Rosenbaum, Joshua <br/><br/>
Investment banking: valuation, LBOs, M&A, and IPOs 

 - 3rd 
 - New Jersey  John Wiley & Sons, Inc.  2021 
 - xxxii, 534 p. 
<br/><br/>TABLE OF CONTENTS<br/>Instructor and Student Resources xv<br/><br/>About the Authors xix<br/><br/>About the Editors xxi<br/><br/>Foreword xxiii<br/><br/>Acknowledgments xxv<br/><br/>Disclaimer xxxiii<br/><br/>Introduction 1<br/><br/>Structure of the Book 3<br/><br/>Part One: Valuation (Chapters 1–3) 3<br/><br/>Part Two: Leveraged Buyouts (Chapters 4 & 5) 5<br/><br/>Part Three: Mergers & Acquisitions (Chapters 6 & 7) 6<br/><br/>Part Four: Initial Public Offerings (Chapters 8 & 9) 8<br/><br/>ValueCo Summary Financial Information 9<br/><br/>Part One Valuation 11<br/><br/>Chapter 1 Comparable Companies Analysis 13<br/><br/>Summary of Comparable Companies Analysis Steps 14<br/><br/>Step I. Select the Universe of Comparable Companies 17<br/><br/>Study the Target 17<br/><br/>Identify Key Characteristics of the Target for Comparison Purposes 18<br/><br/>Screen for Comparable Companies 22<br/><br/>Step II. Locate The Necessary Financial Information 23<br/><br/>SEC Filings: 10-K, 10-Q, 8-K, and Proxy Statement 24<br/><br/>Equity Research 25<br/><br/>Press Releases and News Runs 26<br/><br/>Financial Information Services 26<br/><br/>Summary of Financial Data Primary Sources 27<br/><br/>Step III. Spread Key Statistics, Ratios, and Trading Multiples 28<br/><br/>Calculation of Key Financial Statistics and Ratios 28<br/><br/>Supplemental Financial Concepts and Calculations 42<br/><br/>Calculation of Key Trading Multiples 47<br/><br/>Step IV. Benchmark the Comparable Companies 50<br/><br/>Benchmark the Financial Statistics and Ratios 50<br/><br/>Benchmark the Trading Multiples 50<br/><br/>Step V. Determine Valuation 51<br/><br/>Valuation Implied by EV/EBITDA 52<br/><br/>Valuation Implied by P/E 52<br/><br/>Key Pros and Cons 54<br/><br/>Illustrative Comparable Companies Analysis for ValueCo 55<br/><br/>Step I. Select the Universe of Comparable Companies 55<br/><br/>Step II. Locate the Necessary Financial Information 57<br/><br/>Step III. Spread Key Statistics, Ratios, and Trading Multiples 57<br/><br/>Step IV. Benchmark the Comparable Companies 69<br/><br/>Step V. Determine Valuation 74<br/><br/>Chapter 1 Questions 75<br/><br/>Chapter 2 Precedent Transactions Analysis 79<br/><br/>Summary of Precedent Transactions Analysis Steps 80<br/><br/>Step I. Select the Universe of Comparable Acquisitions 83<br/><br/>Screen for Comparable Acquisitions 83<br/><br/>Examine Other Considerations 84<br/><br/>Step II. Locate the Necessary Deal-Related and Financial Information 86<br/><br/>Public Targets 86<br/><br/>Private Targets 89<br/><br/>Summary of Primary SEC Filings in M&A Transactions 90<br/><br/>Step III. Spread Key Statistics, Ratios, and Transaction Multiples 92<br/><br/>Calculation of Key Financial Statistics and Ratios 92<br/><br/>Calculation of Key Transaction Multiples 98<br/><br/>Step IV. Benchmark the Comparable Acquisitions 102<br/><br/>Step V. Determine Valuation 102<br/><br/>Key Pros and Cons 103<br/><br/>Illustrative Precedent Transaction Analysis for ValueCo 104<br/><br/>Step I. Select the Universe of Comparable Acquisitions 104<br/><br/>Step II. Locate the Necessary Deal-Related and Financial Information 105<br/><br/>Step III. Spread Key Statistics, Ratios, and Transaction Multiples 107<br/><br/>Step