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Certificate in Company Valuation Modelling

LEORON Professional Development Institute
Course summary
5 days
4,770 USD excl. VAT
English
Full time
Dubai
Next available date: 01/11/2020 - Dubai

Course Description

Course Overview

In real life, the main challenge in valuing different entities is the ability to understand and quantify the various inputs. If the inputs are nonsensical, the valuation output will unquestionably be nonsensical. For this reason, a large section of this course is devoted to understanding and modeling valuation inputs including adjustments to financial statements.
This intensive five-days workshop offers in-depth and practical analysis of the different valuation techniques that can be used to value different entities. It will also examine the use of real options modeling that are used to value patents, contracts, natural resources and for various other applications.The workshop will focus on the framework that can be used to pick the right model for any task and it will also extensively expose delegates to the modeling of various real life valuation cases.
Companies are valued for the purposes of investment, mergers and acquisitions or as part of internal measures of financial control. There are many different approaches to the valuation of companies and it is paramount to know when and how to apply what method. It is also essential to understand that company valuation is not an absolute science but also based on interpretation and judgment. In the broadest possible terms, firms or assets can be valued in one of four ways: asset based valuation approaches,
discounted cash flow valuation approaches, relative valuation approaches and option pricing approaches.
The concepts and models taught are designed to be of practical benefit to attendees and are immediately usable in the workplace. This highly practical course will lead you quickly from the basics through the more advanced valuation methodologies and modeling techniques. The hundreds of participants who attended this course in different parts of the world indicate that they gained valuable knowledge and experience that will greatly assist them in their careers. Due to the outstanding success of this course, the presenter was asked to develop Valuation II to show more applications. Only the
participants who attended Valuation I will be allowed to participate in Valuation II.

Suitability - Who should attend?

Who Should Attend?

  • Corporate financiers
  • Portfolio managers
  • Research analysts
  • Investment bankers
  • CEO’s
  • Board members
  • Financial advisors
  • Hedge fund managers
  • Private equity managers
  • Transactors
  • Trustees
  • Venture capitalists
  • Risk controller
  • Strategic planners
  • Corporate lawyers
  • Compliance officers
  • Senior managers
  • Corporate accountants
  • Auditors

Outcome / Qualification etc.

35 NASBA CPE credits

Learning Outcomes

Attend this course and addresses fundamental questions like:

  • How to calculate the cost of capital that a business should cover?
  • Why is there a need to adjust the accounting records?
  • What is the true meaning of normalized free cash flows?
  • How do employee options affect valuation?
  • How to calculate capitalizations rates in valuing properties?
  • How to model the control premiums and liquidity discounts in private entities?

Training Course Content

DAY 1

Real Estate Investment: Basic Concepts

  • Two General Classifications of Estates
  • Estates Not Yet in Possession (Future Estates)
  • Examples of Leasehold Estates
  • Interests, Encumbrances, and Easements
  • Methods of Title Assurance
  • Abstract and Opinion Method
  • The Title Insurance Method
  • Limitations on Property Rights
  • Notes and mortgages
  • Seller financing
  • Reconstructing a mortgage loan

Introduction to valuation

  • The five myths about valuation
  • The principles and practice of time value for money

Exercise 1: modeling a straight bond valuation

  • Benjamin Graham’s safety margin
  • Introduction to DCF
  • Some useful Excel modeling tips

Exercise 5: modeling synthetic rating for a listed and a private company

  • Cost of capital modeling
  • The explicit and implicit costs of financing.

Meaning and importance

  • What happens practically when companies don’t meet their cost of capital?
  • The practice of changing assumptions in the stable growth period
  • Some analysts don’t use CAPM. Practical alternatives?
  • What does Warren Buffet use as cost of capital?
    Case study 1: calculating the cost of capital of Marriott

Financial Statements adjustment

  • The reasons for adjusting financial statements
  • Capitalizing operating leases
  • The capitalization rate
    Exercise 6: modeling the adjustment to EBIT and adjustment to total debt
  • Capitalizing R&D
  • Nature of industry and how many years to look back
    Exercise 7: modeling the tax effect of R&D adjustment and final effect on EBIT
    Case study: capitalizing operating leases and R&D at Boeing

DAY 2
Free Cash Flow to Equity (FCFE) vs
Free Cash Flow to Firm (FCFF)

  • Meaning, measurement and modeling
  • Which one to use? Why?
  • Normalizing EBIT, capex and working capital
  • What does and doesn’t capex include?
  • Why we need the non-cash, non-debt working capital?
  • Adjustments required if firms have negative working capital
  • Marginal vs. effective tax rate
  • Stable debt policy and FCFE
  • FCFE and leverage. Is there a free lunch?

