This course is split into two distinct modules:

Company Analysis and Valuation School: Module 1 - Financial Statement and Business Analysis (Day 1 & 2)

Company Analysis and Valuation School: Module 2 - Corporate Valuation and Modelling (Day 3 - 5)

 

Corporate Financial Analysis and Valuation School

Course agenda

Module 1: Financial analysis for corporate valuation 

This training course will run as a hybrid course and delegates are invited to join either 

(i)    in the classroom 
(ii)    on a virtual basis using Zoom

Module 1 will run for two days, with a 3 ¼ hour session in the morning and in the afternoon. There will be a 15-minute mid-break during each session and a one-hour lunch break. Delegates must bring a lap-top to the course to carry out the case studies. 

Module 2: Corporate valuation - techniques and application

This training course will run as a hybrid course and delegates are invited to join either 
(i)    in the classroom 
(ii)    on a virtual basis using Zoom

Module 2 will run for three days, with a 3 ¼ hour session in the morning and in the afternoon. There will be a 15-minute mid-break during each session and a one-hour lunch break. Delegates must bring a lap-top to the course to carry out the case studies. 

Delegates can choose to attend either or both modules. Morning start times are 8.30am London time and afternoon start times are 12.45pm London time. 

Course background

The valuation of corporates is a fundamental skill required of a wide range of finance professionals including equity analysts, strategists, corporate finance executives, fund managers, PE/VC executives and general bankers. The recent volatility of corporate valuations, combined with the emergence of new sectors, makes understanding the theory and practice of valuation essential. 

Module 1 of the course offers a comprehensive introduction to financial analysis from the point of view of valuation. 

Module 2 This course gives a detailed overview of a range of valuation techniques and methodologies. The course reviews the theory underlying valuations (the key value driver formula) and how to move between EV and equity value.  The course then covers multiple valuations (EBITDA, EBIT, EPS, NAV, DDM and other). The course also reviews DCF valuations, including WACC, OPAT and unlevered FCF.  The course also reviews how capital structure adjustments can impact valuations. The course uses a range of case studies to apply these theories to real life situations.

Course aims and objectives
 
Module 1 – after completing this Module, delegates will learn:
•    how to analyse a firm’s financial statements when undertaking corporate valuations, including how to derive underlying earnings and cashflow
•    ratio analysis, including profitability, performance, leverage, liquidity, and returns to firm and equity
•    the impact on valuation of debt, financial assets, quasi-debt, provisions, deferred taxes, off balance sheet liabilities and other factors

Module 2 - after completing this Module, delegates will learn:
•    valuation fundamentals
•    equity and EV multiple valuations
•    DCF valuations
•    how to apply different valuation techniques 
•    forecasting techniques, using Excel, to establish valuation ranges 
•    the impact of capital structure on valuation
•    the impact of corporate finance transactions on valuation
•    how qualitative factors influence valuations

Methodology 

This practical course is taught using an inter-active webinar or classroom format that comprises lectures followed by short, practical and inter-active case studies and exercises to reinforce the concepts covered in each teaching session. Emphasis is placed on delegates gaining hands­on experience of the various valuation techniques. 

Course Director

Sarah M Martin
Former Executive Director of CSFB and Lehman Brothers

Who could benefit from this course?

•    Investment bankers                    
•    Equity analysts and strategists 
•    Equity sales and traders 
•    Equity capital markets executives
•    Fund managers 
•    In-house corporate M&A specialists
•    Private equity executives
•    Credit analysts        
•    Treasurers 
•    Compliance officers and internal audit
•    Corporate finance lawyers

 
Module 1: Financial analysis for corporate valuation

Day 1: Morning
Session 1: Income statement analysis

•    Analysing and forecasting revenues
•    The impact of IFRS15
•    What are the key revenue drivers and what are their trends?
•    Pricing, volumes, currencies, acquisitions, disposals
•    Customer, product/service and geographical concentration
•    The nature of the cost base including sources of volatility 
•    How depreciation policies impact EBIT, net income and eps
•    How different inventory policies impact earnings
•    Fixed versus variable costs – impact on margins
•    Provision charges and write-backs
•    Defining finance expense and finance income
•    Capitalised interest and other capitalised expenses
•    Dealing with lease expense (following the introduction of IFRS 16)
•    Dealing with exceptional and non-core items
•    Assessing underlying EBITDA
•    Case studies: calculating underlying earnings and net finance expense

