Investment Banking: M&A and Initial Public Offerings

Overview

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This course focuses on examining various practical applications of the fundamental financial analysis and valuation techniques employed in the investment banking industry. Specifically, we will examine how to analyze how a private equity firm or other financial sponsor completes a leveraged buyout of a company, how a public company analyzes the impact of acquiring a company on its earnings per share, and how a company completes an initial public offering. The course will benefit anyone who desires to increase their ability to understand and execute M&A and capital markets transactions, including (but not limited to), entrepreneurs, consultants, bankers, investors, analysts, corporate managers, marketers, strategists, and dealmakers of all types.

Syllabus

Course Introduction and Module 1: Introduction to Mergers and Acquisitions

This module begins with describing the different types of M&A projects and roles investment banks play in them. It then moves on to the motivations and strategies which drive M&A transactions, the different approaches to selling a business, and the process steps to running a sell-side auction process. Finally, the module explores how buyers finance, structure, and analyze M&A transactions.

Module 2: Leveraged Buyout Analysis

Most of the M&A deals that take place in today’s market are completed by private equity firms. The vast majority of these transactions are classified as “leveraged buyouts (LBOs)”, as the consideration is a mix of equity and debt (leverage). This module will explore how a private equity firm determines the price that it can pay for a specific target company in an LBO transaction given an assumed return threshold, financial forecast and capital structure.

Module 3: Merger Consequences Analysis

When a corporation acquires a business, in addition to assessing the target’s standalone valuation, it will also assess whether the completion of the transaction will have a positive impact on its prospective earnings per share (EPS). This module will explore how an acquirer analyzes whether the acquisition has an accretive (positive) or dilutive (negative) impact on its EPS, given assumptions of the target’s valuation, expected transaction synergies, a proposed financing structure, and the impact of both financial and accounting transaction adjustments. This module will also demonstrate how to prepare a pro forma balance sheet for the buyer given the specifics of the M&A transaction.

Module 4: Overview of Initial Public Offerings (IPOs)

Owners of businesses sometimes decide to take their business public as an alternative to an outright sale. This model explores the similarities between selling and an IPO as well as the differences. This module will define commonly used IPO terms and discuss the IPO process on a stage by stage basis. Finally, this module will highlight the key IPO valuation considerations and end with discussing what happens after a company is public.