Advanced Corporate Finance & Valuation Masterclass

ET Masterclass is an initiative of The Economic Times to disseminate knowledge, experience and expertise among professionals and leaders. Special Discount of 20% for all French Chamber members!

Developing an efficient and accurate valuation model that is theoretically valid, well-structured, flexible and accurate is essential for any professional in finance. Unfortunately, many corporate finance models are biased, clumsy and inflexible rendering the whole valuation process at best meaningless.

The two-day intensive Advanced Corporate Finance & Valuation Masterclass will enable corporate finance & valuation professionals, finance executives, accountants, financial consultants, and investors on innovative valuation and modelling techniques. Theoretical and applied techniques and implementation issues are addressed for efficiently creating corporate models with flexible history, automating historic data acquisition, accurately modelling depreciation and creating structured assumptions with interpolation. Valuation techniques that deal with unique methods of measuring normalized cash flow, cost of capital, interest tax shields, terminal value from value drivers and effective presentation are covered with hands-on models. A practical case study from Asiawill be used to illustrate the applied valuation and financial modelling concepts.

Course Delivery

The programme will be hands-on and highly interactive, and sessions will include:

• Seminars in which techniques and ideas are introduced and discussed in detail
• Hands-on modelling sessions where participants work through practical solutions

• Case studies in which participants examine ways to avoid pitfalls in valuation and modelling
• Retention of learning with strategies for continued learning and reinforcement of ideas

Participants receive a Comprehensive Resource Library filled with financial models, databases, case studies, articles and utilities to make analysis more efficient.

Key Benefits

• Understand the theoretical issues with structuring of corporate models, development of assumptions, computation of rate of return on invested capital, risk analysis, valuation formulas, capital structure and other issues.
• Create a structured corporate model that uses and updates historic information in a flexible manner and allows efficient statistical analysis of assumptions.
• Add valuation sections to corporate models that include provisions for changing terminal growth, WACC, multiples and valuation dates; normalise working capital, capital expenditures, depreciation and deferred taxes; and evaluate items that comprise the difference between equity value and enterprise value.
• Resolve tricky issues in terminal value from derived EV/EBITDA ratios that correct for flaws in the value driver (1-g/ROIC)/(WACC-g) formula and consider alternative growth rates; changes in the cost of capital and variations in the spread between the cost of capital and return on invested capital.

• Compute equity value from enterprise value through creating proofs of how different items such as deferred taxes, warranty provisions, derivatives, long-term receivables, unfunded pensions and stock options affect the difference between equity value and enterprise value.
• Use corporate models to quantify risks to risks to debt and equity investors using structured scenario analysis, break-even analysis, sensitivity analysis and Monte Carlo simulation.
• Learn Excel techniques including selected user-defined VBA functions to make better presentations from models, to resolve circular references and to make models more transparent and efficient

Who Should Attend?

• CFOs, Treasurers, Senior Finance Executives
• Corporate Financial Officers
• Equity Research Professionals
• GMs/VPs/AVPs/Managers - M&A
• Directors of Strategic Planning
• Commercial Bankers

• Investment Bankers
• Portfolio Managers
• Fund Managers
• Credit Analysts at Banks and Other Financial Institutions
• Business Strategists at Corporations

Agenda

Day 1: 09:00 AM - 11:00 AM

Creating an Efficient & Well-Structured Corporate Model

• A review of model objectives, model structure and flexibility using examples of completed models that will be used as references throughout the training.
• Development of historic/projected timing switches that allow you to add new historic financial statements to model and efficient ways to add historic data to a model.
• Setting up assumptions for variables that vary over time and scalar variables that remain constant and that compare historic levels with projected values and facilitate statistical analysis of the assumptions.
• Computation of revenues, operating expense, capital expenditures, pre-tax cash flow, free cash flow, operating assumptions and computation of return on invested capital using the financing and direct approaches.
• Case Study

