Ernst / Häcker Applied International Corporate Finance

2. Auflage 2012
ISBN: 978-3-8006-4463-6
Verlag: Franz Vahlen
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 518 Seiten

Corporate Finance in der Praxis. The authors present all core aspects of Corporate Finance: M&A, Private Equity, Acquisition Financing, IPO, and Going Private. Furthermore, the techniques Due Diligence and Valuation are scrutinised. The book includes various case studies, which help to get a practical understanding and apply the techniques in the user´s day-to-day business. Investment bankers, lawyers, accountants, experts working in strategic departments, consultants, shareholders, management professionals, professors, and students seeking in-depth knowledge of Corporate Finance will profit from the book`s practice oriented approach. The information supplement includes - for students: samples of final written examinations - for professors: Excel solutions for the final written examinations as well as a course syllabus - for business professionals: a fully integrated Excel valuation model covering all spreadsheets analyzed in the valuation section of this book The authors Dr. Dr. Dietmar Ernst is Professor for International Finance at Nürtingen University (Germany) and Director of the German Institute of Corporate Finance. Dr. Dr. Joachim Häcker is Professor for Finance at Munich University, the University of Louisville (USA), as well as Director of the German Institute of Corporate Finance.

Autoren/Hrsg.

Ernst, Dietmar

Häcker, Joachim

Inhaltsverzeichnis

1;Cover;1
2;Zum Inhalt_Autor;2
3;Titel;3
4;Impressum;4
5;Endorsements;5
6;Preface;6
7;Authors;7
8;Content;8
9;Part 1: Mergers & Acquisitions (M&A);22
9.1;Chapter 1: Why Mergers & Acquisitions?;22
9.1.1;1.1 The Term "Mergers & Acquisitions";22
9.1.1.1;1.1.1 Mergers;23
9.1.1.2;1.1.2 Acquisitions;27
9.1.1.3;1.1.3 M&A and business alliances;27
9.1.1.3.1;1.1.3.1 Forms of business alliances;27
9.1.1.3.2;1.1.3.2 M&A versus business alliances;30
9.1.2;1.2 Reasons for and success factors of M&A;31
9.1.3;1.3 M&A of listed companies;34
9.1.3.1;1.3.1 Challenges for listed companies;34
9.1.3.1.1;1.3.1.1 Increased public perception;34
9.1.3.1.2;1.3.1.2 Shareholder structure;35
9.1.3.1.3;1.3.1.3 The target company's share price as an uncertainty factor;35
9.1.3.1.4;1.3.1.4 The bidder company's share price as an uncertainty factor;36
9.1.3.2;1.3.2 Legal characteristics;37
9.1.3.2.1;1.3.2.1 The regulations of § 93 AktG;37
9.1.3.2.2;1.3.2.2 The regulations of § 15 WpÜG;37
9.1.3.2.3;1.3.2.3 The regulations of § 21 WpHG;37
9.1.3.3;1.3.3 Takeover regulations;37
9.1.3.3.1;1.3.3.1 Overview of the "Wertpapiererwerbs- und Übernahmegesetz" (WpÜG) (Security Purchase and Takeover Act);38
9.1.3.3.2;1.3.3.2 The bid process according to the WpÜG;39
9.1.3.3.3;1.3.3.3 Squeeze out;41
9.1.4;1.4 The process of M&A;42
9.2;Chapter 2: Initial Phase (Phase 1);44
9.2.1;2.1 Pitch;44
9.2.2;2.2 Choice of process;46
9.2.2.1;2.2.1 The discrete approach;46
9.2.2.2;2.2.2 Simultaneous bilateral negotiations;46
9.2.2.3;2.2.3 Controlled competitive auction;46
9.2.2.4;2.2.4 Full public auction;46
9.2.3;2.3 Candidate screening and selection;48
9.2.3.1;2.3.1 MBO or MBI;49
9.2.3.2;2.3.2 Financial investors;50
9.2.3.3;2.3.3 Strategic investors;51
9.2.4;2.4 Advisers;53
9.2.4.1;2.4.1 Investment banks;53
9.2.4.2;2.4.2 Accountants and tax advisers;54
9.2.4.3;2.4.3 Lawyers;55
9.2.4.4;2.4.4 Other advisers;55
9.2.5;2.5 Mandate letter;57
9.2.6;2.6 Confidentiality agreement;63
9.3;Chapter 3: Contacting Interested Parties (Phase 2);67
9.3.1;3.1 Documentation;67
9.3.1.1;3.1.1 Anonymous short profile;67
9.3.1.2;3.1.2 Information memorandum;67
9.3.2;3.2 Non-binding offer;68
