Private Equity Financial Controllers & CFOs Workshop

3-Day Executive Education Training Programme

With Optional Incremental 1-Day Modules 

This course is available on an in-house basis only - To have this delivered for your team, please contact us.
Pricing is from GBP12995 + VAT (where applicable) for a group of up to 8 attendees
For bigger groups or for training delivered outside London, please contact us for a quote

Programme Background

A study by McKinsey & Company (Private equity: Changing perceptions and new realities, April 2014) has illustrated that private-equity performance has been misunderstood in some essential ways. It illustrated that the private equity industry decisively outperforms public equities with respect to risk-adjusted returns, but this good news comes with a caution: top private-equity firms now seem less able to produce consistently successful funds because success has become more democratic as the general level of investing skill has increased.

The study argues that the new priority for success is differentiated capabilities. Limited partners expect funds that exploit a general partner’s distinctive strengths will do well, while more generalist approaches may fall from favour. Institutional investors will need to get better at identifying and assessing these skills, and private-equity firms will need to look inward to understand better and capitalise on the factors that truly drive their performance.
 
Also, some LPs have begun to “insource,” effectively doing private-equity investments on their own and recent academic research has found this approach preferable for institutional investors in certain circumstances; direct private investment saves fees and can generate better results than an external manager. However, this approach is clearly not for everyone, as it involves overcoming internal structural obstacles as well as building and maintaining investment teams with the right skills.

Whatever approach is adopted, the implications for the financial specialists in the private equity firm are clear – certain key elements in terms of making investments, such as good due diligence, particularly of the commercial issues involved, valuation related issues, managing investments to create value, and exiting investments, are critical.
 
The Private Equity Financial Controllers & CFOs Workshop will examine in detail these and other important aspects of the financial specialist's responsibilities. The objective is to show how the financial specialist can contribute fully to being a core advisor in key corporate strategies and decision-making

Developed in a modular format, attendees have the option to attend:
Day 1 only, Days 1&2, or Days 1-3

Course Director 

Professor Dr Roger Mills PhD, MSc, BTech (Hons), Cert Ed, MColl, FCMA, FCIS, FCT. Roger is currently Group Chairman and CEO at Value Focus Group, a group of consulting firms. He is also Emeritus Professor of Finance and Accounting at Henley Business School, University of Reading and Visiting Professor of Finance at University College London. Roger has over 25 years of experience in private equity. In addition to taking his firm to an AIM listing, he has undertaken numerous acquisitions and exits to private equity acquirers. Roger is also a widely published author of several expert books and his papers have appeared in leading journals.To read Roger's full profile, please click here. 

This course is aimed at:              

• Financial Controllers
• Finance Directors/CFOs
• General Partners
• Limited Partners

Materials:
Participants will be provided with a package of materials, including articles and sample documentation. The course will include real case studies, hands-on exercises, and will give participants the opportunity to demonstrate their understanding through group work and plenary discussions.

Course Outline

Day 1 Topics: Making the investment – how much is it worth? Valuation and how to finance it - capital structure and debt capacity

Introduction and Welcome

Attendee icebreaker session

 Valuation and what kind of value issues need to be considered
• Absolute value
  • What is the value of the business/opportunity
  • What is driving the value - can the value drivers be identified and quantified
  • The importance of understanding the underlying business and how to build this around fundamental analysis
• Relative value
  • What is the potential that can be extracted at exit
  • How does this value differ from absolute value
  • How can it be measured - learning from merger and acquisition best practice - analysing operational, financial and other (e.g. taxation) effects
  • Importance of understanding Incremental Value Effect (IVE)
• Valuation architecture - analysing the business/opportunity by building according to desires and needs rather than using the 'standard' model
    

 Complete overview of valuation theory
• Discounted cash flow (DCF) valuation, including
  • Weighted average cost of capital
  • Risk premiums and Beta
  • Terminal value estimation
• Multiples based valuation
• Dividend discount and other models

The private equity approach to valuation
• Comparison of public equity and private equity valuation
  • Importance of the exit driven perspective
  • Relation between active private equity management and valuation
  • Guidelines on private equity valuations - International Private Equity and Venture Capital Valuation (IPEV) Guidelines
  • The importance of understanding the underlying business and how to build this around fundamental analysis

Value creation in private equity and how do private equity firms create value?
• Minimise purchase price
• Maximise leverage
• Minimise liabilities purchased
• Manage transaction costs
• Improve business operations
• Maximise tax efficiency
• Optimise exit

Case study: developing relative valuation models to assess IVE

Capital structure and debt capacity
• Traditional approaches
• Contemporary approaches
  • Link with cost of capital minimisation
  • Link with issues re DCF analysis – methodology
          • Free cash flow to enterprise versus equity and importance of understanding equity cash flows
          • Sensitivities and identification of key value drivers
          • Identifying the discount rate
          • Debt maturity and repayment issues
          • Terminal value challenges
          • Assessing and challenging growth assumptions
  • Triangulating value using alternative methodologies

Workshop: Calculating debt capacity

Day 2 Topics: Avoiding risk of failure - due diligence

 Why conduct due diligence?

