three critical issues which need to be ad-

dressed in the Heads (& not left to the SPA)• Which set of “Accounts” are used – why

and how this matters• Earn-outs – defining the benchmark & how

to mitigate problems• Specific issues with the Equity Bridge

■ Nature and timing of the Consideration• When the consideration will be paid• Nature of the consideration e.g. cash

shares loans etc.

The Main Conditions ■ How and why this matters to the buyer ■ Required approvals - clarity is key ■ Due diligence

• Arrangements & requirements• Access to key staff• Data rooms

■ Completing a definitive, legally binding SPA• Who prepares this & why that matters

■ Material Adverse Change• Scope

■ Commercial matters, Legal & Regulatory proceedings• Commercial contracts & licenses / CoC• Completion issues

■ Financing • Terms of financing inter-relation with the

financing documents ■ Pre-completion restructuring ■ Timing - Milestones & long-stop dates

Limiting Liability – Representations, Warranties, Disclosure & Indemnities ■ Liability for pre-contractual statements ■ Dealing with the Warranties

• General or Specific approach to warranties• Scope • Tactical matters for the parties

■ Warranty insurance ■ Due diligence - a risk matrix ■ Interaction with Warranties and Disclosure ■ Key areas of DD

• Lawyers• Accountants / tax• Commercial DD• Insurance• Environmental

Miscellaneous ■ Transaction documents

• Migrating the Heads to the SPA• Interaction with other key documents• Non-compete - Issues re employees and

customers ■ Costs & Break Fees

• Triggers for break fees• Potential problems with Break fees• Legal issues – Is it a penalty?• Fiduciary duties• Financial assistance

■ Other agreements

■ Rights of third parties ■ Governing law and jurisdiction

Confidentiality letter / NDAs Real purpose of NDAs

• Seller’s perspective • Buyer issues

■ Long vs Short form ■ “Confidential Information” defined

• Form, Source, Method ■ Dealing with Extremely sensitive information ■ “Residual” clause ■ “Authorised Persons” defined

• Seller and buyer issues ■ The 9 Key Undertakings by the Buyer ■ When the deal fails – “Return or Destroy”

• Potential problem areas for the buyer ■ Enforced Disclosure ■ Other ancillary terms

• No offer, representation, warranty or license• Non-solicitation of staff, customers, suppli-

ers• Non-disclosure of discussions• Enforcement and remedies

■ Practical steps for the Seller

Exclusivity ■ Rationale ■ Format – separate document or in the Heads ■ Lock outs vs Lock ins (are latter enforceable)

• Duration - Potential problems “”reasonable period”

■ Pros and cons • Seller’s view• Buyers view

■ Main clauses• Conduct during the Exclusivity Period• Approaches by 3rd parties• Access during the Exclusivity period• Relief and Remedies• Announcements• Termination & Waivers • Costs• Status of the Exclusivity

■ Issues in re fiduciary duties

Appendices (covered time permitting – materials in Appendix)

Engagement letters ■ Defining the deal ■ Role & scope ■ Remuneration & expenses

• Contentious issues - Abort and Tailgunner fees

■ Duration and Termination ■ Liability and Limiting liability ■ Hold Harmless letters


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Mergers & Acquisitions (M&A) CourseDate: 15-18 May 2018, 22-25 Oct 2018


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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


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Mergers & Acquisitions (M&A) CourseContinued

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• 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

tax considerations

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 mod-

el • 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




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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.

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 ■ 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• Accountants• Other

■ 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




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• Completion accounts • Comfort letters

■ Alternative outcomes• IPO, timescale• MBO, management conflicts• 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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Negotiating and Issuing High Yield BondsDate: 1 Jun 2018, 20 Nov 2018


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Course Objectives

Participants will: ■ Learn who is issuing HYB and why? Understand the size of the market, and what these bonds

look like when they are issued. ■ Understand how deals are brought to market, allowing for market conditions and examine the

documentation, which is key to the deals value. ■ Gain an understanding of the key terms, such as Pledges, Maintenance Covenants and Equity

Cures. ■ Appreciate the latest trends in the market and why they are happening. For example, why inves-

tors are excepting the move to Cov-Light deals, despite them not offering the same protection as investors insisted on in the past.

■ Have explained to them all the main terminology used in HYB deals and just as importantly in what context they are used.

■ Will look at recent issues to highlight the main points discussed in the programme, and to illus-trate the terminology discussed.

The High Yield Bond Market reached a record of €75bn issuance in 2017. This year has so far shown no signs of slowing down. Selecta Group, the Dutch incorporated food and drinks vending machine provider, started 2018 with two large issues, already equalling some of the largest deals of 2017. Both bonds were issued on the 1st February this year. Selecta issued two 6 year bonds; a €765 m 5.875% fixed and a €365m floater paying 3 month Euribor + 537.5 bp.

The HYB market is complex with detailed jargon and documentation. This course is designed to demystify the terms used in negotiating and issuing. We use real life examples to explain the issues in an easy to understand way. We will look in to the latest trends and explain the motivations and outcomes behind recent changes affecting the market, such as the deterioration of covenants and investor protection.

The programme is designed to give participants an in depth understanding of the High Yield Bond Markets and how deals are negotiated and issued. Delegates will understand how the market operates, seeing who is issuing and who is bringing the debt to market. We will look at recent “real life issues” as examples.

■ The Role of AFME• Association for Financial Markets in Europe• Focus on promoting transparency and li-

quidity in the high yield market• How affective are AFME?

■ Fallen Angels ■ Private Equity Issuance ■ Recent New Issues

• Case study: We look at recently issued High Yield Bonds from the market

• What is being issued and why? ■ The Major Bookrunners

• Ranking of Lead Managers / Global Capital• Life Cycle of an Issue

Course Content

Overview of High Yield Bonds ■ Size of the Market / Market Growth ■ Examples of High Yield Bonds

• A look at real bonds in today’s market place

■ Credit Ratings• The Ratings Agencies• Investment Grade v High Yield Debt

■ Current Credit Spreads• What are the current Credit Spreads in

the Market for High Yield Bonds


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Negotiating and Issuing High Yield BondsContinued...

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■ Origination / Syndication / Underwriting / Distribution

Pricing a High Yield Bond Issue ■ From the Government curve ■ From the Mid Swap curve

• Interest Rate Swaps Overview• Where Mid swap rates come from

■ Duration Risk• Market risk of a bond

■ What impact do changing interest rates have?

■ Case study: we look at the pricing of the recent issues of

• Aston martin• Selecta Group

The Documentation ■ Pledges

• Negative Pledges ■ Early redemption / Callable and Puttable

bonds• Examples are used to show the impact

for investors of call and put options im-bedded in to bonds

■ Events of Default• Seizing Collateral• Recovery Rates

■ Cross Default ■ Risk Factors

• Case study: We look at an example of a High Yield Bond and discuss the “Risk Factors” listed in the documentation.

Covenants ■ EBITDA as a constituent of Covenants ■ Maintenance Covenants ■ Case study: we look at examples of cove-

nants and their impact• Carve Outs• Baskets• Breach of Covenant

■ Covenant Erosion• Impact on the market of these recent

developments• Cov- Loose (leverage only financial main-

tenance)• Cov Light (Springing Leverage)

Equity Cure ■ Recent provision changes allowing the

company to receive equity capital and the impact on investors• Shareholders curing a covenant breach

by injecting further equity funding.• Case study: we look at an Equity Cure

Sample Clause and discuss the meaning and jargon.

• Post Default Alternatives Toggle Notes ■ Deferred payment ■ PIK

Case study: Transaction Execution – the pre-launch task time line from week 1 through to week 6. We discuss all the steps that must be taken before we can bring an issue to market.

Exercise: Delegates look at a recent issue prospectus and examine the risk / reward ratio. Class discussion: Should we invest, what are the risks?