9.4;Chapter 4: Financial Aspects in an M&A Sales Process (Phase 3);74
9.4.1;4.1 Due diligence;74
9.4.2;4.2 Valuation;74
9.4.3;4.3 Structuring;74
9.5;Chapter 5: Legal Aspects in an M&A Sales Process (Phase 4);78
9.5.1;5.1 Negotiations;78
9.5.2;5.2 Binding offer;81
9.5.3;5.3 Purchase agreement and closing;81
9.5.3.1;5.3.1 Purchase agreement;81
9.5.3.2;5.3.2 Closing;83
10;Part 2: Private Equity;85
10.1;Chapter 1: What is Private Equity all about?;85
10.1.1;1.1 Definitions;85
10.1.2;1.2 Types of investment financing;90
10.1.2.1;1.2.1 Early stage financings (venture capital financings);91
10.1.2.1.1;1.2.1.1 Seed financing;91
10.1.2.1.2;1.2.1.2 Start-up financing;91
10.1.2.1.3;1.2.1.3 First-stage financing;91
10.1.2.2;1.2.2 Later-stage financings (private equity financings);92
10.1.2.2.1;1.2.2.1 Second-stage financing;92
10.1.2.2.2;1.2.2.2 Third-stage financing;93
10.1.2.2.3;1.2.2.3 Fourth-stage financing;93
10.1.3;1.3 Occasions for private equity financing;95
10.1.3.1;1.3.1 Expansion (development capital);95
10.1.3.2;1.3.2 Bridge financing;95
10.1.3.3;1.3.3 Public-to-private (going private);96
10.1.3.4;1.3.4 Succession planning and displacement of existing shareholders;96
10.1.3.5;1.3.5 Spin-off;97
10.1.3.6;1.3.6 Private placement;97
10.1.3.7;1.3.7 Turnaround;98
10.1.3.8;1.3.8 Platform strategy or buy and build strategy;98
10.1.4;1.4 Types of investments;100
10.1.4.1;1.4.1 Open investments;100
10.1.4.2;1.4.2 Indirect investments;101
10.2;Chapter 2: Who drives Private Equity?;103
10.2.1;2.1 Bidder groups for equity capital;103
10.2.1.1;2.1.1 Captive funds;103
10.2.1.2;2.1.2 Public funds;103
10.2.1.3;2.1.3 Independent funds;103
10.2.2;2.2 The role of banks in the private equity business;104
10.2.3;2.3 Investors in private equity capital;106
10.2.3.1;2.3.1 New funds raised according to capital sources;106
10.2.3.2;2.3.2 Geographical distribution in Germany;107
10.2.3.3;2.3.3 New funds raised according to financing phases;108
10.2.3.4;2.3.4 Sectoral distribution of investment;108
10.3;Chapter 3: How are Private Equity firms organized?;110
10.3.1;3.1 Organizational aspects;110
10.3.1.1;3.1.1 Structure of private equity companies;110
10.3.1.1.1;3.1.1.1 Separation of fund and management;110
10.3.1.1.2;3.1.1.2 Subsidiaries;111
10.3.1.2;3.1.2 Management, control and advisory organs;111
10.3.1.3;3.1.3 Inner organization;112
10.3.2;3.2 The investment contract;114
10.3.2.1;3.2.1 Basic types and significant parts of the contract;114
10.3.2.2;3.2.2 Examples of wordings for certain clauses;116
10.3.2.2.1;3.2.2.1 Options;116
10.3.2.2.2;3.2.2.2 Pre-emptive right, right of first refusal, duty to supply information on offer;116
10.3.2.2.3;3.2.2.3 Take-along rights of managers;117
10.3.2.2.4;3.2.2.4 Drag-along rights;118
10.3.2.2.5;3.2.2.5 Exit/Liquidation proceeds preference;118
10.3.2.2.6;3.2.2.6 Antidilution clause;119
10.3.2.2.7;3.2.2.7 Concentration of corporate activities;119
10.3.2.2.8;3.2.2.8 Prohibition of competition and solicitation for seller;119
10.3.2.2.9;3.2.2.9 Provisions regarding exit;120
10.3.2.2.10;3.2.2.10 List of transactions requiring consent;120
10.3.2.2.11;3.2.2.11 Reporting duties;121
10.3.2.3;3.2.3 Adoption of existing contracts, important side contracts and covenants;121
10.3.2.4;3.2.4 Combined investment contracts;122
10.3.2.5;3.2.5 Participation in advisory and control organs;123
10.3.3;3.3 Valuation of private equity investments;125
10.3.3.1;3.3.1 Measuring performance: the internal rate of return (IRR);125
10.3.3.1.1;3.3.1.1 Derivation of the IRR;126
10.3.3.1.2;3.3.1.2 Calculating the IRR using standard spreadsheet software;127
10.3.3.1.3;3.3.1.3 Three levels of IRR advocated by EVCA;128
10.3.3.2;3.3.2 Valuation principles and methodologies;130
10.3.3.2.1;3.3.2.1 Valuation principles;130