Day 1: 11:30 AM - 01:00 PM

Enterprise Valuation from Corporate Model & Financial Statements

• Development of enterprise valuation analysis that allows for flexible start dates; flexible terminal dates and holding periods; and different terminal valuation approaches.
• Calculation of financial statements through adding financial routines with a cash flow waterfall to the model in debt and cash balance schedules and using the model to establish a target capital structure.
• Illustration of complexities in corporate models related to asset retirements, income taxes, minority interest and capital expenditures.
• Case Study

Day 1: 02:00 PM - 03:30 PM

Innovations in Corporate Finance Theory

• Solution to IRR Problem of Re-Investment and Ranking with Weighted Average IRR
• Computing Cost of Capital with Market to Book Regression Rather than CAPM
• Demonstration of Flaws in Value Driver Formula: V=Income x (1-g/ROI)/(COC-g)
• Correct Evaluation of WACC using Tax Shield from Interest Expense
• Use of Credit Spread to Derive Debt Beta and More Properly Derive Unlevered Beta

Day 1: 04:00 PM - 05:00 PM

Innovations in Corporate Finance Theory

• Evaluation of Terminal Value Adjustments for Capital Expenditures, Working Capital and Deferred Tax that Depend on Growth
• Adjustments to Free Cash Flow and EV to Enterprise Value Bridge for Deferred Tax, Warranty Cost and Other Items
• Development of Terminal Valuation Techniques for Financial Institutions that Use Market to Book Ratio and ROE from Financial Models
• Evaluation of Political Risk Premiums from Computing Implied Probability of Default
• Case Study

Day 2: 09:00 AM - 11:00 AM

Valuation Using Corporate Model

• Demonstrate financial theory associated with multiples, terminal value and credit analysis using financial models.
• Demonstrate variability in enterprise value and use of the return on invested capital to evaluate the reasonableness of the EBITDA assumptions.
• Development of normalised working capital changes, normalised depreciation expense, normalised capital expenditures and normalised deferred taxes that vary as a function of different terminal growth rates and incorporate derived historic growth rates.

Day 2: 11:30 AM - 01:00 PM

Advanced Valuation & Multiples

• Computation of P/E and EV/EBITDA multiples from growth rates, cost of capital, returns, tax rates and asset life as well as transition periods of each value driver and demonstration of problems with the (1-g/ROIC)/(WACC-g) formula.
• Evaluation of which balance sheet items should be included in the bridge between equity value and enterprise value through creating long-term models that prove whether items should be included in free cash flow or as an adjustment to enterprise value.
• Calculation of value from equity cash flow rather than free cash flow and derivation of equity multiples (P/E or market to book) to evaluation how multiples are affected by return and growth forecasts in the model.

Day 2: 02:00 PM - 03:30 PM

Innovations in Corporate Modelling

• Use of Historic Switch to Make Incorporation of New Financial Statements
• Evaluation of ROIC and Invested Capital Using Switches and SUMPRODUCT
• Development of INTERPOLATE Function to Evaluate Assumptions
• Automation of Scenario Analysis with Scenario Reporter
• Effective Automation of Historic Data Graphs with Flexible Spinner Box
• Resolution of Circular References Related to Interest Expense and Taxes
• Deprecation Techniques that Account for Changing Growth and Implied Retirements
• Development of Techniques to Automate Constant Capital Structure in Financial Models
• Dynamic Goal Seek Functions for Evaluation of Cost of Capital Using P/E Ratios
• User Defined Functions for Computing Stable Capital Expenditures to Depreciation and Other Items

Day 2: 04:00 PM - 05:00 PM

Innovations in Corporate Data Analysis

• Creation of techniques to download stock price data, financial statement data and economic data
• Stock price database that allows you to evaluate IRR’s, volatility and beta for stocks, stock price indices, economic series and commodity prices
• Financial database that allows you to extract and evaluate financial data, financial ratios, and cost of capital across companies
• Extraction of data that enables you to have historic basis for creating financial models
• Interest rate, exchange rate and commodity price databases that include historic evaluation of term structures, volatility and other statistics
• Comprehensive country by country database to evaluate growth and risks across the world

Experts

Christopher KE Tan, Partner, Deals Accounting Advisory, Valuations and SPA, PwC Singapore

Terence Ang, Partner, Valuation Advisory, RSM Singapore

Event Location