Oxford Finance Lab. Oxford Master in Financial Economics Master in Law & Finance Master in Business Administration (focus in finance) Offered to

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1 update Oxford Finance Lab Offered to Oxford Master in Financial Economics Master in Law & Finance Master in Business Administration (focus in finance) by Oxford SBS Careers Oxford SBS Finance Faculty Group Oxford Private Equity Institute designed, developed and offered by Andreas T. Angelopoulos , Andreas T. Angelopoulos, All rights reserved. No part of this publication may be reproduced, stored in any system or posted in a web site, used in a spreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the author.

2 Oxford Finance Lab Introduction Students will have the opportunity to understand the main theoretical concepts, instruments and models required for their finance courses, electives and interviews. They will acquire the execution skills required for entry investment banking and investment level positions in: M &A, Leverage Finance, Project & Infrastructure Finance, Distress & Restructuring, Valuation, Equity Research, Capital Markets, Asset Management, Private Equity (Growth Capital, LBO, Distress, Infrastructure). The Lab will cover: A. Finance & Valuation Modelling Debt, Q-Equity and Equity Finance Instruments Understand the concepts of Enterprise Value, Equity Value, IRR The Cycle of the Business, Operational Assumptions & Model Financial Statements & Links Valuation B. Challenges: Comparables (Transaction and Trading) IRR method (LBO and Growth Capital) DCF (APV and WACC) Football Field, Risk & Sensitivity Analysis Bridgepoint Private Equity Challenge Hermes Private Markets Challenge Jefferies Challenge C. Education (Cases) Network Investment banks: Goldman Sachs, Rothschild, Houlihan Lockey, Societe Generale, Jefferies, Morgan Stanley, Commerzbank Private Equity Funds: Advent, Bridgepoint, Bayside, Carlyle, CDC, Denham, Oak Tree Capital, Terra Firma, Hermes 1

3 A. Finance modelling Introduction to finance instruments & main concepts Debt and Quasi Equity, Equity Finance Instruments Introduction STEP B - LOOKING THE ENTRY Debt or Equity Sources EqV CO & Post Types MV of = Finance 37.5 / (1+50%)ˆ5 = 4.9 The finance instruments EqV CO Pre MV = Post MV - I = = 1.4 Debt Finance instruments (Loans) Senior - model Junior Number - model of Shares = (EqV / Share Price) Mezzanine - model Entry Net Income, Multiple PIK - model Capex - model RCF - model Debt Finance instruments (Bonds) High Yield Bonds - model PIK Bonds Corporate bonds Self Issued bonds Enterprise Value, Equity Value, IRR concepts Quasi Equity & Equity Finance instruments Quasi Equity Convertible Bond (public or private company) Shareholder Loan - model Preference Shares Equity Preferred Ordinary shares Ordinary Shares Enterprise Value, Equity Value, IRR EV Equity Value IRR A modelliing exercise in excel understanding the various instruments. 2

4 Introduction to operational model & financial statements Operational Model - Financial Statements The Cycle of Business The Financial Statements The main Links A modelling exercise in excel - how to build the : Operating assumptions Operational model (history, projections, key figures, net WC) Financial Statements Income Statement Cash Flow Balance Sheet 3

5 Introduction to valuation modelling - Comparables Comparables Valuation A modelling exercise in excel - how to build the : Select the comparable companies (public and private) Identify the required financial information Define the period taking into account economic cyclicality and volatility Calculate the statistics, ratios and multiples Benchmark the comparables Determine valuation Databases to use: Thomson IB and Capital IQ 4

6 Introduction to valuation modelling - IRR method LBO Valuation - simple model LBO - advanced model A modelling exercise in excel - a LBO finance model Determine the sources and uses of funds Define the assumptions of the model Define the debt schedule and pricing Calculate the debt schedule Forecast the income statement Calculate the cash flow & cash balance Calculate the credit statistics Calculate the IRR and sensitivity analysis A modelling exercise in excel - a LBO finance advanced model Determine the sources and uses of funds Define the assumptions of the model Define the debt schedule and pricing Calculate the debt schedule and the SHL repayment Forecast the income statement Calculate the cash flow & cash balance Calculate the cash sweep Adjust the Balance Sheet Forecast the Balance Sheet Calculate the credit statistics Calculate the IRR and sensitivity analysis Debt and Investment graph analysis 5