10.3.3.2.2;3.3.2.2 Valuation methodologies;132
10.4;Chapter 4: How is Private Equity Business done?;139
10.4.1;4.1 The working approach of private equity companies;139
10.4.1.1;4.1.1 Organizational milestones;139
10.4.1.1.1;4.1.1.1 Recruiting;139
10.4.1.1.2;4.1.1.2 Fund raising;140
10.4.1.2;4.1.2 Project-oriented milestones;141
10.4.1.2.1;4.1.2.1 Deal-flow;141
10.4.1.2.2;4.1.2.2 Due diligence;142
10.4.1.2.3;4.1.2.3 Business plan;143
10.4.1.2.4;4.1.2.4 Investment negotiations;144
10.4.1.2.5;4.1.2.5 Investment support;145
10.4.1.2.6;4.1.2.6 Exit;146
10.4.2;4.2 Acquisition policy and risk management;152
10.4.2.1;4.2.1 Quality controls in the project examination area;152
10.4.2.2;4.2.2 Setting of competences and decision levels;153
10.4.2.3;4.2.3 Selection of projects according to the criteria of company size;153
10.4.2.4;4.2.4 Risk limitation through syndication;153
10.4.2.5;4.2.5 Risk limitation through specialization;154
10.4.3;4.3 Investment purchase abroad;156
10.4.4;4.4 EVCA governing principles;157
10.4.4.1;4.4.1 Governing principles;157
10.4.4.2;4.4.2 Examples;158
10.4.4.2.1;4.4.2.1 Initial considerations;158
10.4.4.2.1.1;4.4.2.1.1 Early stage planning;158
10.4.4.2.1.2;4.4.2.1.2 Investors and marketing;159
10.4.4.2.1.3;4.4.2.1.3 Structuring;159
10.4.4.2.2;4.4.2.2 Fundraising;159
10.4.4.2.2.1;4.4.2.2.1 Initiators;160
10.4.4.2.2.2;4.4.2.2.2 Target investors;160
10.4.4.2.2.3;4.4.2.2.3 Origin of funds;161
10.4.4.2.2.4;4.4.2.2.4 Investors;161
10.4.4.2.2.5;4.4.2.2.5 Structure of the offer: terms of investment;162
10.4.4.2.2.6;4.4.2.2.6 Structure of the documentation;163
10.4.4.2.2.7;4.4.2.2.7 Presentation to investors;164
10.4.4.2.2.8;4.4.2.2.8 Track records and forecasts;165
10.4.4.2.2.9;4.4.2.2.9 Time period for fundraising;166
10.4.4.2.3;4.4.2.3 Investing;166
10.4.4.2.3.1;4.4.2.3.1 Due diligence;166
10.4.4.2.3.2;4.4.2.3.2 Investment decision;167
10.4.4.2.3.3;4.4.2.3.3 Structuring investment;167
10.4.4.2.3.4;4.4.2.3.4 Possible means by which the fund may influence an investee business;168
10.4.4.2.3.5;4.4.2.3.5 Investment agreements and documents;169
10.4.4.2.3.6;4.4.2.3.6 Manager's consent to investee business actions;170
10.4.4.2.3.7;4.4.2.3.7 Cooperation with co-investors and syndicate partners;170
10.4.4.2.3.8;4.4.2.3.8 Co-investment and parallel investment by the manager and executives;171
10.4.4.2.3.9;4.4.2.3.9 Co-investment and parallel investments by fund investors and other third parties;171
10.4.4.2.3.10;4.4.2.3.10 Divestment planning;172
10.4.4.2.4;4.4.2.4 Management of an investment;172
10.4.4.2.4.1;4.4.2.4.1 Investment monitoring;172
10.4.4.2.4.2;4.4.2.4.2 Exercise of investor consents;173
10.4.4.2.4.3;4.4.2.4.3 Follow-on investments;173
10.4.4.2.4.4;4.4.2.4.4 Under-performing investments;174
10.4.4.2.4.5;4.4.2.5 Disposal of an investment;174
10.4.4.2.4.5.1;4.4.2.5.1 Implementation of divestment planning;175
10.4.4.2.4.5.2;4.4.2.5.2 Responsibility for divestment decision-making;175
10.4.4.2.4.5.3;4.4.2.5.3 Warranties and indemnities;175
10.4.4.2.4.5.4;4.4.2.5.4 Should cash always be taken on realization or can shares/earn-outs be accepted?;176
10.4.4.2.4.5.5;4.4.2.5.5 Sales to another fund managed by the same manager;176
10.4.4.2.4.5.6;4.4.2.5.6 Managing quoted investments;177
10.4.4.2.4.6;4.4.2.6 Distribution;178
10.4.4.2.4.6.1;4.4.2.6.1 Distribution provisions in constitution;178
10.4.4.2.4.6.1.1;4.4.2.6.2 Timing of distributions;178
10.4.4.2.4.7;4.4.2.7 Investor relations;179
10.4.4.2.4.7.1;4.4.2.7.1 Reporting obligations;179
10.4.4.2.4.7.2;4.4.2.7.2 Transparency;179
10.4.4.2.4.7.3;4.4.2.7.3 Investor relations;180
10.4.4.2.4.7.4;4.4.2.7.4 Investors' committee;180
10.4.4.2.4.8;4.4.2.8 Winding up of a fund;181
