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Магистерская программа «Финансовая экономика»

Corporate Valuation Cases in Mergers and Acquisitions

Учебный год
Обучение ведется на английском языке
Курс по выбору
Когда читается:
2-й курс, 3 модуль


Course Syllabus


Corporate Valuation Cases is a one-semester course which primary objective is to give students some useful insight into the practicalities of investment banking profession. The course will further strengthen financial evaluation skills obtained by student in the previous courses and will focus on practical aspects of valuation models applied to various industries and transaction types. The course will start with some overview of modern accounting practice under IFRS (and GAAP), as applied to an investment banker’s work. It will also provide students a brief overview of the European and US securities regulation in terms of the major areas of awareness in the IB environment. This will involve discussing typical disclosure requirements and common bankers’ duties in a banker-client relationship and corporate governance. An overview of the major areas of awareness when concluding corporate transactions under the English law will be provided. The course material will be based on selected sections of the required reading list and optional supplementary readings to be provided to the students by the ICEF. Most of the sessions will be concluded by practical interactive cases involving multiple aspects of the course material, to be submitted by the next class session. Throughout the course, the cases will increase in complexity from qualitative analysis to practical valuation models and actual deal making by students. The course will be taught and evaluated in English. Prerequisites: A Corporate Finance course or equivalent. Investment Analysis course or equivalent. Basic accounting course.
Learning Objectives

Learning Objectives

  • The purpose of the course is to give the students basic knowledge and practical skills required at the entry level to the investment banking and consultancy professions. Considerable amount of practical exercises will allow students to practice their skills across various industries and different advisory engagement types that they will likely to see in their initial years in the profession.
  • During the course, practical cases will increase in the level of complexity from understanding information flow through financial statements to conducting corporate valuations in the light of specific transactions. In the early cases students will be expected to produce simple IFRS financial statements themselves by posting journal entries reflecting economic events of the case into accounting ledgers.
  • In the following coursework students will analyze IFRS financial statements of a public company with a view to prepare evaluation models on the basis of publicly available information, thus simulating work of an equity research analyst. Students will learn how to exercise their professional judgment in analyzing the company performance at large, and how it is presented in the financial statements. Students will calculate some of the most common financial ratios and use them building discounted cash flow models.
  • Students will understand basic elements of typical due diligence process in specific industries, such as oil & gas and real estate. They will learn specific terminology, valuation techniques and value drivers used in these industries. Common spreadsheet building techniques, sensitivity analysis, will also be taught, as well as the use of third-party competent persons reports.
  • In the concluding part of the course students will learn how to apply these techniques to specific transaction types and use them in initial public offerings, share purchase negotiations, etc. Context of securities regulation and basic elements of contract law will be introduced. Main focus of the case work will be on negotiations between students’ teams, where students will have a plenty of practical deal making.
  • Throughout the course students will have need to conduct their own independent Internet research on various aspects of the case work and learn how to work with large amounts of non-adapted professional literature.
Expected Learning Outcomes

Expected Learning Outcomes

  • exercise their professional judgment in analyzing the company performance at large
  • calculate some of the most common financial ratios and use them building discounted cash flow models
  • outline basic elements of typical due diligence process in specific industries, such as oil & gas and real estate
  • use common spreadsheet building techniques, sensitivity analysis, third-party competent persons reports
  • gain experience of practical deal making
  • conduct their own independent Internet research on various aspects of the case work
  • work with large amounts of non-adapted professional literature
Course Contents

Course Contents

  • Introduction to Investment Banking profession
    Organizational structure of an investment bank. Typical activities performed by investment banks: sales & trading, research, M&A, lending and deposits. Banking capital and risk.
  • Review of accounting and financial statements analysis
    The Framework, IFRS Summaries, Information flow. Principles, accruals, matching. Posting of transactions. Ledgers. Building financial statements. Reading and interpreting financial statements. Assets. Liabilities. Impairment. Notes to the financial statements. Fair value concept in accounting. Special issues of fair value accounting for investment properties, real estate, depleted asset industries, mergers and acquisitions. Investments. Business Combinations. M&A accounting. Goodwill. Leveraged Buyouts. Financial statements analysis. Financial and industry ratios.
  • Valuation methods
    Multiples analysis. Review of DCF. CAPM and various modifications. Ibbotson yearbook. Emerging markets. Information efficiency theory. Equity research vs. Corporate finance perspective. Valuation of a major retail business in Russia. Evaluation of competitive growth strategy, capital expenditure, business expansion. Seasonal trends and crisis effect. Modeling working capital. Valuing oil and gas assets. Oil price projections. Netbacks. IFRS vs. GAAP reporting. Accounting of subsoil properties. Reserves categories. Competent Person’s Reports. Production projections. Drilling schedules. Well performance. Taxation in Russia, MET, Export Duties, VAT. Real estate valuations. Accounting guidelines. Percentage of completion method. Interpreting financial statements. Fair value accounting and Net Asset Value appraisal. International Valuation Standards guidelines. Recent crisis issues
  • Investment Banking Process
    Mergers and Acquisitions. Due diligence. IPO processes. Contracts. SPA components. Representations and warranties. Securities regulation. Ethics. Role of banks. Fairness opinions. Special committees.UK and US Securities Regulations. Deal making and disclosure. Leveraged Buy-Out models, financing of M&A transactions.
Assessment Elements

Assessment Elements

  • non-blocking Сase 1
  • non-blocking participation in class discussions
  • non-blocking exam
  • non-blocking Case 2
  • non-blocking Case 3
  • non-blocking Case 4
  • non-blocking Case 5
  • non-blocking Case 6
  • non-blocking Case 7
  • non-blocking Case 8
  • non-blocking Case 9
Interim Assessment

Interim Assessment

  • Interim assessment (3 module)
    0.05 * Case 2 + 0.05 * Case 3 + 0.05 * Case 4 + 0.05 * Case 5 + 0.1 * Case 6 + 0.1 * Case 7 + 0.05 * Case 8 + 0.15 * Case 9 + 0.3 * exam + 0.05 * participation in class discussions + 0.05 * Сase 1


Recommended Core Bibliography

  • Liaw, K. T. (2012). The Business of Investment Banking : A Comprehensive Overview (Vol. 3rd ed). Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=400994
  • Weston, J. F., Mitchell, M., & Mulherin, J. H. (2014). Takeovers, Restructuring, and Corporate Governance: Pearson New International Edition (Vol. 4th ed). Harlow: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1418226

Recommended Additional Bibliography

  • Copeland, T. E., Koller, T., & Murrin, J. (2000). Valuation : Measuring and Managing the Value of Companies (Vol. 3rd ed). New York: John Wiley & Sons, Inc. [US]. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=53431
  • Epstein, B. J., & Jermakowicz, E. K. (2007). Wiley IFRS 2007 : Interpretation and Application of International Financial Reporting Standards. Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=492804
  • Fox, I., & Marcus, A. (1992). The Causes and Consequences of Leveraged Management Buyouts. Academy of Management Review, 17(1), 62–85. https://doi.org/10.5465/AMR.1992.4279571
  • Reilly, R. F., & Schweihs, R. P. (2000). The Handbook of Advanced Business Valuation. New York: McGraw-Hill Professional. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=52262
  • Troy, L. (2012). Almanac of business and industrial financial ratios ; Almanac financial ratios. Slovenia, Europe: Prentice Hall. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.4C5F342C