7 Introduction to valuation modelling - DCF DCF Valuation: WACC DCF Valuation: APV A modelling exercise in excel - how to build the : Key growth drivers and income statement Project target s un-levered FCF Calculate the WACC (using capital structure and cost of equity CAPM) Determine the Terminal Value Calculate the PV and Valuation Sensitivity analysis A modelling exercise in excel - how to build the : Key growth drivers and income statement Calculate the discount rate, used to discount the CF and Terminal Value (TV) to the present using the unlevered cost of equity (CAPM) Project the target s Cash Flows ignoring the capital structure and discount them with the cost of equity Determine the Terminal Value (TV), to quantify the remaining value of the target after the projection period Calculate the tax benefits associated with the capital structure Determine the Valuation: a) the PV of FCF, PV of TV and PV of Tax shields b) Enterprise (EV) Implement a Sensitivity Analysis on the discount rate and Exit Multiple of Terminal Value 6

8 Introduction to valuation modelling - IRR method Growth Capital Capital increase or Shareholder Liquidity Financial Structuring - Key considerations The concept of Pre Money and Post Money valuation IRR method, EQV/NI, no dilution, no share options IRR method, EV/EBITDA, no dilution, no share options A modelling exercise using a simple IRR model Antidilution protection (Full and weighted average ratchet) A short case on antidilution Liquidation preference (simple and participating) A short case on liquidation preference Financial Modeling & Valuation methodology A modelling case - a Growth Capital model using convertible shareholder loan 7

9 Challenges Cases towards Education - Career Bridgepoint Challenge Jefferies Challenge Hermes Challenge Investment Banking M & A Financial Sponsors Leverage Finance Private Equity Growth Capital LBO Capital Markets (Equity) Asset Management Equity Research Valuation Private Wealth Management Asset Management Private Equity Pension Fund Family Offices Co investments Funds of Funds Cases by Banks and Funds Investment Banking Private Equity M & A Capital Markets Distress & Restructuring Leverage, Project & Infrastructure Finance Growth Capital LBO Distress Infrastructure 8

10 A. Challenges Bridgepoint Challenge Jefferies Challenge* Introduction to Challenge by Bridgepoint Challenge: Investment proposal, Finance & Valuation Model Seminar by Bridgepoint Case by Bridgepoint Awards in Oxford (Cash award) One Bridgepoint Introduction to Challenge by Jefferies Challenge: Research report, Finance & Valuation Model Cases, Guidelines and Reports by Jefferies Mentor allocated by Jefferies Awards in London (internship) Network with Jefferies Network with Bridgepoint 9

11 A. Challenges Bridgepoint Challenge Time Schedule Introduction to Challenge by Bridgepoint Challenge: Investment Proposal, Finance & Valuation Model Seminar by Bridgepoint Case by Bridgepoint Awards in Oxford (Cash award) One Bridgepoint Keeping in Touch - Network with Bridgepoint 13th October, 2014: Introduction to Private Equity, Bridgepoint and the Bridgepoint Challenge 7th November, 2014 : Registration closes (group members) 14 th of November, 2014: Deadline for submission of questions to be covered at 24th November seminar 24th November, 2014: Bridgepoint Seminar on Shaping an Investment Case to include examples, tips on writing the final presentation, answering questions submitted in advance 16th January, 2015: Deadline for submission of draft presentation & model, and questions to be covered at 26th January seminar [Date TBC] Bridgepoint Seminar on "Leveraged Finance from a Private Equity Perspective "26th January, 2015: Pets at Home Bridgepoint Case Study, Wrap-Up Seminar, answering questions submitted in advance 9th February, 2015: Deadline for submission of entries 11th February, 2015: Top 10 best groups review by Bridgepoint/AA 23rd February, 2015: Awards Dinner to announce winners - Keeping in Touch [Date TBC] One Bridgepoint (3 winning teams in London) 10

12 B. Challenges Jefferies Challenge* Time schedule Introduction to Challenge by Jefferies Challenge: Research report, Finance & Valuation Model Cases, Guidelines and Reports by Jefferies Mentor allocated by Jefferies Workshop in Oxford by Jefferies Awards in London (internship) Network with Jefferies 15th October, 2014: Introduction to Asset Management, Capital Markets & Equity Research, Jefferies and the Jefferies Challenge 29th October, 2014 : Registration is closing (CV & CL) 4th November, 2014: Jefferies announces the final participants, sectors and their mentors 1 December, 2014: Jefferies workshop, last year winner 12th January, 2015: Deadline for submission of the interim report and valuation model to Jefferies (A) 23rd February, 2015: Deadline for final report and valuation model to AA & Jefferies (B) 3 rd March, 2015: Awards Dinner to announce winners internship 11

13 C. Challenges Hermes Challenge Time schedule Introduction to Challenge by Hermes Challenge: Report, Finance & Valuation Model Guidelines and Reports by Hemres Workshop by Hermes Awards in London (internship) Network with Hermes 26th November, 2014: Introduction to Asset Management, and Private Equity allocation, Hermes and the Hermes Challenge 8th December, 2014 : Registration is closing (CV & CL) [26th January], 2015: Hermes workshop 27rd February, 2015: Deadline for final report and model to Oxford & Hermes [4 th March], 2015: Awards Dinner to announce winners internship 11