10.4.4.2.4.8.1;4.4.2.8.1 Liquidation;181
10.4.4.2.4.8.2;4.4.2.8.2 Fund documentation;181
10.4.4.2.4.9;4.4.2.9 Management of multiple funds;182
10.4.4.2.4.9.1;4.4.2.9.1 Conflicts of interest;182
10.4.4.2.4.9.2;4.4.2.9.2 Establishment of new funds;182
10.4.4.2.4.10;4.4.2.10 Manager's internal organization;183
10.4.4.2.4.10.1;4.4.2.10.1 Human resources;183
10.4.4.2.4.10.2;4.4.2.10.2 Incentivization;183
10.4.4.2.4.10.3;4.4.2.10.3 Financial resources;184
10.4.4.2.4.10.4;4.4.2.10.4 Procedures and organization;184
10.4.4.2.4.10.5;4.4.2.10.5 Segregation of fund assets;184
10.4.4.2.4.10.6;4.4.2.10.6 Internal reviews and controls;185
10.4.4.2.4.10.7;4.4.2.10.7 External assistance;185
10.4.4.2.4.11;4.4.2.11 List of questions addressed in 'Examples' section;186
11;Part 3: Acquisition Financing;189
11.1;Chapter 1: What makes acquisition financing special?;189
11.1.1;1.1 Definition and challenges;189
11.1.2;1.2 The challenges of acquisition financing;190
11.1.3;1.3 Acquisition financing vs.buy-out/buy-in financing;192
11.1.3.1;1.3.1 Management buy-out (MBO);192
11.1.3.2;1.3.2 Management buy in (MBI);193
11.1.3.3;1.3.3 Leveraged buy-out (LBO);193
11.2;Chapter 2: Who drives acquisition financing?;195
11.2.1;2.1 Acquisition financing – parties involved and their various motives;195
11.2.1.1;2.1.1 Senior partners;195
11.2.1.2;2.1.2 Strategic investors;196
11.2.1.3;2.1.3 Financial investors (private equity investors);196
11.2.1.4;2.1.4 Management;196
11.2.1.5;2.1.5 Financial institutions;197
11.2.1.6;2.1.6 Advisors;198
11.2.2;2.2 Main goals of debt capital investors;198
11.2.2.1;2.2.1 Low debt capital ratio;198
11.2.2.2;2.2.2 Collateral;199
11.2.2.3;2.2.3 Marketability – loan syndication;199
11.2.2.4;2.2.4 Return on debt;200
11.2.3;2.3 Main goals of equity capital investors;201
11.2.3.1;2.3.1 Return on equity;201
11.2.3.2;2.3.2 Limited liability;201
11.2.3.3;2.3.3 Contract flexibility;202
11.2.3.4;2.3.4 Minimum expenses;202
11.3;Chapter 3: How does acquisition financing work?;203
11.3.1;3.1 Functionality of leveraged buy-outs;203
11.3.2;3.2 Exploiting the leverage effect;204
11.3.3;3.3 Improvement of cash flows;205
11.3.3.1;3.3.1 Fixed assets and working capital optimization;205
11.3.3.2;3.3.2 Strategic reorientation of the enterprise;205
11.3.3.3;3.3.3 Efficient capital allocation;206
11.3.3.4;3.3.4 Know-how transfer by financial investors;206
11.3.3.5;3.3.5 Elimination of underperformance in the enterprise;206
11.3.3.6;3.3.6 Asset stripping;206
11.3.4;3.4 Improvement of company valuation;207
11.3.4.1;3.4.1 Increase purchase price multiple due to improved returns and profits;207
11.3.4.2;3.4.2 Increase purchase price multiple due to an optimized firm size;207
11.3.5;3.5 Integral parts of successful leveraged buy-outs;208
11.3.5.1;3.5.1 Attractive LBO market environment;208
11.3.5.2;3.5.2 LBO proficient company;208
11.3.5.3;3.5.3 Exit possibilities and increase in company value;209
11.3.5.4;3.5.4 Management;209
11.3.5.5;3.5.5 Track record and firm ethics of financial investor;210
11.3.5.6;3.5.6 Fair price;210
11.3.5.7;3.5.7 Fiscal optimization;212
11.3.5.8;3.5.8 Feasible and sustainable financing structure;212
11.4;Chapter 4: How to structure an acquisition;216
11.4.1;4.1 Acquisition financing – structuring the project under company law;216
11.4.1.1;4.1.1 Three-step takeover approach;216
11.4.1.2;4.1.2 Respective interests of equity capital investors;218
11.4.1.3;4.1.3 Respective interests of debt capital investors;218
11.4.1.4;4.1.4 Legal restrictions;218
11.4.2;4.2 Asset deal vs.share deal;219
11.4.3;4.3 Acquisition financing – structuring the financing tools;220
11.5;Chapter 5: How to determine the financial structure of an acquisition financing;224
11.5.1;5.1 Determination of the debt service ability;224