IV. Benchmark the Comparable Acquisitions 115<br/><br/>Step V. Determine Valuation 117<br/><br/>Chapter 2 Questions 118<br/><br/>Chapter 3 Discounted Cash Flow Analysis 123<br/><br/>Summary of Discounted Cash Flow Analysis Steps 124<br/><br/>Step I. Study the Target and Determine Key Performance Drivers 128<br/><br/>Study the Target 128<br/><br/>Determine Key Performance Drivers 128<br/><br/>Step II. Project Free Cash Flow 129<br/><br/>Considerations for Projecting Free Cash Flow 129<br/><br/>Projection of Sales, EBITDA, and EBIT 131<br/><br/>Projection of Free Cash Flow 133<br/><br/>Step III. Calculate Weighted Average Cost of Capital 139<br/><br/>Step III(a): Determine Target Capital Structure 140<br/><br/>Step III(b): Estimate Cost of Debt (rd) 141<br/><br/>Step III(c): Estimate Cost of Equity (re) 142<br/><br/>Step III(d): Calculate WACC 146<br/><br/>Step IV. Determine Terminal Value 146<br/><br/>Exit Multiple Method 147<br/><br/>Perpetuity Growth Method 147<br/><br/>Step V. Calculate Present Value and Determine Valuation 149<br/><br/>Calculate Present Value 149<br/><br/>Determine Valuation 151<br/><br/>Perform Sensitivity Analysis 153<br/><br/>Key Pros and Cons 154<br/><br/>Illustrative Discounted Cash Flow Analysis for ValueCo 155<br/><br/>Step I. Study the Target and Determine Key Performance Drivers 155<br/><br/>Step II. Project Free Cash Flow 155<br/><br/>Projection of Sales, EBITDA, and EBIT 157<br/><br/>Step III. Calculate Weighted Average Cost of Capital 162<br/><br/>Step IV. Determine Terminal Value 167<br/><br/>Step V. Calculate Present Value and Determine Valuation 169<br/><br/>Chapter 3 Questions 174<br/><br/>Part Two Leveraged Buyouts 179<br/><br/>Chapter 4 Leveraged Buyouts 181<br/><br/>Key Participants 183<br/><br/>Financial Sponsors 183<br/><br/>Investment Banks 184<br/><br/>Bank and Institutional Lenders 186<br/><br/>Bond Investors 187<br/><br/>Private Credit Funds 188<br/><br/>Target Management 188<br/><br/>Characteristics of a Strong LBO Candidate 189<br/><br/>Strong Cash Flow Generation 190<br/><br/>Leading and Defensible Market Positions 190<br/><br/>Growth Opportunities 190<br/><br/>Efficiency Enhancement Opportunities 191<br/><br/>Low Capex Requirements 191<br/><br/>Strong Asset Base 192<br/><br/>Proven Management Team 192<br/><br/>Economics of LBOs 193<br/><br/>Returns Analysis—Internal Rate of Return 193<br/><br/>Returns Analysis—Cash Return 194<br/><br/>How LBOs Generate Returns 194<br/><br/>How Leverage Is Used to Enhance Returns 196<br/><br/>Primary Exit/Monetization Strategies 199<br/><br/>Sale of Business 199<br/><br/>Initial Public Offering 200<br/><br/>Dividends / Dividend Recapitalization 200<br/><br/>Below Par Debt Repurchase 200<br/><br/>LBO Financing: Structure 201<br/><br/>LBO Financing: Primary Sources 204<br/><br/>Secured Debt 204<br/><br/>High Yield Bonds 208<br/><br/>Mezzanine Debt 210<br/><br/>Equity Contribution 211<br/><br/>LBO Financing: Selected Key Terms 214<br/><br/>Security 214<br/><br/>Seniority 214<br/><br/>Maturity 215<br/><br/>Coupon 216<br/><br/>Call Protection 217<br/><br/>Covenants 218<br/><br/>Term Sheets 221<br/><br/>LBO Financing: Determining Financing Structure 224<br/><br/>Chapter 4 Questions 229<br/><br/>Chapter 5 LBO Analysis 233<br/><br/>Financing Structure 233<br/><br/>Valuation 234<br/><br/>Step I. Locate and Analyze the Necessary Information 236<br/><br/>Step II. Build