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Corporate finance is the astute allocation of resources and capital, and over a time horizon which matches investor expectations while integrating business and financial risks. This course illustrates this dynamic process.
Corporate finance addresses the financial and strategic decisions that companies take and the methods and analytical devices applied for taking those decisions. The principal objective of corporate finance is the maximization of corporate value and at the same time, decreasing or diminishing the financial risk factors of the company.
This program is designed to introduce a framework for evaluating client corporate finance needs and associated product, service, and transactional opportunities. The corporate finance advisor should assist the client firm in pursuing an astute mix of assets, capital, and investors, reflecting a sound understanding of management goals and priorities, as well as continuing awareness of buy-side perceptions of client company fundamentals and valuation.
The program will cover the following aspects:
Corporate Finance Framework – 3 Questions
Corporate Finance in an Emerging Markets Context
Fundamental Analysis at the Sector Level
Firm-Level Analysis: Measures of Firm Performance
Debt Financing Options: Debt instruments offer the investor a senior claim on firm cash flows which should present fixed returns with lower volatility. For companies, debt offers cheaper, tax-deductible capital, and can also incorporate equity exposures. Loan and bonded instruments vary greatly, but do share certain important characteristics and pricing and credit conventions. Some bond-like instruments – convertibles or hybrids – combine features of both debt and equity, and thus require special attention. Another class of financial instruments, asset-backed securities, combines characteristics of debt securities, derivative instruments, and even equities.
Valuation (I) – DCF Analysis and Its Uses
Company managements, with the goal of increasing the absolute value of the firm’s equity over time through investment in projects generating returns in excess of cost-of-capital, are often oriented towards Discounted Cashflow Analysis (DCF). Management will generally use this approach when considering capital allocation decisions internal to the firm – i.e., capital budgeting and investment.
Mergers & Acquisitions: Analysis and Valuation in Change-of-Control Contexts - This module extends relative valuation to include its uses in reacting to change-of-control events – i.e., the M&A world.
Capital Structure, Realizing Shareholder Value, and Reacting to “Activist” Investors - Often firms may face investor expectations that diverge from management policy regarding capital structure, dividends, and even the time horizon of investment decisions. This module will examine this potential tension and management options.
Principal Investing and Private Equity - Principal investing and private equity hinge heavily on fundamentals, debt capacity, and funding availability in relevant financial markets
This 5-day instructor-led course will be centered around a series of “real world” case situations involving management decisions and investor analyses. A Socratic approach, with active discussion, participation, and exercises, will be used.
Participants should have a basic knowledge of accounting, financial analysis, and forecasting. The workshop will require a high level of commitment in terms of class participation and group contribution.
This course will be of most value to:
- Corporate management teams
- Junior company financial executives
- Corporate development and strategy professionals
- Lending officers and relationship managers
- Credit practitioners
- Investment bankers
- Private equity and financial sponsor professionals
- Private wealth managers assisting clients with significant corporate exposures
- Accounting professionals with work in valuation and capital markets
- Legal professionals in corporate finance/capital markets practices
CF Topic 1/Morning Session: Corporate Finance Framework – Three Questions
This module introduces a framework for evaluating potential client corporate finance needs and associated transactional opportunities. The corporate financial advisor should assist the client firm in pursuing an astute mix of assets, capital, and investors, reflecting a sound understanding of both buy-side perceptions of client company fundamentals, as well as buy-side time horizons. The module will examine
- Corporate Finance Framework: Three Questions
- Fundamentals: An Attractive Combination of Assets over an Appropriate Time Horizon?
- Funding: An Astute Combination of Capital Types and Investors in the Right Sequence over an Appropriate Time Horizon?
- Valuation: Maximizing Shareholder Value through an Attractive Mix of Assets, Capital, and Investors, and over an Appropriate Time Horizon?