11.5.2;5.2 Acquisition financing – role of equity capital;227
11.5.2.1;5.2.1 Share capital;227
11.5.2.2;5.2.2 Shareholder loans;227
11.5.3;5.3 Acquisition financing – role of outside capital;229
11.5.3.1;5.3.1 Senior term debt;229
11.5.3.2;5.3.2 Working capital facilities;232
11.5.4;5.4 Mezzanine capital;235
11.5.4.1;5.4.1 Particular characteristics of mezzanine capital;235
11.5.4.2;5.4.2 Mezzanine capital in the context of acquisition financings;236
11.5.4.2.1;5.4.2.1 Mezzanine capital – bridging the gap;236
11.5.4.2.2;5.4.2.2 Mezzanine capital – payment structure and yield expectations;237
11.5.4.2.3;5.4.2.3 Mezzanine capital – contractual structuring;237
11.5.4.3;5.4.3 Different forms of mezzanine capital;239
11.5.4.3.1;5.4.3.1 Equity mezzanine instruments;240
11.5.4.3.2;5.4.3.2 Debt mezzanine instruments;241
11.5.5;5.5 Capital structure and key figures;245
11.6;Chapter 6: What kind of contracts are used in acquisition financing?;248
11.6.1;6.1 Credit agreement;248
11.6.1.1;6.1.1 Precedent conditions;249
11.6.1.2;6.1.2 Representations and warranties;249
11.6.1.3;6.1.3 Covenants;250
11.6.2;6.2 Collateral agreement;253
11.6.3;6.3 Consortium agreement;253
11.6.4;6.4 Intercreditor agreement;253
11.6.5;6.5 Purchase agreement;254
11.7;Chapter 7: How is acquisition financing done?;256
11.7.1;7.1 Pre-deal screening;256
11.7.1.1;7.1.1 Business plan;256
11.7.1.2;7.1.2 Due diligence;257
11.7.1.3;7.1.3 Financing case;259
11.7.1.4;7.1.4 Financing structure and term sheet;259
11.7.1.5;7.1.5 Commitment letter;260
11.7.1.6;7.1.6 Contract documentation;260
11.7.1.7;7.1.7 Syndication;260
11.7.1.8;7.1.8 Deal signing and closing;262
11.7.2;7.2 Post-deal monitoring;262
12;Part 4: Initial Public Offering;265
12.1;Chapter 1: Why Initial Public Offering?;265
12.1.1;1.1 Definition and reasons for an IPO;265
12.1.2;1.2 Pros and cons;268
12.1.2.1;1.2.1 Benefits and opportunities;269
12.1.2.2;1.2.2 Drawbacks and continuing obligations;270
12.1.3;1.3 Pre-IPO strategy;273
12.2;Chapter 2: What is the roadmap for a successful IPO?;277
12.2.1;2.1 Phase one: planning and preparation;277
12.2.1.1;2.1.1 Checking the pre-requisites for going public;277
12.2.1.1.1;2.1.1.1 Stock corporation;277
12.2.1.1.2;2.1.1.2 Financial reporting;279
12.2.1.1.3;2.1.1.3 Business plan;280
12.2.1.2;2.1.2 Equity story;280
12.2.1.3;2.1.3 Issue concept;283
12.2.2;2.2 Phase two: structuring;285
12.2.2.1;2.2.1 Recruiting syndicate banks;285
12.2.2.1.1;2.2.1.1 Coordinators;285
12.2.2.1.2;2.2.1.2 Syndicate structure;287
12.2.2.1.3;2.2.1.3 Designations;289
12.2.2.1.4;2.2.1.4 Beauty contest and selection criteria;290
12.2.2.1.5;2.2.1.5 Agreements with coordinators;292
12.2.2.1.6;2.2.1.6 Underwriting commissions;293
12.2.2.2;2.2.2 IPO consultants;294
12.2.2.3;2.2.3 Legal advisers;295
12.2.2.4;2.2.4 Auditors and tax advisers;297
12.2.2.5;2.2.5 IR/PR agencies;297
12.2.2.6;2.2.6 Due diligence;298
12.2.2.7;2.2.7 Valuation;300
12.2.2.8;2.2.8 Prospectus;302
12.2.2.9;2.2.9 Corporate governance;305
12.2.3;2.3 Phase three: marketing: investor relations, pre-marketing, and road show;306
12.2.3.1;2.3.1 Investor relations;306
12.2.3.2;2.3.2 Pre-marketing;307
12.2.3.2.1;2.3.2.1 Analyst meetings;307
12.2.3.2.2;2.3.2.2 Research;307
12.2.3.3;2.3.3 Road show;310
12.2.4;2.4 Phase four: pricing, allocation and stabilisation;311
12.2.4.1;2.4.1 Pricing;311
12.2.4.1.1;2.4.1.1 Pricing methods;311
12.2.4.1.1.1;2.4.1.1.1 Fixed-price method;311
12.2.4.1.1.2;2.4.1.1.2 Bookbuilding;311
12.2.4.1.2;2.4.1.2 Pricing structure;312
12.2.4.1.3;2.4.1.3 Pricing mechanism;312
12.2.4.2;2.4.2 Allocation;315
12.2.4.2.1;2.4.2.1 Allocation to institutional investors;315
12.2.4.2.2;2.4.2.2 Allocation to retail investors;316