the Pre-LBO Model 236<br/><br/>Step II(a): Build Historical and Projected Income Statement through EBIT 237<br/><br/>Step II(b): Input Opening Balance Sheet and Project Balance Sheet Items 240<br/><br/>Step II(c): Build Cash Flow Statement through Investing Activities 242<br/><br/>Operating Activities 242<br/><br/>Step III. Input Transaction Structure 245<br/><br/>Step III(a): Enter Purchase Price Assumptions 245<br/><br/>Step III(b): Enter Financing Structure into Sources and Uses 247<br/><br/>Step III(c): Link Sources and Uses to Balance Sheet Adjustments Columns 248<br/><br/>Uses of Funds Links 251<br/><br/>Step IV. Complete the Post-LBO Model 254<br/><br/>Step IV(a): Build Debt Schedule 254<br/><br/>Step IV(b): Complete Pro Forma Income Statement from EBIT to Net Income 263<br/><br/>Step IV(c): Complete Pro Forma Balance Sheet 266<br/><br/>Step IV(d): Complete Pro Forma Cash Flow Statement 268<br/><br/>Step V. Perform LBO Analysis 270<br/><br/>Step V(a): Analyze Financing Structure 270<br/><br/>Step V(b): Perform Returns Analysis 272<br/><br/>Step V(c): Determine Valuation 276<br/><br/>Step V(d): Create Transaction Summary Page 277<br/><br/>Illustrative LBO Analysis for ValueCo 278<br/><br/>Chapter 5 Questions 288<br/><br/>Part Three Mergers & Acquisitions 293<br/><br/>Chapter 6 Sell-Side M&A 295<br/><br/>Auctions 296<br/><br/>Auction Structure 299<br/><br/>Organization and Preparation 299<br/><br/>Identify Seller Objectives and Determine Appropriate Sale Process 299<br/><br/>Perform Sell-Side Advisor Due Diligence and Preliminary<br/><br/>Valuation Analysis 301<br/><br/>Select Buyer Universe 301<br/><br/>Prepare Marketing Materials 302<br/><br/>Prepare Confidentiality Agreement 305<br/><br/>First Round 306<br/><br/>Contact Prospective Buyers 306<br/><br/>Negotiate and Execute Confidentiality Agreement with Interested Parties 306<br/><br/>Distribute Confidential Information Memorandum and Initial Bid Procedures Letter 307<br/><br/>Prepare Management Presentation 308<br/><br/>Set Up Data Room 309<br/><br/>Prepare Stapled Financing Package (if applicable) 311<br/><br/>Receive Initial Bids and Select Buyers to Proceed to Second Round 311<br/><br/>Second Round 313<br/><br/>Conduct Management Presentations 313<br/><br/>Facilitate Site Visits 314<br/><br/>Provide Data Room Access and Respond to Diligence Requests 314<br/><br/>Distribute Final Bid Procedures Letter and Draft Definitive Agreement 315<br/><br/>Receive Final Bids 316<br/><br/>Negotiations 320<br/><br/>Evaluate Final Bids 320<br/><br/>Negotiate with Preferred Buyer(s) 320<br/><br/>Select Winning Bidder 320<br/><br/>Render Fairness Opinion (if required) 321<br/><br/>Receive Board/Owner Approval and Execute Definitive Agreement 321<br/><br/>Closing 322<br/><br/>Obtain Necessary Approvals 322<br/><br/>Shareholder Approval 323<br/><br/>Financing and Closing 325<br/><br/>Negotiated Sale 326<br/><br/>Chapter 6 Questions 328<br/><br/>Chapter 7 Buy-Side M&A 331<br/><br/>Buyer Motivation 332<br/><br/>Synergies 333<br/><br/>Cost Synergies 334<br/><br/>Revenue Synergies 334<br/><br/>Acquisition Strategies 335<br/><br/>Horizontal Integration 335<br/><br/>Vertical Integration 335<br/><br/>Conglomeration 336<br/><br/>Form of Financing 337<br/><br/>Cash on Hand 338<br/><br/>Debt Financing 338<br/><br/>Equity Financing 339<br/><br/>Debt vs. Equity Financing Summary—Acquirer Perspective 340<br/><br/>Deal