- Corporate Finance in an Emerging Markets Context: The “Big Five” Challenges
· Excessive Emphasis on Growth vs. Profitability and Returns to Capital
· Excessive Diversification
· Lack of Transparency in Information Flows
· Lack of Liquidity
· Double Standards in the Treatment of Majority vs. Minority Shareholders and Related Party Transactions
- Fundamental Analysis at the Sector Level
· Topline Drivers, Profitability Drivers, Capital Use Drivers
· Cyclicality and Non-Cyclicality and Implications for Sector Attractiveness
· Consumer: Staples and Non-Discretionary
· Industrials: Durables and Non-Durables
· Financials, Utilities, Telecoms
- Firm-level Analysis: Measures of Firm Performance
· Growth: Revenues/”Topline”
· Profitability: Margins
· Returns: ROE, ROIC, ROA
· Cashflow: EBIT, EBITDA
· Capital use: capital expenditure
CF Topic 2/Afternoon Session: Debt Financing: Loans and Bonded Debt
Debt instruments offer the investor a senior claim on firm cashflows which should present fixed returns with lower volatility. Loans and bonded instruments vary greatly, but do share certain important characteristics and pricing conventions. The module will examine
- Debt Characteristics
- Security/Collateral, Covenants, and Indentures
- Coupons: fixed/floating, deductibility
- Maturities and call features
- Structures: bullets, zeros, self-amortizing
- Bond-like instruments: annuities and perpetuities
- Types of Debt
· Syndicated Loans
· Low risk debt: treasuries, municipal bonds, international bonds
· Risky debt: corporate high grades vs. intermediates vs. high-yield
· Medium Term Notes
· ABS, securitization, and structured products
· Hybrids: convertibles, preferred stock
- Debt Capital Markets
· Leveraged finance/syndicated loan market
· The bond markets
§ Rule 415: accelerated issuance
§ Competitive-bid underwritings
§ “Bought deals” vs. negotiated “full underwritings”
§ Bond issuance: prospectuses
· Rule 144A: accelerated issuance and reduced disclosure
· Reg S Market and Traditional private markets
- Financial mathematics
- Coupons as future cashflows
- Time value of money, Present Value, and IRR
- Bond pricing conventions
- YTM: the IRR of a bond
- Yield-to-Call: accelerated maturities
- Pricing between coupon dates: accrued interest
- Pricing bond-like instruments: annuities and perpetuities
- Credit spreads: risk in cashflows and risk premia in bond returns
- Weighted average life of bond cashflows
- time-weighted average life of bond cashflows
- price sensitivity of a bond to changes in yield
- Convexity: the changing price sensitivity of a bond to changes in yield
CF Topic 3/Morning Session: Credit Analysis and Ratings in DCM Applications
The module will examine credit analysis, with specific attention to metrics popular with bond market investors:
- Debt capacity: projected cashflows vs. capital needs and debt capital servicing
- Fundamental analysis from a creditor’s standpoint: stability of the cashflows
- The “Four C’s” of Credit Analysis
- Ratio analysis
- Activity Ratios: Asset Turnover. Assets/Revenues
- Profitability Ratios: Gross Margin, Operating Margin, EBIT Margin, Net Margin
- Return Ratios: ROIC, ROE, ROS
- Leverage and Coverage Ratios
§ EBIT/Net Interest, EBITDA/Net Interest
§ Total Debt/Net Worth, Total Debt/Equity Capitalization, Total Debt/Enterprise Value
§ Total Debt/EBITDA
- Ratings: applying S&P and Moody’s medians to determine a rating
- High-grade vs. high-yield debt markets: investor bases
- The NAIC regulatory capital weightings systems and the importance of the “investment grade frontier”
CF Topic 4/Afternoon Session: Convertibles and Mezzanine Debt; Asset-backed Securities
Some bond-like instruments – convertibles or hybrids – combine features of both debt and equity, and thus require special attention. Another class of financial instruments, asset-backed securities, combines characteristics of debt securities, derivative instruments, and even equities. The value of an ABS is “derived” from some underlying asset, generally a pool of similar assets. The module will examine
- Convertibles: a combination of a straight bond and a call option into “the underlying
- Convertible features: conversion premium, conversion price, conversion ratio, call protection
- Traditional convertible metrics: payback period, payoffs vs. common
- Non-traditional convertible metrics: separating the convertible into a risk-free bond, a credit spread, and a call option
- Other hybrids: debt-with-warrants, convertible preferred stock
- Non-convertible mezzanine debt
- Securitization: selling claims against cashflows generated by packaged pools of homogeneous assets
- The first ABS: MBS pass-throughs
- The problem: prepayment risk
- The solution: sequential pay structures
- Beyond the pass-through: CMO cashflows and structures
- Varieties of CMOs
- MBS portfolio analytics
- Beyond MBS: credit card ABS, auto loan ABS, student loan ABS, commercial loan ABS, CDOs and CLOs
CF Topic 5/Morning Session: Valuation (I) – DCF Analysis and Its Uses