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Tax Issues Affecting MBOsDate: 20 April 2018

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Location: London Price: £350 +VAT Membership Price: £280 + VAT

This course is intended to give those involved in MBO transactions an understanding of the taxation traps and planning opportunities that the tax legislation produces. The course will look at issues for the target business, those providing funding and, in particular, the management team. The potential charges under the employment-related securities legislation are particularly important for the latter.

As well as explaining the tax rules, importance compliance aspects, such as obtaining (where possible) HMRC clearance in advance of the transaction, will be discussed.

Tax issues affecting the target business ■ Acquisition of trade and assets or shares

in target? ■ Possible tax charges if target company

acquired ■ Preserving trading losses

• Problems caused by anti-avoidance rules

Taxation of Venture Capitalist/ Private Equity Funding ■ Tax treatment of debt and equity ■ Problems with “stranded interest” ■ Taxation of share buy-backs ■ Taxation of share sales

The tax treatment of managers’ shares ■ Interest on money borrowed to buy

shares ■ Capital gains treatment on eventual sale ■ Availability of relief under Enterprise In-

vestment Scheme and Seed EIS ■ Potential income tax charges under em-

ployment-related securities legislation ■ Complying with the conditions in the

memorandum of understanding between BVCA and Inland Revenue

Structuring ratchets to avoid income tax charges on the manager shares Using EMI options to recruit, retain and incentivise key staff ■ Qualifying companies ■ Conditions to be satisfied by employees ■ Exercise conditions, forfeiture, restric-

tions ■ Disqualifying events



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Leveraged Buyouts - The LBO Course for Lawyers

In-House or via Live Webinar

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Course Overview

The private equity model operates on a different paradigm from traditional corporate investors in terms of its aim and objectives, the structures it employs, the manner in which it approaches an investment and its sophisticated approach to capital structuring, the management incentives and last, the use of laminated (senior and junior debt) or bifurcated (pari loan / bond) debt financing.

This is an intensive one day programme designed to cover all the major areas relevant to the deal so as to provide attendees with a toolkit to understand the LBO process, the key issues from the perspective of all the major players’ PE, management and the various providers of finance.

The PE market is dynamic so the course will provide an historical perspective together with the current trends and issues relevant in the market.

The course is relevant those in PE or professionals involved either directly or indirectly in private equity. Matters are approached from a pan-European perspective.

LBOs: Value creation model, structuring issues & structuring parameters ■ The traditional PE value creation model ■ New value creation model ■ Structuring issues

• Ranking• Collateral / Security • Tax issues

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

debt capital structure• EBITDA multiples• Target returns for PE & Mezz Funds

■ The 3 main stages of a PE deal & relevant agreements: overview, scope & purpose• The Sale & Purchase Agreement• Loan Agreements• Security documents• Management’s Service agreements• The Shareholder’s / investment agree-

ment

Case Study: Deriving the source and uses of funds; target equity returns of the PE fund and Management

Financing: summary of application, key terms, conditions and pricing ■ Spectrum of financing instruments in LBOs ■ Senior loans

• Alphabet notes• RCF• Capex facilities

■ Mezzanine debt

• Warranted & warrantless ■ High Yield Notes (FRNs and Fixed)

• Senior Secured Notes• Senior Notes• Second Lien Notes• PIK Notes

■ Equity financing – typical structures and coupons

■ Vendor NotesCase Study: Deriving the target equity returns of the PE fund and Management

The Lender’s perspective ■ Lender’s approach to credit decision ■ Overview of loan documentation and im-

pact on deal/restructuring ■ The four deal scenarios ■ Key financial and other covenants

• Negative pledge• Summary of main financial covenants /

ratiosCase Study: Analysing & “right-sizing” the capital structure to identify the optimum funding instruments and funding structure

The Private Equity firm’s perspective ■ Typical objectives & required market re-

turns ■ Typical fund structures ■ Assessing the investment – the 5 key crite-

ria ■ Division of the spoils – typical terms

(what’s market?)• Hurdle / preferred return


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• Carried interest (European vs US ap-proach)

■ Equity ratchets

Management issues ■ Multifaceted role and duties of manage-

ment• Issues vis-à-vis role as Director, Em-

ployee, Shareholder, Warrantor ■ Critical issues in the Investment agree-

ment• Good vs. Bad leaver• Management warranties

■ Critical issues in the Service agreement• Restraints• Termination

Pulling it all together ■ Structuring the deal – the first take ■ How much debt can or should be used ■ Equity second

• Who goes first – PE or Management• Deciding who gets what• Ratchets

■ Evaluating the structure – does it work?



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Syndicated (Leveraged)TLB & Yankee loans


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The syndicated loan market and high yield bond markets continue their “race to the bottom”. The continued inflows of liquidity from existing and new sources, coupled with the resurrection of the CLO market, continues to create intense competition between these two, historically different forms of finance. The main upshot has been the continuing, if not accelerating, convergence between the terms for loans and high yield bonds.

The convergence is being driven both on the buy and the sell-side; first, U.S. based Private Equity funds in Europe have been keen synchronise their (pari loan/bond) capital structures, by aligning the terms of their loans more closely with their bonds particular in the larger deals which include both term loans and bonds (e.g. Kirk Beauty /Douglas where the bonds were flexed down to accommodate larger TLBs).

The more borrower-friendly-incurrence covenants in bonds are also not unimportant for these borrowers; second, an increasing number of U.S. credit funds who have tapped into the European market and they too are keen to synchronise their documentation. The more liquid secondary loan market in the U.S. means these lenders are more relaxed about the absence of financial-maintenance covenants since their protection comes from the ability to trade when borrowers are in or near distress.

One further source of impetus has been the opening of high yield bond markets in Europe to mid-cap issuers with bonds now in the 200 million mark (and lower q.v. Wagamama £150m) increasingly common. In this context, the markets have seen smaller deals, of this size, increasingly arranged on a syndicated basis.

These developments also explain the increasing incidence of documentation being drafted according to NY State law which, through no co-incidence also tend to mirror the terminology used in high yield bond indentures. The trend towards using NY law is supported by data from DebtXplained which indicates that, in 2014, nearly half of all TLB Yankee loans were subject to New York state law and this trend seems to be accelerating in 2015.

This seminar examines the typical terms of syndicated loans in the current market and compares the key differences between LMA-based senior facilities and NY style documentation.

Background & basics ■ Review of the funding landscape ■ Impact on loan documentation ■ Increasing use of NY-style loans vs tradi-

tional LMA – where, who and why? ■ How and why do they differ ■ Incurrence covenants vs maintenance cove-

nants – does it matter?

Key concepts ■ The Restricted Group

• Inclusions and exclusions• Approach used in high yield bonds & why

it matters• Re-designation of subsidiaries to and

from the Restricted Group• Typical requirements

■ Material subsidiaries• What constitutes at material subsidiary –

market approach to the threshold %• The various tests: EBITDA and other ap-

proaches• Relevance and application in the SFA• Date and manner of determination- Certif-

icate (LMA vs market approach) ■ Permitted baskets generally

• Hard & soft caps• Soft caps – EBITDA, Total Assets, Total


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Syndicated (Leveraged)TLB & Yankee loansContinued...