Exercise 8: calculating FCFF of a listed company

  • Calculation of terminal value
    Case study 2: modeling the FCFF of Boeing

Estimating Growth

  • The three ways of estimating growth rates
  • Extrapolation and its danger
  • High growth period vs. stable growth period
  • Length of the high growth period
  • Fundamental growth rate
  • Effect of ROC and Reinvestment rate on growth rate

Exercise 9: calculating the fundamental growth rate of a listed company

  • High growth rate estimation vs. stable growth rate assumption
  • Real vs. nominal growth rates
  • The three growth patterns and which to use

Exercise 10: modeling the three growth patterns
Tying up loose ends

  • Effect of management options on valuation
    Exercise 11: valuing management options of a listed company
  •  Effect of minority interest on valuation
    Exercise 12: applying relative valuation to minority interest
  • Valuing operating and non-operating assets
  • Effect of contingent claims
    Putting it all together
    Case study 3: full valuation of a cement company covering all the previous topics

DAY 3
Dividend discount models (DDM)

  • Gordon growth model
  • Versions of the model
  • Issues in using DDM

Exercise 13: valuing S&P 500 using DDM
Case study 4: valuing a utility company using DDM
Free cash flow to equity and free cash flow to the firm:

  • Adjusting the accounting records
  • The cost of capital approach
  • Effect of leverage on firm value Relative valuation
  • Standardized values and multiples
  • Three different ways to using multiples

Exercise 14: using regression analysis with multiples

  • Earnings multiples
  • Book value multiples
  • Sales multiples
  • Calculation of terminal value using multiples
  • Presentation of a fully automated model developed by Hamed Behairy using multiples to screen for quality and cheap investment ideas worldwide.

Valuing financial services firms

  • What is unique?
  • General framework
  • Excess return model
  • Valuing financial services firms using DDM

Exercise 15: valuing Morgan Stanley using Excess Return Model
Exercise 16: Valuing Morgan Stanley using multiples Valuing distressed firms and firms with negative earnings:

  • Distressed firms: implications of viewing equity as an option
  • Negative earnings: causes and consequences

Exercise 17: once off charge at Daimler Chrysler
Exercise 18: temporary or sector wide reasons at Volvo

DAY 4
Valuing private companies

  • What makes them different?
  •  Estimating the cost of capital for private companies
  • Charging for higher risk: haircut from valuation or increasing the cost of capital?
  • Estimating the size of liquidity discount
  • Estimating the value of control premium

Exercise 19: modeling valuation of a private company
Case study 4: Building a venture capital valuation model in Excel using sensitivity analysis for different exit options

  • Using IRR in venture capital valuation
  • IPEVCVG (International Private Equity and Venture Capital Valuation Guidelines)
    developed by 35 internatinal private equity and venture capital associations Real options valuation
  • Introduction to Black-Scholes model
  • Payoffs of put vs. call options and long vs. short options
    Exercise 20: Using Black-Scholes model to value financial options
  • Real options: meaning and applications
  • Valuing a patent
    Exercise 21: model of a pharmaceutical patent valuation
  • Valuing natural resources as options
    Exercise 22: model of an oil mine valuation
  • Valuing a contract with options to expand or abandon
    Exercise 23: model of value to expand operations of Disney in Latin America
    Exercise 24: model of value to abandon of Disney from a construction contract

Valuing properties

  • Real vs. financial assets
  • DCF, relative valuation
  • Capitalization rates
    Exercise 25: valuing a building in New York
    Case study 5: valuing a piece of land in South Africa.General framework
  • Choosing the right DCF model
  • Choosing the right relative valuation model
  • When should you use the option pricing model?
  • Conclusion

DAY 5
M&A valuation and modeling

  • Model-building process
  • Key M&A model formulas
  • Modeling the Acquirer standalone valuation (Excel Model)
  • Modeling the Target standalone valuation (Excel Model)
  • Modeling the combined valuation and synergy estimation (Excel Model)
  • Modeling Initial offer price calculation (Excel Model)
  • Modeling forecasted EPS of the Acquirer after acquisition (Excel Model)
  • Modeling the combined company financing capacity (Excel Model)

Deal structuring and financing

  • The deal structuring process
  • What is the best form of payment? Why?
  • Alternative financing options
  • Common forms of leveraged buyout deal structures
  • Analyzing leveraged buyouts
  • Applying LBO valuation models
  • Real life case studies


Alternative restructuring exit strategies

  • Motives for exiting businesses
  • Divestitures
  • Carve outs
  • Split ups vs split offs
  • Spin offs
  • Bust ups
  • Real life case studies

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The Partners for Quality Award recognizes an Employer providing support to an individual where there was a significant benefit to the Division or Society. LEORON institute was granted the prestigious award for their continued promotion of Organizational Excellence through training courses that are directly related to quality improvement techniques and methodologies they provide while promoting the values and mission of ASQ Quality Management Division.

   

Provider: LEORON Professional Development Institute

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