12.2.4.2.3;2.4.2.3 Employee equity compensation programs;317
12.2.4.2.4;2.4.2.4 Friends & family program;317
12.2.4.3;2.4.3 Stabilization;318
12.2.4.3.1;2.4.3.1 Greenshoe (over-allotment option);318
12.2.4.3.2;2.4.3.2 Naked short;319
12.2.4.3.3;2.4.3.3 Naked long;319
12.2.5;2.5 Phase five: life as a public company;320
12.2.5.1;2.5.1 Ad-hoc disclosures;320
12.2.5.2;2.5.2 Insider information and compliance;321
12.2.5.3;2.5.3 Transparency for capital markets;322
12.2.5.4;2.5.4 Annual financial statements and quarterly reports;323
12.2.5.5;2.5.5 Analyst conferences and research;325
12.2.5.6;2.5.6 Corporation action timetable;325
12.2.6;4.5.7 Investor relations;326
13;Part 5: Going Private;329
13.1;Chapter 1: Why go private?;329
13.1.1;1.1 Definition of going private;329
13.1.2;1.2 Going private and going dark;330
13.1.2.1;1.2.1 Going dark;330
13.1.2.2;1.2.2 Similarities and differences between going private and going dark;332
13.1.3;1.3 Motives and success factors for going private;333
13.1.3.1;1.3.1 Reasons for going private;333
13.1.3.2;1.3.2 Benefits of going private;334
13.1.3.3;1.3.3 Risks of going private;335
13.1.4;1.4 Candidates for going private transactions;336
13.1.5;1.5 Recent transactions in the U.S., U.K. and Germany;337
13.2;Chapter 2: Going private in Germany;339
13.2.1;2.1 What is the legal framework of going private transactions in Germany?;342
13.2.2;2.2 How can delisting be done?;343
13.2.2.1;2.2.1 Ex officio delisting;343
13.2.2.2;2.2.2 Hot delisting;343
13.2.2.3;2.2.3 Cold delisting;344
13.2.2.3.1;2.2.3.1 Squeeze-out;344
13.2.2.3.2;2.2.3.2 Integration;346
13.2.2.3.3;2.2.3.3 Conversion, merger and corporate division;347
13.2.2.3.4;2.2.3.4 Liquidation and sale of all assets;348
14;Part 6: Due Diligence;350
14.1;Chapter 1: Why Due Diligence?;331
14.1.1;1.1 Definition of the term due diligence;350
14.1.2;1.2 Motives for conducting a due diligence;351
14.1.3;1.3 Objectives of the due diligence process;352
14.1.3.1;1.3.1 Reducing the information asymmetry;352
14.1.3.2;1.3.2 Identifying and examining the synergy potential;352
14.1.3.3;1.3.3 Linking the strategic preparation with the integration period;353
14.1.3.4;1.3.4 Providing reps and warranties;353
14.1.4;1.4 Participants in the due diligence process;353
14.1.5;1.5 Information sources for conducting due diligence;354
14.1.5.1;1.5.1 Internal sources of information;354
14.1.5.1.1;1.5.1.1 The data room;354
14.1.5.1.2;1.5.1.2 Interviewing the management;354
14.1.5.1.3;1.5.1.3 Site visits;355
14.1.5.2;1.5.2 External sources of information;355
14.2;Chapter 2: What is a data room?;356
14.2.1;2.1 The data room;356
14.2.2;2.2 Data room checklist;358
14.2.2.1;2.2.1 Corporate organization;358
14.2.2.2;2.2.2 Employees;359
14.2.2.3;2.2.3 Litigation;359
14.2.2.4;2.2.4 Pensions;359
14.2.2.5;2.2.5 Taxation;359
14.2.2.6;2.2.6 Agreements;360
14.2.2.7;2.2.7 Insurances;360
14.2.2.8;2.2.8 Financial documents;360
14.2.2.9;2.2.9 Intellectual property;360
14.2.2.10;2.2.10 Property;360
14.2.2.11;2.2.11 Products/services/technology;361
14.3;Chapter 3: What is done in a due diligence?;362
14.3.1;3.1 The strategic audit;362
14.3.1.1;3.1.1 Assessing the target company's forecasting process;362
14.3.1.2;3.1.2 Steps for formulating a business plan;362
14.3.1.3;3.1.3 What happens with the business plan?;363
14.3.1.4;3.1.4 Challenging the business plan;363
14.3.2;3.2 The financial audit;368
14.3.2.1;3.2.1 Assessing internal controls;368
14.3.2.2;3.2.2 Assessing annual reports;368
14.3.3;3.3 The legal audit;372
14.3.3.1;3.3.1 The legal foundation;353
14.3.3.2;3.3.2 The legal risk factors;372
14.3.3.3;3.3.3 The internal legal structure;373
14.3.3.4;3.3.4 The external legal structure;373
14.3.4;3.4 Conducting a tax due diligence;374