14 D. Education (Cases) - Network Investment Banks Private Equity Funds / Asset Management Houlihan Lockey (Distress & Restructuring) Bridgepoint (LBO) Goldman Sachs (Mergers & Acquisitions) Bayside (Distress) Rothschild (Mergers & Acquisitions) Oak Tree Capital (Distress) Societe Generale (Leverage Finance) Carlyle (Growth Capital) Jefferies (Equity Research/Asset Management) Terra Firma (Alternative energy) Morgan Stanley ( Distress, Capital Markets) Denham (Infrastructure) Commerzbank (IPO, Capital Markets) CDC (Emerging markets) Advent (Private Equity) Hermes (Asset Management) 12

15 E. Workshops by Thomson IB, S & P Capital IQ and Bloomberg A Workshop by Thomson IB A Workshop by S & P Capital IQ A exercise how you can analyse investment targets using Datastream and Thomson one (Thomson IB): macro economic conditions sector analysis company information market- competition financials, projections - equity research comparables (private and public) valuation (beta etc) debt capital markets (instruments, volumes and pricing) An exercise how you can analyse investment targets using Capital IQ: macro economic conditions sector analysis company information market- competition financials, projections - equity research comparables (private and public) valuation (beta etc) debt capital markets (instruments, volumes and pricing) An addirtional Bloomberg workshop will be be organized by Library and Careers 13

16 Time Schedule - Place Term 1 Lab Introduction 17 September Sept Oct 2014 Application Opens Sept 30 Closes Oct 6 10-Oct-14 Term 1 ( Modelling/Challenges: and Cases/Network: Rhodes Trust Lab 1 - Introduction Bridgepoint Challenge (network cocktail) Lab 2 - Modelling Modelling Lab 3 - Modelling - Jefferies Challenge (network cocktail) Lab 4 - Modelling Rothschild (network cocktail) Lab 5 - Modelling Houlihan Lokey (network cocktail) Lab 6 - Modelling Goldman Sachs (network cocktail) Lab 7 - Modelling Bayside Lab 8 - Modelling Societe Generale (network cocktail) Lab 9 - Modelling Carlyle Lab 10 - Modelling Oak Tree Capital (tbc) 14

17 Time Schedule - Place Term 1 and 2 Term Lab 11 - Bridgepoint Seminar 1 and 2 (network cocktail) Lab 12 Hermes Challenge Lab - Jefferies Workshop Lab 13 Morgan Stanley (from 18:00 20:00) (network cocktail) Lab 14 - Advent International (from ) Term 2 ( Modelling/Challenges: and Cases/Network: ES LT Lab 15 Modelling Lab 15 - Modelling - Bridgepoint Case (network cocktail) Lab 16 - Terra Firma - CDC Lab 17 - Modelling Denham Lab 18 - Bridgepoint Challenge awards and dinner in Oxford Lab 19 Commerzbank Lab 20 - Jefferies Challenge awards and dinner in London TBC.03 Lab 20 Hermes Challenge award and dinner in London 15

18 Terms & Conditions Oxford Finance Lab To be admitted : Up to 120 students Application process and selection run by Careers Application information and deadlines will be provided by Careers Participate in at least one Challenge (HR) Challenge participation can NOT be dropped after Nov 7. Cases attendance will be open to non Lab students (upon availability and registration by Careers) A Finance & Valuation Modelling Certificate by Oxford will be provided subject to attend the 80% of modelling sessions (bold) and participate at least in one challenge 16

19 Contact details Andreas T. Angelopoulos Executive Director Private Equity Institute Programme Director Oxford Chicago Valuation Programme Director Oxford Finance Lab University of Oxford Said Business School Park End Street, Oxford OX1 1HP United Kingdom For any further questions please contact: Adila Khan Career Advisor- Finance Associate Director Oxford Finance Lab University of Oxford Said Business School Park End Street, Oxford OX1 1HP United Kingdom T +44 (0) 'δῶς μοι πᾶ στῶ καὶ τὰν γᾶν κινάσω' Ἀρχιμήδης

20 Note Andreas Angelopoulos all rights reserved. The distribution or reproduction is prohibited without author s further written permission. All materials are available only for the registered students in Oxford Finance Lab. Every effort has been made to ensure the accuracy of the contents and calculations. These materials are not intended as a substitute of any professional advise or to be used for professional purposes without the advise and review of an expert. Speakers and copyrights owner have developed these materials strictly for class discussion. Numbers, names and assumptions are not representing the real companies or cases. The materials should not be used for commercial use, sold, traded or lent, hired out, copied, presented or circulated, stored and ed all or parts without the prior written consent of Andreas Angelopoulos who retain sole ownership of these materials. 17