Corporate Valuation Cases in Mergers and Acquisitions
- 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.
- 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
- Introduction to Investment Banking professionOrganizational 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 analysisThe 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 methodsMultiples 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 ProcessMergers 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.
- Сase 1
- participation in class discussions
- Case 2
- Case 3
- Case 4
- Case 5
- Case 6
- Case 7
- Case 8
- Case 9
- 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
- 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
- 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