14.3.4.1;3.4.1 The scope of the tax due diligence;374
14.3.4.2;3.4.2 Past periods that were not covered by tax audits;375
15;Part 7: An Overview of Corporate Valuation;377
15.1;Chapter 1: Why Valuation?;377
15.1.1;1.1 Valuation methods at a glance;377
15.1.2;1.2 Occasions and purposes of valuation;379
15.1.3;1.3 General framework;382
15.1.3.1;1.3.1 Valuation: art or science?;382
15.1.3.2;1.3.2 Value vs.price;382
15.2;Chapter 2: How to carry out a valuation;384
15.2.1;2.1 Valuation techniques;384
15.2.2;2.2 Methods of individual valuation;384
15.2.2.1;2.2.1 Net asset value based on reproduction values;385
15.2.2.2;2.2.2 Net asset value based on liquidation values;385
15.2.3;2.3 The Automotive Supplier Case Study;387
15.3;Chapter 3: The DCF method;390
15.3.1;3.1 Overview of the various DCF approaches;390
15.3.1.1;3.1.1 The WACC approach;390
15.3.1.2;3.1.2 Adjusted present value (APV) approach;392
15.3.1.3;3.1.3 Equity approach (net approach);393
15.3.2;3.2 Calculation of the cash flows and terminal value;395
15.3.2.1;3.2.1 Calculation of the operating free cash flows according to the WACC approach and the APV approach;395
15.3.2.2;3.2.2 Calculation of the flows to equity in the equity approach;398
15.3.2.3;3.2.3 Calculation of the terminal value;400
15.3.2.3.1;3.2.3.1 The two-phase model for the determination of the value of a company with infinite lifetime;400
15.3.2.3.2;3.2.3.2 Determination of the terminal value;401
15.3.2.3.3;3.2.3.3 Determination of the detail planning horizon (detail planning period);405
15.3.3;3.3 Determination of the discount rate;407
15.3.3.1;3.3.1 Determination of the discount rate subject to the respective DCF method;407
15.3.3.2;3.3.2 Determination of the market value-weighted capital structure;409
15.3.3.2.1;3.3.2.1 Determination of the current capital structure;409
15.3.3.2.2;3.3.2.2 Target capital structure;411
15.3.3.3;3.3.3 Cost of equity;414
15.3.3.3.1;3.3.3.1 Determination of the interest rate of a risk-free investment;414
15.3.3.3.2;3.3.3.2 Risk premium;419
15.3.3.3.2.1;3.3.3.2.1 Systematization of risks;419
15.3.3.3.2.2;3.3.3.2.2 Determination of the risk premium with the help of capital market theory models;420
15.3.3.3.2.2.1;3.3.3.2.2.1 Market risk premium;421
15.3.3.3.2.2.2;3.3.3.2.2.2 Significance of the Beta factor;422
15.3.3.3.2.2.3;3.3.3.2.2.3 Structure of the Beta factor (dependence of the Beta factor on the leverage);423
15.3.3.3.2.2.4;3.3.3.2.2.4 Determination of the Beta factor out of past values;425
15.3.3.3.2.2.5;3.3.3.2.2.5 Beta factors for non-publicly listed companies;428
15.3.3.3.2.2.6;3.3.3.2.2.6 Determination of Beta factors for conglomerates;432
15.3.3.3.2.2.7;3.3.3.2.2.7 Estimation of future Beta factors;433
15.3.3.3.2.2.8;3.3.3.2.2.8 Model assumptions of the CAPM;433
15.3.3.3.2.3;3.3.3.2.3 Agios in the calculation of the risk premium;434
15.3.3.3.2.3.1;3.3.3.2.3.1 Agios for the unsystematic risk;434
15.3.3.3.2.3.2;3.3.3.2.3.2 Mobility agio (liquidity agio, fungibility agio);435
15.3.3.3.2.3.3;3.3.3.2.3.3 Agio for personal liability;435
15.3.3.3.2.3.4;3.3.3.2.3.4 Majority disagio (package agio);435
15.3.3.4;3.3.4 Cost of debt;438
15.3.3.4.1;3.3.4.1 But where can the information on the risk premium which is currently valid in the market be obtained?;438
15.3.4;3.4 Calculation of the enterprise value;442
15.3.5;3.5 Period-specific WACC;448
15.4;Chapter 4: The trading multiples method;451
15.4.1;4.1 Basic principle and procedure;451
15.4.1.1;4.1.1 The procedure of multiples valuation;451
15.4.1.2;4.1.2 Creation of multiples;452
15.4.1.3;4.1.3 Calculation of the company value;453
15.4.2;4.2 Presentation of the different multiples;454
15.4.2.1;4.2.1 Equity value vs.entity value multiples;454
15.4.2.2;4.2.2 Trading vs.transaction multiples;456