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• Revenues, mix n’match • Review of data from DebtXplained• Other restrictions

Permitted Acquisitions ■ Permitted Acquisitions – LMA approach vs

Yankee loans ■ Hard capped baskets – lifetime or annual

limit ■ Approved acquisition ratio – incidence

• Typical tests & thresholds ■ Treatment of pro-forma synergies

• Can management add synergies to the test

• What synergies qualify, time limits? ■ Third party / Independent certification

• Due diligence requirement

Debt incurrence / Incremental facilities ■ Main sources of additional debt incurrence ■ Typical exclusions; Refinancing debt etc ■ Purposes & limitations for incurring addi-

tional debt; M&A, Capex ■ Prohibition & Ratio Debt Basket

• Ratio based approach ■ Permitted debt / carve-out baskets – typi-

cal examples, and controls• General debt basket• Acquired debt basket (no obligation to

discharge)• Acquisition finance debt basket• Attributable debt / Finance leases / PMO

debt basket• Other baskets • Availability to non-guarantor restricted

subsidiaries (capped vs uncapped?) ■ Reclassification of debt between baskets

and the Ratio Debt basket• Debt reclassification among permitted

debt baskets (excluding/including credit facility) and ratio debt basket

• Ability to split an amount or transaction between different baskets or exceptions

• Other aggressive approaches (e.g. auto-matic reclassification between baskets)

■ Incremental Facilities• Incidence in deals• Hard vs soft caps• Controls on soft caps• Other restrictions – yields, tenor etc

Restricted Payments / Distributions (to Shareholders) ■ LMA vs TLB approach compared ■ Application – dividends, subordinated debt ■ Restricted Payment General baskets

• Basis of calculation – hard vs soft caps• Hard caps – lifetime vs annual limits• Soft caps approach – CNI etc

• Source of payments – Available Amount, Cumulative Credit, other

• Other requirements ■ Leverage basket

• Typical leverage ratios (q.v. Debtxplained)• Additions/Source of proceeds available

■ Other conditions

Collateral & Liens ■ LMA approach vs TLB approach to “Permitted”

lien baskets ■ Availability of general and other baskets ■ Hard vs soft “grower” permitted lien baskets ■ Carve-outs for Non-Guarantor Restricted sub-

sidiaries ■ Guarantor Coverage Test – LMA vs. Yankee

loans compared

Mandatory prepayments (Cash sweeps) ■ Borrower friendly post Excess Cashflow

Sweep deductions ■ No mandatory prepayment waiver right ■ Borrower friendly post Excess Cashflow

Sweep deductions ■ Carve-out baskets from disposal proceeds not

required for making mandatory prepayments if ratings conditions met

■ All or some of mandatory prepayment cate-gories can be applied pro rata to prepay other pari passu debt

■ Absence of mandatory prepayment using insurance proceeds

■ Lender prepayment waiver right only if Bor-rower elects

■ Mandatory prepayment de minimis and thresholds include a great of hard cap and EBITDA soft cap

Margins, MFN & sunset provisions ■ Trends in LIBOR/Euribor floors ■ Matters affecting the floor ■ MFN provisions – scope

• Margins – yield vs all-in yield; pricing dif-ferentials

• Other terms and conditions ■ Sunset provisions

• Incidence and typical periods – US vs Eu-ropean approach

• Governing law ■ Absence of margin ratchets

• Rationale and incidence (funds!)





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■ Fixed rate deals

Financial maintenance covenants ■ Review of current market approach: Tradi-

tional vs Cov-lose vs Cov-lite ■ “Springing” leverage covenants

• What are they• Typical terms

■ Aggressive add-backs to EBITDA• Synergies and other add-backs• Additional requirements and time limits

■ Equity cures • Current market approach – what can be

cured; how often, over-cures?• Deemed cures – what are they and are

they widely used ■ Deal outliers

• Introduction of minimum EBITDA cove-nant

• Maintenance covenants tested at great-er intervals

Transfer provisions & Portability/ Change of control ■ What type of transactions qualify

• Consent vs Consultation • Carve-outs• Other restrictions e.g. minimum transfer

sizes ■ Portability

• Ratings test• Ratio - Leverage or Enterprise value

ratio ■ Timing periods/limits & Frequency ■ Additional requirements

Voting thresholds & Amendments (LMA vs US approach specific thresholds; how and why they matter) ■ Majority lenders - thresholds & typical

matters ■ Super-majority - thresholds & typical mat-

ters ■ Unanimous consent - Typical matters ■ Snooze you lose – timing ■ Yank the bank ■ Structural adjustments

• Major vs minor vs payables• Requirements - each Lender directly

and/or adversely affected

Sanction & anti-corruption provisions ■ US OFAC vs EU Blocking Statute [Reg

2271/96]– reconciling the irreconcilable?• Summary of provisions

■ Use of proceeds ■ The range of options

• Due diligence• Limitations on the scope

• Side letters – when to use them• Consequences of a breach

■ Solutions in practice

Summary of deal outliers ■ Incremental Facility yield cap applies only for

the first 12 months of signing / closing (“sun-set” provision)

■ Option for each Lender to cancel and acceler-ate upon a Change of Control and/or sale of substantially all assets

■ Permitted Payment basket based on Annual-ised EBITDA

■ HYB-style “Designated Non-Cash Considera-tion” concept in Asset Disposals (English law SFA)

■ All Permitted Disposals subject to a pro forma total leverage test




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Warranties, Indemnities, Guarantees, RepresentationsEntire Agreement Clauses & Distinctions


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Location: London Standard Price: £*** +VAT Membership : £*** +VAT

This programme is focussed on lawyers and non-lawyers alike, any practitioner in business transactions, whether in commerce or finance, both from the UK and abroad.

Participants will look at distinctions between each, their different use and interpretations between jurisdictions. Where overlap and confusion may creep into transactions and expected outcome.

They are used in commercial, infrastructure, IT, construction, property, M & A, joint venture and other transactions. In addition they are symbiotic with due diligence in its many forms whether buying a business, share or asset purchase. They are routes to minimising the risk in a transaction.

Each type manages risk at different levels and the course will assist you in which to select to protect you or your clients’ interests.

Increasingly they have all become the subject of claims and therefore court cases. The course will look at key cases and the impact for lawyers and non-lawyers for negotiations, drafting and transactions.

The course will look at key cases as to the scope of a warranty, Betfairs v Sutherland, what is meant by ‘full and fair disclosure’ Levison, Daniel Reeds, New Hearts and Infiniteland v Artisan, , prior knowledge Eurocopy, warranties v representations and a damages Sycamore v Bidco.

During the course participants will look at case studies, sample clauses and receive checklists to assist them with dealing with joint ventures a following the course.

Introduction ■ Definitions ■ Contrast ■ Distinguishing warranties and indemnities ■ Does a guarantee vary the agreement ■ Recent cases ■ Letter of Comfort v Guarantee

Warranties ■ Allocating risk ■ Difference between a Warranty and an

Indemnity ■ Providing a warranty ■ Key pointers ■ Third parties ■ Security ■ Remedies for breach ■ Damages for breach of warranty

Indemnities ■ Definition – examples ■ 6 types of indemnity clauses ■ Indemnity or warranty

■ Indemnity or guarantee ■ Guarantors consent to alterations ■ “Hold Harmless” ■ Drafting indemnities ■ Your giving ■ Your receiving ■ Duration of liability ■ Key cases - Tullow v Heritage [2014] ■ Contra proferentum ■ Extending indemnities

Guarantees ■ Fundamental elements including Golden

Ocean v Salgaocar Mining [2012] ■ Pointers for drafting ■ Drafting pitfalls ■ Guarantor’s rights ■ Distinction between performance bonds

and guarantees ■ “All monies” guarantee ■ Anti – discharge provisions


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Warranties, Indemnities, Guarantees, RepresentationsEntire Agreement Clauses & Distinctions

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■ Guarantee or Indemnity Associated Ports v Ferryways [2009]

Representations ■ Differences between Representations and

Warranties ■ Innocent misrepresentation ■ Negligent misrepresentation ■ Negligent misstatement ■ Fraudulent misrepresentation ■ Fraudulent misstatement (tort of deceit) ■ Misrepresentation Claims

‘Entire Agreement’ Clause ■ Key elements ■ Rectification ■ Court’s approach Surgicraft v Parardigm

[2010] ■ Practical considerations ■ Pointers for Sellers ■ Pointers for purchasers

Warranty Claims – Key Cases ■ Scope and nature of the warranty ■ Betfairs v Sutherland ■ Full and fair disclosure ■ Levison v Farin ■ Daniel reeds ■ Infinite land v Artisan ■ Sycamore Bidco v Breslin ■ Prior knowledge ■ Eurocopy ■ Pointers for buyers ■ Pointers for sellers

Clinic & Questions


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Venture CapitalIn-House or via Live Webinar

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Course Overview

An Introduction to Venture Capital Deals is a one day interactive executive education course tailored specifically to the venture capital industry.