Day 1: Afternoon
Session 2: Income statement analysis continued

•    Analysing the differences between IFRS earnings and management’s adjusted earnings
•    The impact of joint ventures, associates and NCI
•    Taxation rates and deferred tax
•    Detailed ratio analysis
•    Calculating and analysing key operational and financial ratios
•    Gross margin, EBITDA margin, EBIT margin, pre-tax margin, net margin
•    Interest cover ratios
•    Dividend cover and enhanced dividend cover ratios
•    Case studies: calculating revisions to management’s adjusted earnings; calculating and interpreting income statement ratios

Cashflow statement analysis

•    Direct versus in-direct cashflow statements
•    Understanding the volatility and predictability of the firm’s cashflow
•    Deriving operating cashflow, including changes in NWC
•    Understanding typical non-cash and cash adjustments (provisions, extra pension contributions, gains/losses on disposal, impairments, stock option expense etc)
•    Do operating earnings generate operating cashflow? 
•    Case study: moving from EBIT to operating cashflow

Day 2: Morning
Session 3: Cashflow statement analysis continued

•    Net operating cashflow – deducting net finance expense and tax paid
•    Understanding dividends received from joint ventures, associates and investments
•    Investment spending, gross and net - are new investments adding value?
•    The financing section of the cashflow statement
•    How lease repayments are treated in the cashflow statement
•    Does the firm generate sufficient cashflow to cover its tax, debt servicing, investment spending and any dividends?
•    What is the potential for paying dividends and for share buybacks?
•    Case studies: commenting on a variety of cashflow statements; calculating and analysing cashflow ratios – interest cover, debt service cover, years to repay gross debt, investment cover, dividend cover, cash conversion ratios, dependence on external funding

Day 2: Afternoon
Session 4: Balance sheet analysis

•    The nature of the asset base: PP&E, intangibles, financial assets, joint ventures and investments
•    How are the assets valued?
•    What is the outlook for impairments or revaluations?
•    What are the assets lives and what is the outlook for maintenance and expansionary capex?
•    Understanding the firm’s capital intensity and operating leverage
•    Understanding NWC and accrued income, including seasonality
•    Is there any value in non-consolidated entities?
•    What to include in gross debt: bank debt, bonds, derivative liabilities, supplier finance, leases, shareholder loans, pension deficits etc
•    What to include in financial assets: cash, investments, derivative assets 
•    Valuation adjustments for off balance sheet liabilities:, short term operating leases, contingent liabilities, securitised receivables etc
•    Valuation adjustments for NWC, deferred tax assets and liabilities, provisions, cash pledges, restricted cash, deferred revenues
•    Is the book value of equity important to the valuation?
•    What is the impact of credit metrics (leverage, interest cover, interest rates, liquidity, covenant breaches) on valuation?
•    Case studies: finding the valuation impact of line items in a range of balance sheets; calculating and interpreting key balance sheet ratios to assess a firm’s financial position relative to its sector – leverage, liquidity, working capital, ROCE, ROE

Module 2: Corporate Valuation – techniques and application

Day 3: Morning
Session 5: Introduction to corporate valuations

Analysing recent trends in corporate valuations
 
Enterprise value versus equity value 
•    Calculating equity value including NCI
•    Calculating gross debt and net debt
•    Adjusting for provisions, quasi-debt, equity linked instruments, equity kickers, options, capital commitments etc
•    Adjusting for off balance sheet liabilities
•    Case study: moving between EV and equity value

Background to corporate valuations 
•    Valuation fundamentals
•    Drivers of valuation – ROIC, WACC, growth, size
•    The FCF perpetuity valuation formula
•    The key value driver valuation formula
•    ROIC vs. WACC – computation and drawbacks
•    Case study: valuing companies using the above formulae

Day 3: Afternoon
Session 6: Multiple valuations

•    Equity multiple valuations based on net income, EPS, dividends and NAV
•    PE ratios, PB ratios and dividend yields
•    EV multiple valuations based on revenues, EBIT, EBITDA
•    Adjustments to group EV to derive operating EV
•    Adjustments to EV multiples to derive the correct underlying multiple
•    Choosing comparable firms and creating a peer group
•    Reconciliation of multiple valuations to the key value driver formula
•    Examining how using different multiples gives different valuations
•    Earnings versus cashflow
•    Case studies: valuing companies using multiple analysis