Company managements, with the goal of increasing the absolute value of the firm’s equity over time through investment in projects generating returns in excess of cost-of-capital, are often oriented towards Discounted Cashflow Analysis (DCF). Management will generally use this approach when considering capital allocation decisions internal to the firm – i.e., capital budgeting and investment. This module will examine
- DCF Analysis
- Evaluating Financial Forecasts: “Hockey sticks” and Internal Inconsistencies
- Intrinsic (Absolute) vs. Relative Valuation
- Determining Free Cashflows
- Discount Rates and the Cost of Capital
- Terminal Values: Exit Multiples, Perpetuities
- NPV and IRR
- DCF Analysis in a Public Markets Context
- DCF Analysis in an Emerging Markets Context
- Unlevered DCF Valuation vs. Levered (Equity) Cashflow Valuation
- Assumptions about Capital Structure
- Capital Structure Theory: Modigliani and Miller – Minimizing the WACC
- Capital Structure Practice: Alternative Strategies – FRICTO, the “Pecking Order”, and the “Quiet Life”
- Corporate Capital Budgeting: Internal Capital Allocation
· Unlevered Analysis: DCF, Opportunity Cost-of-Capital, NPV, Pay-back Periods
· Levered Analysis: Funding Assumptions, IRRs, and APV
CF Topic 6/Afternoon Session: Valuation (II) – Relative Valuation and Public Market Investors
Though company managements are often oriented toward absolute analytical techniques in valuation and investment decision-making, the buy-side is generally oriented toward relative valuation, reflecting their need to outperform “beta” benchmarks. Hence corporate finance must complement DCF analysis with relative valuation analysis, even for privately-held firms, and especially when seeking equity capital via the public markets. This module will examine
- Beating the Beta: Relative valuation vs. intrinsic, or absolute, valuation (DCF)
- Relative Valuation: Process
- Define the Relevant Peer Group: Comparable Company Analysis:
§ “Dimensions of Comparability”: How the Buy-side Views Company Fundamentals
§ Prospects for Topline Growth, Margins, and Cash Generation
- Identify the Relevant Valuation Metric: which metric – P/E, P/CEPS, EV/EBITDA, P/BV, Yield – in which sectors?
- What drives a multiple: the growth vs. risk tradeoff
- Multiple Expansion and Contraction/Compression (Re-Rating vs. De-Rating)
- Additional Valuation Metrics: FCF yield, FFO, NAV
- Popular active management valuation concepts
- Multiple Compression (De-rating) and Expansion (Re-rating)
- Price-to-Growth and PEG Ratios
- Multiples and implied growth rates
- Sum-of-the-Parts Analysis
- Adjusting Multiples for Cash/STI Balances
- P/BV vs. ROE/Cost of Equity
- EV/IC vs. ROIC/WACC
- Equity capital-raising alternatives
- Initial public offerings (IPOs)
- Follow-on offerings: primary secondaries and secondary secondaries
- Special Purpose Acquisition Companies (SPACs)
- Direct Listings
- “Back-door” IPOs via merger with an existing public firm
- “Blind pools”
CF Topic 7/Morning Session: Valuation (III) – Sector-Specific Comparable Firm Valuation
This module extends relative valuation to include widely-used securities selection metrics used by investment managers in specific industries, as well as to some additional valuation techniques. The module will
- Examine how different metrics are of special value in specific sectors: cyclicals, non-cyclicals, financials, utilities, telecoms
- Sector-specific metrics
- Industrials: P/BV, P/E, EV/Sales, EV/EBITDA, Dividend and FCF Yield
- Financials: P/BV, Dividend Yield, Residual Income P/BV vs. ROE/Cost of Equity, Embedded Value
- Consumer: P/E, Dividend Yield, Dividend Discount Model, EV/EBITDA, FCF Yield
- Utilities: P/BV, P/E, Dividend Yield, EV/EBIT
- Tech and Telecoms: P/E, EV/Revenues, EV/EBITDA, FCF Yield
- Highlight newer valuation methodologies
- P/BV vs. ROE/Cost of Equity and EV/IC vs. ROIC/WACC
- Market Valuation Metrics
- Relative Valuation vs. the Index (e.g., S&P 500)
- Earnings Yield vs. Bond Yields
CF Topic 8/Afternoon Session: M&A – Valuation and Analysis in Change-of-Control Contexts
This module extends relative valuation to include its uses in reacting to change-of-control events – i.e., the M&A world. The module will
- Examine the valuation of controlling, as opposed to minority, interests in public and private companies
- Illustrate the award of control premia to existing minority shareholders in a target firm
- Rationalize the payment of those control premia by the acquirer, based on cost synergies and revenue synergies
- Show the estimated impact of a proposed transaction on the post-deal performance of the acquirer through accretion and dilution calculations
- Profile different structuring options to fund M&A activity: all-cash, all-stock, cash-and-stock, assumed debt
- Present the challenge of judging, in real time, the likely immediate impacts of an announced deal on the stock prices of both the target firm and the acquirer
- Present analysis to aid in post-announcement investment decision-making: Sell the acquirer? Buy the target? Sell both? Buy both?