It is aimed at investment executives who are relatively new to venture capital, those who are working ancillary to the investment role, entrepreneurs seeking to raise venture capital finance and accountants, lawyers and other professionals who wish to gain a fundamental understanding of the venture capital investment process.

The course covers the entire investment process from originating deals, evaluating business propositions and valuing and structuring deals, through due diligence and deal execution, the negotiation of term sheets, monitoring and adding value to exiting deals via a trade sale or IPO. The course is highly practical, involving interactive case studies, group exercises and discussions.

Key Learning OutcomesAttendees of this one day course should gain an understanding of the current trends and issues in the venture capital industry, how to appraise a business proposition, how to arrive at the valuation and required equity stake for a venture capital investment, how to negotiate a venture capital deal, including the principal clauses included in a term sheet, how venture capital firms go about monitoring deals and conducting portfolio reviews, how they seek to add value to an investment and how they seek exits via trade sales and stock market flotations.

Attendees will have the opportunity to review investment propositions, negotiate a VC term sheet and review investment portfolios through practical case studies, group exercises and group discussion.

This course will cover the following areas:

Global trends in the venture capital industry

The structure of venture capital funds ■ The GP – LP fund structure ■ Different strategies for VC funds: stage,

sector and geographic focus ■ Theme approach to VC investment ■ Fund strategy exercise

Investment risk and returnCase study on eBay

Business proposition: ■ Key components of business plan for VC

investment ■ Business model ■ Initial appraisal of business plan ■ Porters 5 Forces analysis and traps to avoid

with business proposals ■ Exercise on investment appraisal using Por-

ters 5 Forces ■ Non-disclosure agreements

The venture capital investment process: ■ Sourcing deals ■ Structuring VC deals ■ Valuation methods ■ Types of financing structure: ordinary

shares, preference shares, A ordinary shares ■ Worked example on structuring a deal ■ Terms included in a typical VC term sheet ■ Negotiating a term sheet ■ Group exercise on term sheet negotiation ■ Carrying our internal and external due dili-

gence ■ Investment decision process in VC firms ■ Group exercise on the rejection or pursual of

a VC deal ■ Syndicating deals with other VCs

The post-investment process: ■ Monitoring the performance of investments ■ Portfolio reviews ■ Group exercise on VC fund investments track

record ■ Methods of adding value to an investment ■ Case study on adding value

Current topics and issues in venture capital: ■ Sector focus, including current “hot” areas

for investment ■ Technology clusters, including Silicon Valley

and UK tech hot spots ■ University spinouts ■ Differences in approach between UK/Europe-

an and US VC firms ■ Wider environmental and ecosystem factors

impacting on venture capital

Other Alternative forms of early stage finance: ■ Corporate venture capital ■ Crowdfunding and business angels ■ EIS, SEIS and Venture Capital Trusts

Exiting from a VC deal: ■ Trade sales ■ IPOs ■ Secondary deals ■ Group exercise on issues in exiting from a VC

deal via an IPO

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Private Equity FundsIn-House or via Live Webinar

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Course Overview

Private Equity Funds is an intensive one-day interactive executive education course tailored specifically to the private equity sector. The course is designed for those who are new to working in the private equity industry, either with fund managers or with institutional investors, and for accountants, lawyers and other professional advisors who wish to gain an understanding of private equity funds. This introductory course provides a commercial overview into the structure of private equity funds, the fund raising process, marketing private equity funds, fund terms and conditions and private equity as an asset class, including the performance of private equity funds.

Key Learning OutcomesAttendees of this one-day course should gain an understanding of the typical structure of a private equity fund, how funds are raised, the essential ingredients of a private placement memorandum, how funds are marketed, how private equity returns are measured and how private equity funds compare to other asset classes. This practical and commercial focused fundamentals course is taught through a combination of talks, group discussion and case study exercises.

Global trends in the private equity industry: ■ Origins of private equity ■ Types of private equity ■ Investment risk and return ■ Growth and evolution of the industry, includ-

ing fund raising and investments data

Key players and their roles: ■ General partners and limited partners ■ Placement agents, fund of funds and gate-

keepers The limited partnership model: ■ The typical GP / LP model and relationship ■ Methods of investing in private equity funds ■ Deal by deal and pledge funds, evergreen

funds, listed vehicles, co-investment and direct investment

■ Fund of funds

Fund strategies: ■ Stage, sector, geographic focus ■ Fund and investment size ■ Group exercise on fund strategy ■ What LPs look for in a GP

Fund raising process: ■ Fund raising timeline ■ Private placement memoranda ■ Track record ■ Deal flow ■ Group exercise on example fund PPM, includ-

ing track record ■ Marketing private equity funds, including firm

competitor analysis and marketing activity matrix

■ Case study on firm and fund strategy

■ Brexit implications, including passporting

Fund terms and conditions: ■ Limited partnership agreement; deeds of

adherence ■ Carried interest, distribution waterfall, hurdle

rates ■ Management fees ■ Keyman clauses ■ Investment restrictions ■ Conflicts of interest ■ Advisory boards ■ Investor relations ■ Fund due diligence ■ Group discussion on fund due diligence ■ Group review of limited partnership agree-

ment

Marketing private equity firms and funds: ■ Firm and competitor analysis, including

SWOTs ■ Group discussion on SWOTs using example

fund PPM ■ Developing a marketing strategy ■ Case study on fund strategy ■ Marketing activity matrix

Private equity as an asset class: ■ Pros and cons of investing in private equity ■ Current issues in private equity, including

fund terms and regulatory issues ■ Regulation of private equity, including FCA,

Walker Review, AIFMD ■ Private equity investor asset allocation ■ Measuring private equity returns ■ Risk and diversification in private equity

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Valuing Commodity Companies and Sectors


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This advanced valuation and modelling course looks at the valuation approaches to be taken to enable participants to value sectors which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three stage growth profile and a terminal value or basic multiple based valuation tools. This course looks at some of the more difficult companies to value based on the underlying fundamentals of the sector in which the company operates.

The course covers commodity companies, identifying the issues with sectors such as resources, energy and chemicals companies. As well as discussed some of the current issues with traditional cash flow and multiple based valuation approaches the course will cover more advanced valuation approaches. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the valuation approach taken.

Examples are provided to illustrate each issue.

Participants will be required to bring a laptop to the course.

Overview of valuation approaches ■ Intrinsic valuation – traditional cash flow

techniques ■ Relative valuation – multiple based analysis ■ Probabilistic valuation – scenario analysis,

decision trees and simulations ■ Real options valuation – additional value

created through optionality

Other valuation issues ■ Assessing risk – the risky risk free rate and

other current valuation issues ■ The economic cycle – incorporating mac-

ro-economic factors into a valuation

Valuing commodity companies and sectors ■ Characteristics of commodity companies

ӹThe impact of global pricing – companies as price takers

■ Valuation issues• Base year fixation

ӹWhere do I start from and why? ӹDetermining the cycle starting point

• The macro point of view ӹThe demand and supply fundamentals

• Selective normalisation ӹHow do I get to mid cycle? ӹSome key errors in cycle assessment

■ Valuing a cyclical business in practice

• Normalised valuations ӹTaking the cycle out of the equation

• The adaptive growth approach• Probabilistic approaches

ӹUsing probabilities to reduce forecasting limitations

• Normalised earnings multiples ӹBack to mid cycle…..

• Adaptive fundamentals• Real options for underdeveloped resources

ӹThe extraction/development decision and its value

• Valuing a natural resource firm


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Senior Syndicated Leveraged Loans; Negotiating Issues & Trends


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This programme is aimed at professionals involved in syndicated high-yield (leveraged) loans used by both Sponsored and Corporate borrowers.

Historically, bonds were structured mainly as junior debt in the European high yield market whereas the recent trend has seen them used increasingly used as senior debt together with senior loans and/or super-senior RCFs in bifurcated pari Loan / Bond structures.

