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Pricing is from GBP9995 + VAT (where applicable) for a group of up to 8 attendees
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Private Equity – Negotiation and Investment Structuring - This is an intermediate level, 2 day series of workshops focusing directly on modern practice, in both the buyout and growth capital arenas. It is an exercise driven skill enhancement programme for front line private equity practitioners, advisers and managers. Delegates will have a familiarity with the basic tenets of private equity and be seeking to refine their practical structuring skills and understanding.
The programme format entails high levels of participation from delegates, in case studies, exercises, simulations and debates. All tools and models used come from actual, modern practice and learning is heavily focused on real life case studies. Formal lecturing is reduced to the essential minimum required.
Delegates will be expected to arrive with an understanding of basic financial and accounting concepts and familiarity with spreadsheet models, but the programme is highly flexible in coping with different degrees of experience. A willingness to participate actively is essential.
The key areas addressed by the programme are organised into four main topics. Although approximately half a day is allocated to each, it should be noted that the highly interactive nature of the course, and the flexible response to delegates’ needs and interests, mean that this may well vary significantly.
Garry Sharp has been active in the private equity markets as a practitioner, trainer, writer and adviser since 1985, when he joined a nascent UK venture capital firm. He participated in the firm’s own management buyout in 1989, its subsequent rapid growth and in its sale to a major financial institution in 1996. Following this sale, he co-founded Indepedent Direction, a specialist advisory focusing on the management aspects of private equity investments; this firm too achieved rapid growth and was successfully sold in 2005. To read Garry's full profile, please click here.
Session One - Investment Structuring and Valuation
• Review and consolidation of fundamental structuring principles
• Alignment of interests and motivations
• Valuation tools, techniques and templates
• Variety and use of differing instruments
• Specific techniques for protecting minority stake investors
• The use, and potential dangers, of ratchets
• A simplified PE portfolio, demonstrating the effects of portfolio spread, return maximisation, the value of running yield
• Key investment instruments and their use; flat share pricing vs share premia
• Preference, income, redemption, control triggers
• Valuation ranges, sense checks, reconciling DCF and multiple driven valuations (growth assumptions, discount rates)
Exercise 1 - Delegates will structure a simple growth capital investment, initially without the use of a spreadsheet. This exercise is designed to consolidate understanding of:
• The key drivers of private equity returns
• The effects of introducing various investment instruments
• The dangers of relying purely on spreadsheets
Session Two - Applied Structuring
This is an entirely exercise driven session intended to allow delegates to explore:
• The practical application of key investment structuring techniques
• Refinements and the use of more advanced structures
• Approaches to negotiating investment structure
Exercise 2 -Delegates will split into groups; some will play the owner managers of a successful, established family company which needs to raise capital to address a strategic issue, the other groups will play the role of private equity executives. The groups will, after preparation, meet and attempt to negotiate the outlines of a transaction. This exercise will require delegates to:
• Communicate to an operating management team the key elements of the PE / investee relationship
• Identify and align key strategic objectives and motivators
• Outline the broad parameters of a proposed investment structure and explain its rationale
• Absorb feedback from negotiating counterparties and refine proposed structures
The negotiations will be video recorded in order to enhance the value of the post-exercise review.
Session 3 - Change of control / buyout investments
Learning objectives: This session will give delegates context and background to:
• Alternative routes to value creation for control investors
• Buyout structuring techniques and their applicability to growth capital investments
• Value creation in buyouts - the three key routes
• Current practice and market pressures
• The buyout model
• The use of leverage
• Incentivising operational management
• Types of debt and their application
Exercise 3 - Delegates will play the role of corporate finance adviser to the CEO of a buyout target company. The basic structure of a buyout will be developed by the group as a whole, led by the programme director. A last minute structuring challenge will then be introduced which delegates will be asked to resolve in groups.
Session 4 - Human Factors and Negotiation
Learning Objectives: Structuring investments is not simply a numerical exercise. The private equity model depends on close partnership between investor and operating management team, and the investment structure will both reflect and shape this partnership. An understanding of this is essential to a successful PE executive, as is a sound understanding of the specific challenges of negotiating PE investment structures.
• Understanding the entrepreneur; drivers and motivators
• The negotiating pyramid
• The principles of negotiation
• Framing an agreement
• Approaches and Tactics
• Positional bargaining
• Principled negotiation
• Anticipation and analysis of your counterpart’s actions
• Formulating a negotiation plan in team settings
Exercise 4 - Delegates will role play an acquisition negotiation, in an exercise designed to highlight the importance of non-financial considerations.
Course review and wrap up