CF Topic 9/Morning Session: Capital Structure, Realizing Shareholder Value, and Reacting to “Activist” Investors
Often firms may face investor expectations that diverge from management policy regarding capital structure, dividends, and even the time horizon of investment decisions. This module will examine this potential tension and management options:
- The Impact of Potential Changes in Capital Structure on Public Valuations
- Debtholder vs. Equityholder Interests
- Optimal Capital Structure: Theory vs. Practice
o The Impact of Leverage on Equity Valuations
- Realizing Shareholder Value
- Unused Debt Capacity
- Excessive Debt/Leverage
- Dividend Policy: Regular and Special Dividends
- Shareholder Value Initiatives:
- Share Buybacks
- Dealing with “Activist” Hedge Fund Investors
CF Topic 10/Afternoon Session: Principal Investing and Private Equity
Principal investing and private equity hinge heavily on fundamentals, debt capacity, and funding availability in relevant financial markets. This module will examine
- Characteristics of an LBO/MBO Candidate
- Stabilized, non-cyclical cashflows
- Opportunistic timing/undemanding valuation
- Strong management team in-place
- Potential for modest operational improvement
- Cost reduction and margin improvement
- Capital expenditure economies
- Underutilized balance sheet
- Non-core assets that can be monetized
- Unused debt capacity
- Forecasting in a Highly-Leveraged Situation
- Improved fundamental performance: cost controls, improved WC management, discipline in capital expenditure, management incentives
- Forecasting Debt Capacity vs. Minimizing Cost-of-Capital
- Transaction Structure
- Sources and Uses of Funds
- Debt Capacity vs. Credit Analysis/Ratings
- Equity levels
- Projected method and timing of exit and projected IRR
- Sources of Financing
- Leveraged loan markets, structures
- Public bond markets, structures, and covenants
- Mezzanine securities and Equity sources
- Newer Types of Principal Investing Common to Emerging Markets
- “Growth equity”
- “Strategic investors”
COURSE REVIEW AND CLOSE
Our Tailored Learning Offering
Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company’s exact requirements? If you’d like to do either of these, we can bring this course to your company’s office. You could even save up to 50% on the cost of sending delegates to a public course and dramatically increase your ROI.
If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.
We produce learning solutions that are completely unique to your business. We’ll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.
We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.
We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:
- Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
- Track record – 10/10 of the world’s largest banks have chosen us as there training provider and we have delivered training across the largest banks and have trained over 25,000 professionals.
- Knowledge – our 100+ strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
- Reliability – if we promise it, we deliver it. We have delivered over 25,000 events both in person and online, using simultaneous translation to delegates from over 99 countries.
- Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 4.2/5 on service and 4.7/5 on Coursecheck
Andrew ReganWith experience that spans both practical and academic spheres, I specialise in delivering training in the theory and practice of corporate finance and financial markets. My specialty is valuation in the public and private equity markets, but other interests include portfolio management and real estate valuation.
BiographyCourse Instructor: Andrew D. Regan, CFAAndrew Regan brings to the consulting task experience in finance in both the practical and academic spheres. Mr. Regan started in public finance at Merrill Lynch, serving as a financial advisor to municipal entities and directing their efforts in raising public capital in the tax-exempt debt markets. After receiving his MBA from Harvard Business School, Mr. Regan became Retailing Analyst at Donaldson, Lufkin, and Jenrette in New York, where he counseled large institutional investors on their retail sector holdings. In addition to these conventional sell-side equity research duties, he was centrally engaged while at DLJ in a number of banking transactions involving merchants, including LBOs, IPOs, primary and secondary equity offerings, and private placements.Mr. Regan returned to HBS as a Charles M. Williams Fellow and Dean’s Doctoral Award Winner. His research interests included the performance of LBOs, privatization in emerging markets, competition in the securities markets, and capital availability in the airline industry. In 1994-95 Mr. Regan served as Secretary to Professor Samuel Hayes, Warren Buffet, GE Chairman John Welch, former Merrill Lynch Chairman Daniel Tully, and other members of the Compensation Practices Committee, a blue-ribbon panel appointed by SEC Chairman Arthur Levitt to look at remuneration in the retail brokerage business. Mr. Regan provides consulting support to financial service organizations looking for organizational and staff development in the theory, practice, and products of corporate finance and financial markets. This includes both the “sell-side” process of such activity (advisory, M&A, and capital markets) as well as the concomitant “buy-side” analysis (investors and their analytical approaches). Such investors include conventional investors, as well as alternative assets, including real estate finance and investment.He has delivered organizational and staff development projects for clients in North America as well as Europe, Latin America, Asia, Africa, and the Middle East. His clients include all the U.S. “Bulge Bracket” firms, as well as several Persian Gulf and Chinese financial institutions, and he has worked with private firms on a variety of financial and strategic issues.Mr. Regan received his A.B. magna cum laude with Highest Honors in Modern European History from Harvard College in 1983, his M.Sc., with Distinction, in West European Politics from the London School of Economics in 1986, and his M.B.A., with High Honors, from HBS, where he was a George F. Baker Scholar, in 1988. He is a member of the Association for Investment Management and Research and holds the CFA Charter.