These developments have intensified pressure on syndicated lenders to adopt a more borrower-friendly approach than is advocated by the relevant Loan Market Association precedents. Borrowers have become increasingly frustrated by the conflicts between the flexibility offered by incurrence-based bond covenants and the more restrictive maintenance-based loan covenants. This conflict is driving convergence between these products and has accelerated the migration of terms from bonds to loans and vice versa.

Well known examples of the former include cov-lite loans and debt buy backs but more recent areas include covenant release/loosening on I-Grade rating and greater flexibility in the use of the various permitted baskets (including reclassification and splitting).

The recent Orange deal introduced a more alarming (and little noticed) innovation which, if adopted in loans, could allow Midco permitted payments to service debt.

This programme will look at the current trends and developments in syndicated loans and will draw on data and analysis from DebtXplained's Representative Loan Terms Database (www.debtxplained.com).

The database is a unique tool that has already changed the way that sell-side practitioners pitch for mandates and keep abreast of market trends. It tracks over 400 terms of loan documentation on a non-confidential basis allowing the users to precisely understand what is "market" for all significant negotiating points of a deal at any given time.

This information has never been available to the market before and gives borrowers, bankers, lawyers and advisors unprecedented knowledge of the current trends and practices in the Loans Market and Loan Terms.

Part 1: Deal & Loan structure, changes to the Parties & Buybacks

Scope of the Loan ■ Concept and composition of the “Covenant

(Restricted) Group” ■ Issues re Dormant subsidiaries – why they

matter ■ Issues re Joint Ventures ■ Dealing with Acquired firms

Debt buy-backs ■ Buybacks provisions – present or silent,

permitted? ■ Conditions permitting debt buybacks ■ Affiliate debt buyback methods ■ Investor buyback - restrictive conditions

The Lenders, changes to the Lenders & relevant thresholds ■ Key voting thresholds & why they matter ■ Super-Majority lenders – typical thresholds ■ Matters requiring Unanimous consent ■ Facility Change/Structural Adjustment ■ Treatment of Hedge parties ■ Ability to transfer - Consent vs Consultation

Methods ■ Carve-outs from Restricted transfer ■ Minimum transfer sizes

Part 2: Key “Permitted” definitions & Additional facilities


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Permitted Acquisitions ■ What is “Permitted” ■ Aspects re the Baskets ■ Additional restrictions: ■ Impact on financial covenants – pro forma

synergies?

Permitted Disposals ■ What types of transactions are affected /

carved-out ■ Which Group companies affected ■ Aspects re the Baskets ■ Carve-out for non-obligors

Permitted Financial Indebtedness ■ Scope - Financial Indebtedness defined (typi-

cal exclusions) ■ Issues re the Baskets – General & other bas-

kets • Size and availability• Automatic increase in Basket• Carry forward and Carry back (rare)

Accordion Facilities ■ Availability ■ Which Facilities are affected (RCF, New, M&A) ■ Committed at signing ■ Existing lenders right of 1st refusal ■ Lender consent requirements ■ Specified purpose (Capex, Restructuring, JVs) ■ Cap on Additional facilities

Basket erosion ■ Reclassification of baskets ■ Splitting of deals over baskets

Part 3: Interest & Yield Protection & Availability

Debt Service ■ Interest and default interest periods ■ Libor floors ■ Margin and margin ratchets

• Increased costs - Basel 2 and 3 (silent, included, carver-out, one/both)

■ Interaction with Financial covenants ■ Specific issues for Revolving Credit Facilities

(“RCFs”) ■ Clean-downs re RCFs, Ancillary Outstandings,

LCs ■ Clean-down amount ■ Periods fixed – Annual, Borrower’s election ■ Periods - timing, one or more ■ Cashless rollovers – why they matter ■ Problems with Headroom

Part 4: Exit, Acceleration and Prepayments (Sweeps)

Change of Control ■ Pre and Post IPO ■ Change in ownership chain ■ Various thresholds that apply – voting con-

trol ■ Sale of all or substantially all of the assets of

the Group – single or series

Mandatory Repayments (Cash Sweeps) ■ Disposal proceeds

• What is a “Disposal”• Baskets to sale proceeds• Annual - individual deal amount• Annual basket carve-out• Excluded Disposal proceeds

■ Acquisition Proceeds• What are “Acquisition Proceeds”• Excluded Acquisition proceeds• Basket annual and individual

■ Insurance Proceeds• Excluded Insurance Proceeds• Basket – annual or per deal• Retention periods

■ Listing Proceeds• Does Listing trigger full repayment• Does covenant grid cover repayment• Application of IPO proceeds – leverage

grid?• Application of retained funds• Potential tests that can be used • Relevant period

Excess Cash ■ Excess Cashflow defined ■ Excess Cashflow – typical deductions ■ De minimis basket ■ Use of Retained Excess Cash flow

Voluntary Prepayment, Trapped Cash & illegality ■ Can Borrower prepay voluntarily ■ Are there minimum / max. amounts ■ Circumstances when Borrower can avoid

mandatory prepayment• Tax - Trapped Cash (amounts)

■ Impact of illegality lender’s commitment ■ Prepayment Fees and Order

• Prepayment fees• Does Borrower have option to vary pre-

payment order• Can borrower prepay next four TLA amor-

tisations• Designated prepayment order






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Part 5: Dividends, Share Redemption and Subordinated Debt Payments

Limitation on Dividends and Share Redemption ■ What types of distributions / redemptions

are covered• Investor equity related payments e.g.

dividends / distribution • Management or advisory fee • Retirement of share capital• Redemption, repurchase or similar pay-

ment in respect of any of share capital• Share premium reserves

■ Exceptions• Permitted Payments • Permitted Transactions

Permitted Payments ■ What payments are permitted

• Basket carve outs – amounts, caps, car-ry forward/back

• Payments in re Equity & equity substi-tutes , Management/monitoring fees

• Subordinated debt ■ Basket carve outs – conditions precedent ■ Basket Carve-out categories ■ Restrictions on source of cash to fund

sponsor distributions ■ The “Orange” issue – permitted payments

to service debt from Midco

Part 6: Covenants & Undertakings & Events of Default

Covenant Overview ■ Covenants generally

• Function• Covenants in Loans vs Covenants in

Bonds ■ Covenant Suspension/Loosening

• Triggers - Qualified Listing and/or I- Grade Rating

• Available to Borrower• Scope of covenants affected

■ Material event reporting - scope ■ Access Rights for Lenders

• Triggers for Access rights – EoD, Agent “suspects” EoD

Financial covenants and Equity cures ■ The main covenants per the LMA

• Cash flow cover• Leverage• Interest cover

• Capex restrictions ■ Equity cures

• Current market practice• Cures in practice• Recent case law

General Undertakings ■ Permitted Security Basket

• Amount• Availability• Automatic increase in basket

■ Permitted Guarantees & carve-outs ■ The Guarantor Coverage Test

• Core carve-outs sought by Sponsors• Other exceptions sought by Sponsors

Default and Events of Default ■ Default vs Event of Default ■ Grace periods ■ Sensitive EoDs ■ Cross default to financial Indebtedness

• Cross-default defined• Sponsor friendly exclusions

MAC / MAE clause ■ Arguments for and against inclusion ■ Objective or subjective test ■ Impact of “Reasonably Likely” ■ Scope of MAE clause

• Security / Security Documents• Finance documents• Business, operations or financial condition

of the Group




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Public to Private TakeoversIn-house or via Live Webinar

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Course Overview

This course examines the key Takeover Code Rules which affect Public to Private bids and how they affect the strategies and tactics that the PTP bidder may wish to use in its approach to the takeover.

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

ӹCertain funds ■ 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

ӹDisclosure ӹPanel consultation ӹShareholder vote

• 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 ■ The offer document

• Views of independent directors • Financial information on the offeror• Financing of offer• Profit forecasts• Revised offers

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

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 Takeover 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

shareholder 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 and information• Price and other future actions• Equality of information

ӹCompeting offerors ӹ Information to independent directors in PTPs

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

useful?


