Module 1

What is Corporate Development?

Acquiring a company is easier said than done. Reading press accounts of a closed transaction often leaves out the most difficult part of the proces - Finding a company to buy. In M&A, the roles of buyer and seller are often reversed. Buyers far outnumber sellers and as a result, buying a company is far more difficult and challenging than selling a company. 

• What is the “state” of today’s M&A landscape? 
• Valuation does not necessarily correlate to activity. What is the status of the capital markets and how does that impact valuations? 
• How do corporate acquirers, private equity firms, family offices, and independent sponsors interact? 
• What does “accretive” mean? How does it impact the acquirer’s decision? 
• What is an “M&A process”? 
• How is a target list created? 
• How are markets made? What is the difference between an auction and a negotiated transaction? 
• What impacts M&A activity more - Macroeconomic or Microeconomic conditions? 

Class Participation: Attendees will discuss their M&A related goals, their expectations, and what they wish to accomplish.

Module 2

Determining Valuation

While determining what a company is worth is often more art than science, understanding the academic exercise of valuation is imperative for any deal maker. EBITDA (earnings before interest, taxes, depreciation, and amortization) is often one of the main components of valuation, but other important considerations are also examined.

• What is EBITDA and why it is used as a basis for valuation? 
• What are add backs to EBITDA, when are they legitimate, when are they not? 
• What enhances valuation? What hurts valuation? 
• How do investment bankers analyze financials? 
• What is a buyer’s “strategic imperative” and how can it impact valuation? 
• How do terms, timing, and structure impact a company’s valuation?

Case Discussion: A review of an actual investment bank valuation. This includes a review of trading comparables, transaction comparables, leveraged buyout analysis, and discounted cash flow analysis.

Module 3

Cultural Differences in M&A

M&A has many universal activities that are the same or similar from country to country, but cultural and regional differences can impact deal making. Some key deal making differences between the U.S. and Asia will be highlighted and discussed. These include: 

• Tax issues and regulatory oversight 
• The impact of government owned enterprises 
• Sourcing transactions 
• Legal considerations, due diligence, and closing transactions 

Small Group Project: Resolve actual transaction related problems.

Module 4

Tales from Negotiations

Negotiating deals is where the science of valuation often morphs into an art. While analogies to poker are apt, successful negotiating is not about bluffing or issuing “take it or leave it” demands. The key is understanding the relative strength of your hand to the other side.

• Weak hand, strong hand, and calling bluffs. How to use poker skills in M&A negotiations. 
• How to effectively use logic and objectivity 
• Identifying logical fallacies and how to use them to close a deal 
• Crafting mutually beneficial transactions 

Case Discussion: Negotiating tactics from actual transactions will be presented, discussed, and reviewed by the class.

Day 2

Module 5

Transaction Advisors and M&A Documents

Even the most skilled and experienced deal makers require assistance from other professionals. What are the types of advisors needed to successfully affect M&A transactions? These key advisors will help the deal maker create, edit, and refine necessary documentation required to memorize the numerous documents that are required to close transactions.

• Lawyers, accountants, auditors, consultants and more… who is needed to do what? 
• Confidentiality agreements, term sheets, Indications of Interest (IOI), and Letters of Intent (LOI) will be discussed 
• A purchase agreement will be analyzed 
• What is working capital, how is it calculated, and why is it calculated? 
• What are adverse material changes, representations and warranties, indemnification, and escrow? 
• What recourse, if any, does a buyer have if a seller breaches a representation?

Interactive Review and Discussion: Indication of Interest, Letter of Intent, and Purchase Agreements.

Module 6

Financing Options

M&A transactions are complicated affairs and a seller can convey a company to a buyer in innumerable ways. Buyers and sellers will come to terms only when they can craft mutually beneficial deals. What does the buyer acquire and what does the seller get in exchange?

• What sort of rates of return should a buyer expect? 
• In addition to cash, what deal structures can be utilized? 
• How are transactions financed? 
• What are the pluses and minuses of using cash, stock, options, assumption of debt, and earn-outs? 
• What does “structuring” mean? 
• What is the difference between buying equity and buying assets? 
• How can minority investors protect their interests? 
• What are some techniques to incentivize management? 
• How can structuring be used to bridge valuation gaps?

Case Study: Creative Deal Making at Churchill Downs 

Module 7

Due Diligence

A signed LOI is only a starting point for a successful transaction. The buyer must perform due diligence to confirm the seller’s representations and more importantly, the buyer must properly plan to integrate the acquired company.

• What should be accomplished during meetings with management? 
• Will the acquired company have sufficient management to run the business after the transaction closes? 
• Compilations, reviews, audits, and quality of earnings reports. What are the differences and how are they utilized? 
• Utilizing “stay bonuses” to help insure key management doesn’t leave 
• Are inventory and earnings accurate? 
• Can add backs to EBITDA be quantified?

Case Discussion : Disagreements and heated arguments during the Due Diligence Process and how resolution was found

Module 8

The Pitfalls of M&A

A good company with an owner with reasonable expectations has a very high probability of successfully closing a transaction. Far more difficult is the task facing the acquirer. The right mix of plan, tools, and materials is needed to successfully close a transaction for both sides, but for acquirers, luck sometimes comes into play. Sell-side M&A processes and buy-side M&A process can fail and when they do, they often fail for different reasons.

• Reasons why sell-side M&A processes fail 
• Reasons why buy-side M&A processes fail 
• Declining financial performance, environmental problems, undisclosed issues, lawsuits, lack of candor and other deal killers 
• Common mistakes acquirers make when designing their search criteria 
• The folly of holding out for the perfect target 
• The impact of irrationality, indecisiveness, and seconds thoughts when trying to close a transaction 
• Settling disputes about earnings and inventory 
• Finding consensus with add-backs to earnings

Case Discussion: Two actual sale processes that were derailed by a host of difficulties (The Perfect Storm of Problems).

Module 9

Tales from Integration

Just as a signed LOI does not mean the deal is closed, a closed transaction does not mean the deal will be successful. Deal makers must pay attention to myriad issue just before and immediately after the transaction closes.

• What are the differences between entrepreneurial companies and professionally managed companies? 
• Making the announcement to the acquired employees 
• The importance of a seamless transition – getting human resources, accounting, computer systems, and payroll on the same page 
• How to incentivize personnel 
• The use of checklists to help insure integration is moving forward 
• Who’s in charge? Who’s the boss? Finding common ground between different cultures 
• Communication and explanation: The best ways to solve and avoid problems 
• Right-sizing a company through redundancy and attrition 
• What is a zombie company and why is it worse than failed company?

Case Discussion: Success, Failure, and the Zombie - Three examples of integration.