 When to conduct due diligence?

An overview of the process
• Appointment of the team
• Confidentiality agreements
• Data room and access to the room
• Due diligence questionnaire and checklist
• One on one interviews with management from the target company
• The due diligence report

The Phases of Due Diligence
• Strategy
• Planning: 
    • Where to focus the due diligence effort
    • Defining the scope of the due diligence
• Data
• Analysis
• Verification
• Negotiation
• Completion
• Post-transaction
• Comfort letters

Overview of the main types of due diligence
• Industry - strategic perspective, industry analysis and value chain 
•Company 
    • Accounting
    • Operational - manufacturing and production – supply chain
    • Commercial
• Environmental
• Human
• Legal/Regulatory/Intellectual Property

Due diligence and the business plan
• How due diligence is linked with the financial plan
• Identifying critical success factors and high impact risks
• How to interrogate the business plan using due diligence
• Preliminary valuation of the business plan
• Evaluating the high impact factors
• Prioritising high impact factors to structure the direction of the due diligence process -high impact high likelihood investigated first

Mini cases and practical sessions to reinforce the points covered during the session

Case study: How to interrogate the financial statements forming a business plan, and how to identify problem areas.

Day 2 Topics Continued: Creating value from ownership

Creating value and understanding the big picture in managing for value

• Link value drivers to key performance metrics

 • Understanding relative versus absolute value for synergy and improvements from restructuring

 • Incremental Value Effect (IVE) approach for valuing target investments and synergy/restructuring effects

• Building a relative value framework to:
    • Visualise the impact of prospective ownership plans
    •Understand the sources of value and the relative importance of the ‘value drivers’ for the business
    •Value driver analysis and applying free cash flow and economic profit analysis 
    •Developing a relative valuation dashboard and understanding value drivers
    •Estimating sources of value from value driver assessment
    •Developing and using a financial model to evaluate prospective targets
•Link value drivers to key performance metrics

• Evaluating synergies/benefits from restructuring using valuation analysis

• What are synergies/benefits from restructuring, how are they measured and how can they be analysed within a transaction?

• Importance of understanding different perspectives

• Control premium

• Valuation of synergies/benefits from restructuring – the principles and the challenges
    •The synergies framework 
    •Operating
        •Financing
        •Tax, including understanding important tax complications/considerations
    •Valuing the acquisition target with synergies
 
Case study review

Day 3 Topics: Managing for value post investment, and exit planning, strategies and implementation

Creating value post investment involvement
• Managing to create value, including
    • Principles of value based management
    • Techniques of value based management
    • Performance measurement and economic profit
    • Monitoring and internal reporting design
    • Investment performance reporting design and review 
    • Selection, implementation and testing of PE administration systems
    • Dealing with the human factor challenges in implementing the plan
    • Management incentives
    • Succession planning and key man risk
    • Use of external consultants

Exit planning
• Identifying potential buyers and understanding reasons for their interest
• Making the investment attractive to buyers
• Generating competing buyers

Review of Issues and Methods
• Sale
     • Advantages and disadvantages
     • The process
     • Key success factors
     • Estimating synergies - valuing existing businesses on a stand-alone basis and comparing them with the value of the combined businesses
     • Importance of understanding different perspectives – control premium, valuation of synergies and perspective
     • Valuing the acquisition target with synergies

• IPO
    •Advantages and disadvantages
    • Process 
    • Valuation challenges
    • Pricing and allocation
    • Aftermarket

• Secondary buyout 
    • Advantages and disadvantages
    • The process

• Leveraged recapitalisation
    • Advantages and disadvantages
    • The process

Strategies to protect minority interests, especially when investing alongside a majority owner
• Ensuring that minority protections are incorporated into legal agreements
    • Negative covenants – restrictions upon e.g.
          • Entry into material/onerous contracts
          • Sale or lease of any assets
          • Any acquisition of shares
          • Creating, issuing or allotting any new shares
          • Reduction in capital/redemption of own shares
          • Merger/consolidation/amalgamation
          • Change in Directors and/or their powers
    • Positive covenants , e.g. Board meetings are held regularly (e.g. once a month)
    • Board Representation 
    • Control triggers when the business is not performing well
    • Tag along rights
    • Share transfer restrictions and permitted versus non permitted transfers
    • Drag along/come along clause

Review

Want this course in-house? Please click here

For Frequently Asked Questions, please click here

Why Train with Us?

You can register for this programme in 3 easy ways:

1. Online: using the ‘Book Now’ button found on this webpage
2. Email: Scan and email to us your completed 1-page registration form, found on this webpage by using the ‘Download Brochure’ link (located top right of this page). Please email the completed form to info@ascentium-associates.com
3. Telephone: Call us on +44 207 193 5423