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Due Diligence - A Two Day Course with Asia Pacfic Specfic Case Studies


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Course Overview

This course will provide you with an understanding of the concepts and practices of due diligence: the art of ensuring something is what you think, believe and hope it is. Due diligence is required in just about every significant commercial decision: investment by existing companies in new projects and ventures, takeovers and mergers, private equity and venture capital investment, and decisions by Government and even NGOs. Failure to do due diligence properly can cost companies fortunes, and even destroy them altogether. Yet it is still done exceptionally badly. This course teaches how to do it properly. Every type of due diligence will be examined, case studies provided and the procedures necessary reviews. You will understand the essential tools you need to run due diligence for even the most complex of deals, and will also gain first-hand insight into key issues in commercial and legal aspects of acquisitions and financing, ownership of assets and pending and threatened litigations.

Day One Due Diligence: Definition And Overview An introduction to the terms of due diligence and a review of how due diligence has evolved. ■ Due diligence in the financing, private eq-

uity and M&A markets of the 21st century ■ Review of how due diligence concept has

evolved ■ Due diligence in the face of new technol-

ogies and new aspects of capital market transactions

■ How is due diligence measured? ■ Roles of the parties

When Is Due Diligence Required? ■ Acquisitions ■ Disposals ■ Investments (including private equity) ■ Buying fixed assets

Case study of a real estate due diligence in Asia-Pac prior to a sale and to a letting ■ Public offerings ■ Private offerings

The Phases Of Due Diligence ■ Strategy ■ Planning ■ Data ■ Analysis ■ Verification ■ Negotiation ■ Completion ■ Post-transaction ■ Comfort Letters

Discussion: Cultural and economic differences in AsiaPac – is there a ‘Thai model’ for due diligence?

Sell Side Due Diligence ■ Due diligence in public offerings – (case stud-

ies) ■ Exchanges: rules and key differences be-

tween Asian markets and the USA/Europe ■ Differences between global markets ■ How do emerging markets treat sell-side due

diligence?

Case Study: Due Diligence In Private Offerings

Due diligence checklists: You will review a detailed document and information request list as an example of a due diligence checklist to be used in the context of an issue of securities.

Due Diligence Check Lists Day Two Types Of Due Diligence ■ Commercial

Case studies of commercial forecasts and how to interrogate them Worked example of commercial due diligence

■ Operational|

Case Studies of operational losses and how they can be predicted and avoided


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■ Financial (including Islamic financial due diligence)

■ Environmental

A case study of environmental due diligence

■ Personal

Case Studies on CVs and individuals

■ Technological

You will be given practical case studies drawn from Asian and global companies and examples of each type of due diligence.

Introduction to legal due diligence ■ What is legal due diligence? ■ Who needs to perform legal due diligence

and why? ■ Which transactions require due diligence?

Where is Legal Due Diligence applied? Examples from: ■ M&A ■ Lending ■ Real estate investment ■ Long-term commercial contracts ■ Private equity/venture capital investment

Aspects of Legal Due Diligence ■ Document review ■ Other information gathering ■ Analysis and synthesis of information

Worked Exercise A highly practical review of several due diligence contracts, in the context of construction and investment

Sources Of Due Diligence Data ■ Target companies ■ Government/public records ■ Third parties (customers, government etc)

Case Study: What information is available publicly about companies in emerging Asian markets, and can we trust it? Due Diligence Process ■ Building an effective team ■ The due diligence checklist ■ Data room ■ Public records search

Case Study: The results of public records searches

Key Issues in Legal Due Diligence ■ Corporate matters

Case Study: Investing in a fund – what legal due diligence is needed? ■ Ownership of assets

Case Study: Intellectual property and contracts due diligence ■ Government licenses and permits ■ Liens and encumbrances ■ Pending and threatened litigation ■ Intellectual property matters

Case Study: How has IP law changed in Asia?

■ Environmental matters ■ Employees ■ Asia-Pac local law issues

Case study – What does legal due diligence require when Government makes a commitment?

Review of Important Judicial Interpretations Of Due Diligence ■ Conduct and procedures to satisfy the court’s

interpretation of the minimum standard of pro-fessional performance

■ Do professionals participating in a securities offering have a public disclosure obligation to the public?

■ Do the courts evaluate due diligence at the time of securities offerings?

■ Do the courts examine the conduct of all par-ticipants after something has gone wrong with the benefit of hindsight?

■ What is the legal liability to perform due dili-gence

■ What standards are applied? Course Conclusion

Due Diligence - A Two Day Course with Asia Pacfic Specfic Case Studies



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Valuing Emerging Market Companies


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Course Overview

This programme has been designed to develop the participants’ understanding of the key issues facing Finance professionals valuing Emerging Market (EM) companies.

At the end of this programme, the participants will be able to:

■ Understand the key challenges arising from EM companies, namely currency volatility and coun-try risk premium;

■ Compute a Discounted Cash Flows (DCF) and trading multiples valuation of EM companies; ■ Analyse and choose appropriate currency in cash flow forecast and discount rate; ■ Decide on appropriate risk free rate, beta and country risk premium to be used in the discount

rate; ■ Perform a two-stage Terminal Value for high-growth EM companies; ■ Decide on sensible use of trading multiples in EM.

Case Study: The participants will use a variety of EM case studies and exercises during the training

Participants will be required to bring a laptop and a calculator to the course.

Introduction ■ How does EM differ from developed markets

• Family-owned business• Inflation and growth rate• Country risks• Commodity risks• Lack of transparency• Corporate governance• Access to data

■ Are local trading multiples available? ■ Should DCF be the main source of value? ■ Key valuation issues to consider

• Choice of currency in forecast and dis-count rate

• Discount rate and country risk premium• Two-stage Terminal Value for high growth

with use of fades• Valuation discount necessary?

Information Gap and Accounting Standards ■ Access to data/financial statements ■ IFRS reporting or local GAAP? ■ Inflation accounting use in hyperinflation

countries

Currency Issues ■ EM country currency systems

• Pegged vs. floating exchange rate ■ Nominal or real cash flows ■ Currency volatility

• Exchange rate• Own purchaing power (inflation)

■ Choice of currency in valuation• Currency consistency - same currency in

forecasts as per discount rate ■ Local EM currency vs. standard (i.e, US$)

• Standard currency and use of Forward rates for foreign exchange conversion

Case Study I: Participants compute the Free Cash Flows of Tata Motors

Discount Rate - Cost of Debt ■ Risk free rate

• Any public traded bonds outstanding?

• Local currency or US$• Use of default spread with synthetic rating

■ Sovereign default rating ■ Pitfall of double-couting or triple-counting

risks

Discount Rate - Cost of Equity ■ Beta

• Beta reliable and liquid?• Use of ADR or GDR betas?• Choice of well-diversified global index

■ Country risk premium methods • Sovereign default spread method• Relative equity market volatility method• Composite method

Case Study II: Participants calculate betas and cost of equity for Gerdau Steel

Two-stage Terminal Value ■ Entire value in Terminal Value highly sensitive

to perpetuity growth rate and WAC ■ Alternative terminal value approach: value

driver• Disaggregating return on invested capital -

profitability and efficiency ■ Building a two-stage terminal value model

using separate annuity and perpetuity rates

Case Study II: Participants compute a two-stage Terminal Value of EM corporate

Trading Multiples in EM ■ Size of sample: less than a handful real com-

parables? ■ Considering other EM regions ? ■ Using discount to developed markets trading

range

Overall Valuation Discounts ■ Significant risk from nationalization or expro-

priation ■ Subjective discount or scientific method? ■ Use of decision trees and probability weight-

ing


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Real Estate Investment and Management - South Africa


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The course has four primary aims: ■ To create detailed knowledge of the issues, problems and opportunities for the property indus-

try ■ To develop a greater understanding of the role of property within the overall development and

investment strategy of an organisation ■ To appreciate the investment strategy into real estate required for a pension fund, especially in

the South African context ■ To enhance the management and organisational skills necessary for effective property manage-

ment

Day 1 Real Estate as an Investment Real Estate Background: ■ Real estate investment and management

within the larger global economy ■ Types of property and their performance

Case Study: The emergence of land and property as a crucial investment class

■ Valuation theory and Applications

Examples of Land and Property Valuations

■ Property taxation, valuation and legal framework

■ Real estate in South Africa – private own-ership, recent development, stock markets and family investments

