Building on the disciplines of Mindset of the Business Owner I, this program focuses first on the technical skills required to support an in-depth value creation discussion with the client, with a particular focus on corporate finance valuation techniques. In particular:
- Net Present Value and Internal Rates of Return: With a particular emphasis on how these techniques are used by private equity investors and financial buyers to ascertain the minimum required returns on investment
- Discounted Cash Flow Analysis: computation of free cash flow and how this differs from cash flow computations used in the lending decision
- Weighted Average Cost of Capital (WACC): How this is computed for privately held and publicly traded companies and used as a discount rate to assist in the determination of corporate value
- Terminal or Residual Value: Reviewing the different techniques for this calculation using perpetuity valuation methodology or exit multiple approaches
- Multiple Analysis: Transaction and comparable company multiple analysis and how this is employed as a legitimate, practical alternative to DCF analysis
Building on this theoretical foundation, the program then takes these techniques and practically applies them to opportunities for transfers of ownership in general, and management buyouts in particular, by reviewing buyer and seller motivations, the breakdown between strategic and financial buyers, and the legal and accounting implications of acquisition financing and transfer of ownership
Using real life examples, the program provides an introduction to the role of corporate valuation, and in particular how this is used by relationship managers in fostering and developing client relationships.
Participants will review the theory underpinning such concepts as free cash flow, WACC and terminal value and will see how such valuation techniques can be successfully and seamlessly integrated into a case example which applies these principles in practice.
Most important, the program will show how sound lending practices, combined with sensible practical application of well considered valuation techniques, can help clients avoid overpaying for businesses and ultimately overfinancing the purchase.