15.4.2.3;4.2.3 Overview of the different multiples;457
15.4.2.4;4.2.4 Multiples based on balance sheet figures – price-book-value;458
15.4.2.5;4.2.5 Multiples based on profit & loss statement figures;460
15.4.2.5.1;4.2.5.1 Sales multiples;461
15.4.2.5.2;4.2.5.2 EV/EBITDA multiple;463
15.4.2.5.3;4.2.5.3 EV/EBITA multiple;464
15.4.2.5.4;4.2.5.4 EV/EBIT multiple;465
15.4.2.5.5;4.2.5.5 Price-earnings-ratio;466
15.4.2.6;4.2.6 Cash flow multiples;467
15.4.2.7;4.2.7 Non-financial multiples;468
15.4.2.8;4.2.8 Consideration of growth;469
15.4.3;4.3 Calculation of the multiples of the peer companies;471
15.4.3.1;4.3.1 Selection of the peer companies;471
15.4.3.2;4.3.2 Selection of the valuation period;475
15.4.3.3;4.3.3 Selection of the multiple;477
15.4.3.4;4.3.4 Collection and preparation of the information;478
15.4.3.4.1;4.3.4.1 Market value of the equity and enterprise value;478
15.4.3.4.2;4.3.4.2 Determination of the reference figures: annual report figures;479
15.4.3.4.3;4.3.4.3 Determination of the reference figures: estimations;479
15.4.3.5;4.3.5 Information preparation and multiples calculation based on the example of Beru AG;482
15.4.3.5.1;4.3.5.1 Market value of the equity;482
15.4.3.5.2;4.3.5.2 Enterprise value;482
15.4.3.5.3;4.3.5.3 Calculation of past-oriented multiples;482
15.4.3.5.3.1;4.3.5.3.1 Determination of the reference figures of the single multiples from the annual report figures;482
15.4.3.5.3.2;4.3.5.3.2 Calculation of the multiples;485
15.4.3.5.4;4.3.5.4 Calculation of future-oriented multiples;486
15.4.3.5.4.1;4.3.5.4.1 Collection of the estimations;486
15.4.3.5.4.2;4.3.5.4.2 Verification of the estimations;489
15.4.3.5.4.3;4.3.5.4.3 Interpolation in case of a business year deviating from the calendar year;490
15.4.3.5.4.4;4.3.5.4.4 Calculation of the multiples;492
15.4.3.6;4.3.6 Market value vs.book value for minority interests and non-fully consolidated participations;494
15.4.3.6.1;4.3.6.1 Consideration of minority interests in the example of Peugeot and Faurecia;495
15.4.3.6.2;4.3.6.2 Consideration of non-consolidated participations based on the example of Renault and Nissan;497
15.4.4;4.4 Multiples valuation for Automotive Supplier GmbH;499
15.4.4.1;4.4.1 Determination of the peer companies' multiples;499
15.4.4.2;4.4.2 Aggregation of the multiples;508
15.4.4.3;4.4.3 Calculation of the company value of Automotive Supplier GmbH;512
15.5;Chapter 5: The transaction multiples method;516
15.5.1;5.1 Valuation conception;516
15.5.2;5.2 Prevalence and application of the valuation method;516
15.5.3;5.3 Thoughts on the practical application of transaction multiples;517
15.5.3.1;5.3.1 Preferred multiples;517
15.5.3.2;5.3.2 Determination of relevant comparable transactions;519
15.5.3.2.1;5.3.2.1 Company-specific factors;519
15.5.3.2.2;5.3.2.2 Transaction-specific factors;519
15.5.3.3;5.3.3 Data collection and calculation;520
15.5.3.3.1;5.3.3.1 Calculation of the transaction multiples;520
15.5.3.3.2;5.3.3.2 Financial data of the valuation object;523
15.5.4;5.4 Sector-specific issues and regional differences;524
15.5.4.1;5.4.1 The relevance of the sector and the regional presence for transaction multiples;524
15.5.4.2;5.4.2 Reasons and implications;525
15.5.5;5.5 Takeover premiums;526
15.5.5.1;5.5.1 Significance of the takeover premium;526
15.5.5.2;5.2.2 Reasons for takeover premiums;528
15.5.5.2.1;5.2.2.1 Undervaluation of the target company;528
15.5.5.2.2;5.2.2.2 Compensation of synergy effects;529
15.5.5.2.3;5.2.2.3 Manager hybris;529
15.5.5.2.4;5.5.2.4 Control premium;529
15.5.5.2.5;5.2.2.5 Bidder competition vs.exclusive negotiations;530
15.5.6;5.6 Case study;531
15.5.7;5.7 Critique of the valuation methodology;532
16;Index;535