■ Key stakeholders within the property in-dustry

■ Property professionals and their role

Case Studies: The Royal Institute of Chartered Surveyors and the Urban Land Institute

Financing Property Purchase ■ Bank loans for property investment ■ Secondary loans

Case Study: Debt formulation and deal structuring in real estate investment ■ ■ Equity investment ■ Calculation of returns

Examples of Excel financial models for real estate investment analysis – different classes of investment

■ ARGUS DCF Valuation software demon-

stration

Property and Conveyancing Law ■ Legal principles, structure, court and devolu-

tion ■ Legal issues for property professionals

Examples of legal issues for property investment

■ Law of contract ■ Law of Tort, nuisance and negligence ■ Land law, property rights and obligations ■ Applied property law, legal issues in building

and construction, planning and development, liabilities for owners / occupiers

■ Islamic property legal issues ■ Mortgage Law

Case Study: the South African mortgage market ■ Differences in real estate law between South

Africa and other jurisdictions Case Studies of real estate law and legal decisions

Day 2: Property as an asset class All About Leases ■ Nature and creation of leases ■ Differences between types of commercial

property leases ■ Commercial leases and statutory control ■ Residential tenancies and statutory control ■ Structure of leases e.g. length of the lease

period; including options for tenant alter



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■ ations and expansion

Lease Calculations (with worked examples and exercises)

■ Rent reviews and lease renewal options ■ Covenants to leases e.g. repairing liability,

occupancy conditions, sub-leases, termina-tion, service charge provision

Tenant Management ■ Qualifying the prospective tenant financially

Case Studies: Do Ratings Work?

■ Marketing considerations for office build-ings – understanding the market, building a marketing plan, measuring marketing efficiency

Group work: preparing a marketing plan for a commercial building in Johannesburg

■ Advertising and public relations; how to get referrals; canvassing for tenants; preparing a rental sales plan

■ Security deposits and other negotiation issues

■ Inspections ■ Effectively handling inquiries and com-

plaints ■ What to incorporate in tenant and director’s

meetings

Group work: Handling tenant negotiations

■ Housing and tenant management Bricks and Mortar ■ Property Management ■ Advanced Operations And Facilities Manage-

ment ■ Occupational Health And Safety ■ Maintenance and Structural Preservation ■ Procurement and Supply Chain Manage-

ment ■ Property Life Cycle Planning ■ Sustainability and Real Estate Management ■ Information Technology ■ Staffing ■ Management ■ Contracts and Outsourcing

Business Management ■ Strategic business planning processes ■ Business life cycle ■ Analysing industry trends

Examples of real estate investment and occupancy strategies for pension funds and companies

■ Accounting and monetary practices ■ Insurance

Financial Management Principles ■ Reporting procedures in the management of

different kinds of properties ■ Preparing profit-and-loss statements ■ Tax implications; tax records; ■ Cash flows; depreciation; investment tax cred-

its; after-tax cash flow; ■ Risk management and how to obtain proper

insurance ■ Accounting theory and methods ■ Asset and liability valuations ■ Budgeting and cash flow analysis

Case Studies; principles of real estate management budgets

■ Decision making based on cost data; indus-trial, commercial and property finance; ratio analysis

■ Property accounting principles for investors (including IAS)

■ Presentation to clients and management of client’s accounts

Case Study: financial management - outlining a property’s sources of income and types of expenses and how they are accounted and reported

Real Estate Strategy ■ Principles of property management within the

built environment and a business environment ■ Private and public strategy for the manage-

ment of property resources within an opera-tional plan

Case Study: Government real estate planning, institutions and strategies

■ Application of legal and planning restrictions on asset enhancement

■ Corporate property strategy

Case Studies: Sale and Leaseback

Ownership Forms and Goals ■ Ways investors can own real estate and their






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■ expectations for this type of investment ■ The role of real estate funds

Operational Property Portfolio Planning ■ Master, action and project planning ■ Change management and relocations ■ Selling property

Group work: preparing a sales marketing plan for a commercial property

Portfolio Analysis ■ Comparison of risk–return profiles of real

estate and financial investment assets ■ Measuring investment performance ■ Principles of portfolio diversification ■ The case for active portfolio management ■ Application of property within a larger

non-property investment market ■ The nature of risk and return from prop-

erty compared with bonds and equities

Case Studies: portfolio management and property investment – how much property should a fund hold?

Course Conclusion





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Real Estate Investment and Management - Hong Kong


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the Hong Kong context ■ To enhance the management and organisational skills necessary for effective property manage-

ment







■ Real estate in Hong Kong – private owner-ship, recent development, stock markets and family investments








stration







Case Study: the Hong Kong mortgage market ■ Differences in real estate law between Hong

Kong and other jurisdictions Case Studies of real estate law and legal decisions



period; including options for tenant alterations and expansion






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Group work: preparing a marketing plan for a commercial building in Hong Kong





meetings






























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Course Conclusion





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Real Estate Investment and Management - UAE


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the UAE’s context ■ To enhance the management and organisational skills necessary for effective property manage-

ment







■ Real estate in UAE – private ownership, recent development, stock markets and family investments








stration







Case Study: the UAE mortgage market ■ Differences in real estate law between UAE

and other jurisdictions Case Studies of real estate law and legal decisions



period; including options for tenant alterations and expansion






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Group work: preparing a marketing plan for a commercial building in Dubai





meetings






























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Course Conclusion





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Real Estate Valuation - South Africa


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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in South Africa, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.

Top 5 Learning Objectives ■ Understand the most widely-practiced property income and capital valuation techniques ■ Identify the cost of capital for real estate ■ Successfully implement discounted cash flow valuation frameworks ■ Acquire the ability to value a range of different types of properties ■ Appreciate international differences in valuation approaches

Day 1

Real Estate As An Investment ClassProperty Performance Analysis ■ How is property measured? ■ Identifying what makes a good property ■ Problems and issues with performance

evaluation ■ Sources of data ■ Evolution of data measurement ■ International comparisons of performance ■ Current issues in performance manage-

ment

Case Study: Best international practice in property performance measurement

Property In The Investment Portfolio ■ Concept of Modern Portfolio Theory (MPT) ■ Measuring variance (Beta and equivalents) ■ Constructing a portfolio ■ Property correlation with other assets ■ Best international practice on property in a

portfolio ■ International trends in property correlation

Case Study: Pension fund and private equity investment in African property

RICS Valuation Standards ■ Appraisal of income property – RICS Valu-

ation Practices and international compari-sons

■ Comparison with corporate finance valua-tion

■ Reporting according to IFRS standards

■ Types of valuation approach ■ Important aspects of the RICS Valuation

Standards (including valuer independence)

IFRS Valuation and Real Estate

Concepts of fair value ■ Accounting implications of the valuation of

non-financial assets i.e. investment properties and property plant and equipment, leasing, impairment, and comparisons with equity

Relevant IFRS standards for real estate ■ 8 Operating segments ■ 13 Fair Value ■ 16 Property, plant and equipment ■ 17 Leases

Case Study: Does the transaction fall under IAS 17? If so, is it a finance or an operating lease?

■ 23 Borrowing costs ■ 36 Impairment ■ 40 Investment property ■

Case study: Deciding whether a property is an investment property

Case Study: Ascertaining the reliability and accuracy of the values taken into financial statements in compliance with IFRS statements



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Basic accounting decisions and their implications for preparers and users ■ Choosing between the cost model and the

fair value model ■ Cost model: how to determine initial cost

including borrowing costs and appropriate depreciation schedule

■ Identifying relevant indicators for impair-ment review

■ Estimating recoverable amount: ‘Value in use’ versus ‘Fair value less costs to sell’

■ Fair value model: Estimating fair values (a) of unique assets and (b) in illiquid markets

■ Setting valuation assumptions ■ Trading and development properties

Case study: Property leases: some special issues and their impact on the financial statements

■ Rent-free periods and other incentives ■ Tenants’ improvements ■ Step-up rents ■ Disclosures, especially with regard to

management judgements, impairment and revaluations

■ Review of corporate accounts, GAAP and IFRS consolidation rules and other issues associated with SPVs

Worked exercises: Comparing corporate annual reports with real estate values calculated

Group discussion: Is valuation in South Africa adhering to best international practice?

