Private Equity for Lawyers

This two day workshop seeks to address the following questions: Why is the private capital market becoming more and more significant? What are the changes in our understanding of applied corporate finance theory that have facilitated this process? What do the terms used by venture capitalists mean? What is the structure of a typical transaction? What key business risk factors drive the structure? What are the typical financial instruments used in these transactions? What effect do these structures have on business risk? What information is required to properly assess transaction risk?
Day 1 INTRODUCTION What is Private capital? Why is private capital becoming more and more significant? What is corporate finance? Foresight and hindsight in corporate finance Private capital and corporate finance THE COST OF CAPITAL The cost of debt to the business The equity risk premium, beta and the cost of equity Implications of the underlying corporate finance theory on the quality of estimates Case study: calculating the cost of capital FINANCING STRUCTURES The relationship between financing structures and cash flow VALUATION USING CASH FLOWS Valuing a project Mini case - Speculative building project Valuing a business - Understanding free cash flow Mini case - Beautific The seven value drivers VALUE DEVELOPMENT The need for growth The growth options Adding value real or pyrrhic? Financial engineering versus real synergies THE HISTORY OF VENTURE CAPITAL IN EUROPE Overview of current activity in the market Overview of the activities of a private capital fund Introduction to terminology A typical private capital transaction HOW IS IT DONE? Structure 1 – example of a basic leveraged structure The limitations on leverage The incentives to management Hurt money, retention of management Day 2 THE NATURE AND IMPACT OF DIFFERENT CAPITAL TYPES Senior debt Subordinated ( Junior) debt Junk debt Mezzanine finance Equity, who provides it and where from STRUCTURING Structure 2 – example of a leveraged structure with many layers of debt Risk mitigation through due diligence Elimination of information asymmetry The use of inter creditor agreements Case study: Example of buyout STRENGTHS & WEAKNESSES IN THE MODEL The ideal leveraged buyout Fundamental market inefficiencies Disposal problems Valuation issues CURRENT MARKET ISSUES The herd instinct – bankers The herd instinct – private equity funds Leveraged recapitalization Fund of funds Possible negative scenarios for the market Discussion of the current realities in the private capital market. CREDIT RISK ANALYSIS Methodology for assessing the default risk of a leveraged buyout Overview of the credit process Checklist of tasks to perform Case study: Simple discussion cases of buyout examples. MONITORING PRIVATE EQUITY ACTIVITY Monitoring guidelines Scenarios implying increasing default risk Case study: Examples of buyouts and their analysis CONCLUSIONS The ideal buyout