Day 4: Morning 
Session 7: DCF valuations

•    Background to DCF valuations
•    Calculating OPAT and unlevered free cashflow
•    Explicit forecast period and terminal value
•    Calculating the terminal value: perpetuity method, multiple method, liquidation method
•    Importance of final year forecasts – fading the forecasts
•    Case studies: calculating OPAT, unlevered FCF and TVs

Day 4: Afternoon
Session 8: DCF valuations continued

•    Calculating the WACC
•    Calculating the cost of debt; different types of debt and multi-currency debt
•    Working out the value of the tax shield
•    The CAPM
•    Calculating the risk-free rate
•    Calculating the equity risk premium
•    Betas – levered and unlevered
•    Case studies: modelling DCF valuations in Excel; comparing valuations using multiples vs. DCF

Day 5: Morning
Session 9: The impact of corporate finance transactions and capital structure on valuation

The impact of corporate finance transactions on valuation
•    Friendly/hostile takeover
•    Merger
•    Demerger/spinoff/break-up
•    IPO of subsidiary or affiliate business
•    Case study: review and comment on recent corporate finance transactions and the valuation impact

The impact of capital structure on valuation
•    Increasing equity value through the use of debt
•    The impact of hybrid securities – convertible/exchangeable debt and deeply subordinated hybrids
•    Focus on shareholder value – dividend policy and share buybacks
•    Companies suited to leverage
•    Debt markets and credit ratings
•    Analysing debt capacity
•    Case study: working out a firm’s debt capacity 

Day 5: Afternoon
Session 10: The impact of qualitative factors on valuation

What are the key business risks faced by the firm and are there any mitigating factors?

Analysis of the sovereign and macro-economic conditions

•    What are the levels of and trends in sovereign credit ratings where the firm has its main areas of activity?
•    What are the macro-economic influences?
•    Currencies, inflation, interest rates, growth rates, political risks

Analysis of the industry and market
•    Is the business environment changing?
•    What are the main threats and opportunities facing the industry?  
•    Technological, demographic, political, ESG, climate change, new entrants, disruption, consolidation
•    What is the competitive landscape - Porter’s five forces?
•    What is the growth outlook? - industry life cycle and cyclicality
•    What is the capital intensity and cost base profile of the sector?
•    What is the earnings quality?
•    What are the leading indicators?
•    What are the pricing dynamics? 
•    Is regulation a threat or a support?

Analysis of the company’s specific characteristics
•    What are the firm’s strategies?
•    Commercial, treasury, capital and corporate finance 
•    What are the firm’s market positions, competitive advantages and cost position – does the firm create value?
•    How does the firm compare to the peer group?
•    What is the product/service offering?
•    Is it differentiated, is there any pricing power?
•    Does the firm suffer from buyer power or supplier power?
•    Does the firm benefit from geographical and revenue diversification? 
•    Does the firm benefit from vertical integration?
•    Does the firm have currency or commodity exposures?
•    Management, the Board and corporate governance
•    Case study: assess the main risks and mitigating factors for a chosen group

Webinar/Session 11: Course recap and final valuation exercise
•    Delegates are introduced to a financial forecasting model with embedded scenarios
•    Final case study: Delegates undertake valuations of a firm relative to a peer group and on a DCF basis, using a financial forecasting model and taking account of qualitative factors; they vary the valuation using the scenario functions.

Trainer Biography

Sarah M Martin

Sarah Martin has worked as a financial trainer for over ten years for many major financial institutions in Europe, Asia, the Middle East and Africa. Recent clients include: The EBRD, The EIB, BBVA, Gibbs Business School in Johannesburg, Bahrain Institute of Business Finance, Bank of China, Erste Bank, Raiffeisen Bank, Standard Bank and Mizuho Bank. The delegate profile ranges from graduates to board members. She trains in financial analysis, basic and advanced credit analysis, LBOs, company valuation, financial modelling and distressed debt. The training involves classroom learning and also blended training using videos, webinars and other forms of e-learning. 

She has a degree in economics from the London School of Economics and stock exchange qualifications from London and New York. A former Executive Director of CSFB and Lehman Brothers, the trainer has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade, high yield and mezzanine markets, the European new issue markets, the Asian convertible bond markets and of corporate restructurings of distressed credits. She specialised in the telecoms sector and was closely involved in the structuring, raising and/or trading of bank and public debt for telecoms companies in many countries, including Europe, South Africa, Asia and Latin America. She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings. She has also worked as an expertise witness in financial lawsuits. 

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.

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• 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.
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