Structure 340<br/><br/>Stock Sale 340<br/><br/>Asset Sale 343<br/><br/>Stock Sales Treated as Asset Sales for Tax Purposes 346<br/><br/>Buy-Side Valuation 349<br/><br/>Football Field 349<br/><br/>Analysis at Various Prices 352<br/><br/>Contribution Analysis 353<br/><br/>Merger Consequences Analysis 355<br/><br/>Purchase Price Assumptions 355<br/><br/>Balance Sheet Effects 360<br/><br/>Accretion/(Dilution) Analysis 365<br/><br/>Acquisition Scenarios—I) 50% Stock/50% Cash; II) 100% Cash; and III) 100% Stock 368<br/><br/>Illustrative Merger Consequences Analysis for the BuyerCo / ValueCo Transaction 373<br/><br/>Chapter 7 Questions 394<br/><br/>Part Four Initial Public Offerings 399<br/><br/>Chapter 8 Initial Public Offerings 401<br/><br/>Why Do Companies Go Public? 402<br/><br/>Characteristics of a Strong IPO Candidate 404<br/><br/>Attractive Industry 404<br/><br/>Strong Competitive Position 404<br/><br/>Growth Opportunities 405<br/><br/>Moat & Barriers to Entry 406<br/><br/>Healthy Financial Profile 406<br/><br/>Disruptive & Differentiated Solutions 407<br/><br/>Favorable Risk Profile 407<br/><br/>Proven Management Team 408<br/><br/>Key Participants 409<br/><br/>Investment Banks 409<br/><br/>Company Management 412<br/><br/>Current Owners / Investors 413<br/><br/>IPO Investors 413<br/><br/>Lawyers 414<br/><br/>Accountants 414<br/><br/>Exchange Partner 415<br/><br/>IPO Advisors 416<br/><br/>Vendors 416<br/><br/>Selected Key Terms 417<br/><br/>Offering Size 418<br/><br/>Primary / Secondary 419<br/><br/>Overallotment Option, a.k.a. “Greenshoe” 420<br/><br/>Syndicate Structure 421<br/><br/>Lock-up Provision 422<br/><br/>Listing Exchange 422<br/><br/>Gross Spread 423<br/><br/>Dual-Track Process 424<br/><br/>Special Purpose Acquisition Companies (SPACs) 427<br/><br/>Direct Listings 429<br/><br/>Post-IPO Equity Offerings 432<br/><br/>IPO Considerations 433<br/><br/>Chapter 8 Questions 435<br/><br/>Nasdaq Appendix 439<br/><br/>Chapter 9 The IPO Process 443<br/><br/>Organization and Preparation 445<br/><br/>Select IPO Team, Exchange Partner, and Assign Responsibilities 445<br/><br/>Manage Corporate Housekeeping 448<br/><br/>C Corp vs. Up-C Structure 453<br/><br/>Determine IPO Timing 455<br/><br/>Determine Offering Structure and Preliminary IPO Valuation 456<br/><br/>Host Organizational Meeting 459<br/><br/>Due Diligence, Drafting, and Filing 460<br/><br/>Perform Underwriter Due Diligence 460<br/><br/>Draft and File the Registration Statement 461<br/><br/>Prepare Other Key Transaction and Corporate Governance Documents 466<br/><br/>Coordinate with Equity Research 467<br/><br/>Respond to SEC Comments and File Amended Registration Statement 467<br/><br/>Marketing and Roadshow 468<br/><br/>Prepare Marketing Materials 468<br/><br/>Salesforce Teach-in 469<br/><br/>Conduct Roadshow 470<br/><br/>Build Order Book 473<br/><br/>Pricing and Allocation 475<br/><br/>Price the Offering 475<br/><br/>Allocate Shares to Investors 477<br/><br/>Closing 477<br/><br/>Chapter 9 Questions 479<br/><br/>Solutions to Selected Questions 485<br/><br/>Afterword 513<br/><br/>Bibliography and Recommended Reading 515<br/><br/>Index 521 
<br/><br/> . 
<br/><br/><label>ISBN: </label>9781119823377 
<br/><br/><label>Subjects--Topical Terms: </label><br/>Valuation<br/>Consolidation and merger of corporations<br/>Investment banking
<br/><br/><label>Dewey Class. No.: </label>332.66  / ROS