Residential Property – Assessing Capital Value ■ Why buy residential real estate? ■ Does rental income matter for residential

property? ■ What are the main problems? ■ Measurement criteria for residential real

estate – hedonic approaches ■ Qualitative issues, competition, style and

marketing

Case Study: Residential price trends in South Africa – comparative analysis

Day Two

Discounted Cash Flow For Real Estate InvestmentsNet Operating Income (NOI) ■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate

■ Capital expenditure issues ■ Differences between property types ■ Approaches to the cap rate

Case Study: The band of investment approach

Projecting Cash flows ■ The dynamic behaviour of the 4-Q model: sta-

bility versus oscillations ■ Real estate pricing behavior: backward or for-

ward looking? ■ Forecasting markets: univariate analysis, vec-

tor auto regressions, structured models. ■ Forecasting examples ■ The definition and evaluation of “risk”

Case Study: Forecasting techniques

Creating And Using A Detailed Discounted Cash Flow (DCF) Model ■ Debt service and pre-tax cash flow ■ The sinking fund ■ Lease variations ■ Differences between sectors ■ Estimating resale value ■ Terminal capitalisation rates

Exercises: Delegates will use a number of real world examples to create and use spreadsheets for DCF valuation

Real Estate Valuation and the cost of capital ■ What is the significance of the cost of capital? ■ Differentiation between debt and equity ■ Hybrid products ■ The pecking order theory of cost of capital ■ Market derived cost of capital

Case Study: estimating the cost of capital for a real estate company

Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in South Africa ■

Case Study: Data availability on land prices






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The Cost Approach ■ Type of costs ■ Methods of evaluating costs ■ Sources of cost estimation ■ Incurable and curable depreciation ■ Market extraction method

Exercises: Delegates will use spreadsheet models to calculate a range of cost estimates for individual properties

The Sales Comparison Approach ■ Value, worth and price ■ Sources of comparable data ■ Identifying points of comparison and differ-

ence ■ Sales comparison approach example

Exercises: Using the sales comparison approach in practice

Highest And Best Use Approach ■ Definitions of HBU ■ Site value ■ Improved value ■ Calculating HBU

Case Study: Business Plan for a major project analysed

Leasing Analysis ■ Introduction to leases

Exercises: Stop calculations, lease valuation and feasibility rents

■ Analysing comparables ■ Analysing rental prospects

Exercises: Depreciation, net operating income and yield calculations

■ Securing tenants in relation to valuation and finance

■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Africa – issues, the law and values

Day FourIntroduction To Real Options ■ How to calculate real option value ■ Comparing the Black-Scholes and Binominal

Expansion model ■ Real world examples ■ Problems with real option calculation ■ Application to distressed firms’ equity and

other financial ■ Applications

Exercise: Delegates will study a range of real option calculations using customised spreadsheet models

■ Does property possess real options? ■ Examples of possible real estate real options ■ Call Option approach to land value ■ Samuelson-McKean approach ■ Difficulties of measurement ■ Potential benefits

Exercise: Delegates will value a potential development on the basis of conventional DCF and real option analysis

Valuation In Practice ■ How is valuation practiced by chartered sur-

veyors? ■ What are the key elements of the RICS valua-

tion guidelines? ■ What is the evidence on valuation practice in

COUNTRY? ■ What to look for in a valuation report ■ What are the differences between countries?

Case studies: Examples of real estate valuation reports (RICS and others)

Course Conclusion





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Real Estate Valuation - Hong Kong


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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in Hong Kong, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.


Day 1



ment




Case Study: Pension fund and private equity investment in ASPAC property




■ Reporting according to IFRS standards

■ Types of valuation approach ■ Important aspects of the RICS Valuation















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Group discussion: Is valuation in Hong Kong adhering to best international practice?




marketing

Case Study: Residential price trends in Hong Kong – comparative analysis

Day Two

Discounted Cash Flow For Real Estate InvestmentsNet Operating Income (NOI) ■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate

■ Capital expenditure issues ■ Differences between property types ■ Approaches to the cap rate











Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in Hong Kong







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■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Hong Kong – issues, the law and

values




Exercise: Delegates will study a range of real option calculations using customised

spreadsheet models








Course Conclusion





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Real Estate Valuation - UAE


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Course Overview

This course covers the methods, concepts and application of real estate valuation. At this course, you will learn to value most typical forms of real estate using a variety of techniques and methods, in the same way as a chartered surveyor. The focus is on properties and market conditions in UAE, but with plenty of international examples, including land, properties with development potential, and different classes of property such as offices, retail, hotels, and warehouses as well as residential property valuation.


Day 1



ment




Case Study: Pension fund and private equity investment in Middle Eastern property




■ Reporting according to IFRS standards ■ Types of valuation approach ■ Important aspects of the RICS Valuation















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Group discussion: Is valuation in UAE adhering to best international practice?




marketing

Case Study: Residential price trends in UAE – comparative analysis

Day Two

Discounted Cash Flow For Real Estate InvestmentsNet Operating Income (NOI) ■ Gross and net income ■ Differences in calculating NOI ■ Overall capitalisation rate ■ Capital expenditure issues

■ Differences between property types ■ Approaches to the cap rate











Land Prices ■ Should land prices be calculated separately? ■ How cyclical are land prices? ■ Modelling land prices ■ Empirical evidence on land prices ■ Forecasting land prices ■ Land price issues in UAE







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■ Quality control and finance ■ Forecasting and limiting operating costs ■ Leases in Middle East – issues, the law and

values




Exercise: Delegates will study a range of real option calculations using customised

spreadsheet models








Course Conclusion





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Agribusiness Investment Modelling


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Agribusiness is globalising and attracting more private investment. The importance of land valuation, professional management of farmland, and the requirements of capital investment are the key drivers of investment success. Effective investment, however, requires proper modelling, and this course is the key to understanding how to use Excel to optimise the value of an agribusiness investment. Covering the crucial areas of Excel techniques, model structure, forecasting and risk assessment, delegates build and eventually take away from this course with a fully-functioning agribusiness model, as well as a host of other case studies, examples of models, and model-building skills.

Day 1 Agribusiness Modelling using Excel 1. Using Excel for modelling ■ Worksheet organization ■ Data input, management and verification ■ Use of colour/add-ins ■ Naming of cells ■ Location of input variables ■ Review of Excel functions and their use ■ Macros and their use ■ Goal seeking ■ Optimisation ■ Circularity and how to resolve it ■ Working with range names ■ Graphs and charts ■ What is needed from Excel and what is

superfluous ■ Principles of spreadsheets and workbooks

Case Study: Evaluating good and bad Excel financial models 2. Bank and PE House perspectives ■ DSCR and other critical bank ratios and

how to model them ■ Equity NPV/ IRR and project IRR and how

to model them ■ Modelling cash flow and ratios: ■ Allowing for accountancy - depreciation, tax

and capital allowances

Case Study: Examples of Excel project modelling

Day 2 3. Building an agribusiness investment model Delegates will construct and use an agribusiness investment model. This group exercise will include: ■ Creating model inputs from management and

legal documentation ■ Using Excel Scenario Manager to analyse alter-

native investment strategies ■ Forecasting operating revenues and costs ■ Loan assessment criteria ■ Modelling loan amortization ■ IRR NPV and other valuation analysis ■ Methods of handling risk ■ Using @RISK to analyse the risks of the model

(Monte Carlo) Course Conclusion – where now for agribusiness investment?


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