Cases in Finance & Investments

for Entrepreneurs | Investors | Companies

Course Project Guidelines

Introduction An assessment and mark (76% of the total mark) based on a course project by a group of 3 students each one leading an individual element: Raising Capital (leverage finance) by a group of banks, as an investor that is interested to acquire a specific company (sector), during an LBO acquisition. Each Group consisting of a maximum of 3 students* will raise leverage finance for a company acquisition in one of the sectors: o Manufacturing & Industrial products o Consumer Goods, Food & Retail o Luxury brands o Healthcare (pharma, hospitals, diagnostics) o Cleantech (energy, environment, water, waste management, recycling etc.), o Travel & Leisure o Education o IT & Telecoms You should NOT choose a company that any member of the group has worked in a previous assignment or have been provided as an example during the regular teaching in class. The group will prepare and submit to his Investment Committee (Blackboard), by 30th July 2013, 08.59 hours UK time: A. A Leverage Finance Case - Proposal Capital raising & finance presentation analysis, Up to 40 slides individual work A Leverage Finance & Valuation Model Financial structuring, finance, valuation and risks analysis model, Up to 15 spreadsheets individual work A Leverage Finance Term Sheet Legal analysis, legal structuring, governance risk distribution proposal, Up to 20 slides individual work

B.

C.

* Please note that the project will be completed in groups of maximum 3 students, which students organise themselves. In the case that the number of students in the class is not evenly divisible by 3 then there will necessarily be some groups of 2.
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This is simulation of a leverage finance capital raising process: analyzing a sector (Retail, Food, Consumer Goods, Healthcare, Education, TMT & Publishing, Luxury brands, Industrial & Manufacturing), choosing a target company, analyzing the potential opportunity, executing the financial analysis, structuring, valuation and presenting the opportunity & risks.

Group Project Assignment a detailed description Sector Company Shortlist a sector and companies to review that you feel could be a potential good investment for your team. Analyse the market, competition and the various potential targets. As a group, analyse brokers reports, research reports and the companys data (companys web site, investor relations and Library databases & resources please see below) regarding the company and the sector. Pick a company, note that it should be listed (required information) in a Stock exchange. The last date for changing your company is 23.59 hours UK time, 12th June 2013. Specific assumptions will be discussed in class. The Avusa case and model is a base to build further upon. Decide which member of your group will lead which section and thereafter develop the following documents: A. Leverage finance Case - Proposal You should develop a proposal raising financing for the specific company (in MS PowerPoint AND Adobe PDF format, max 40 slides, additional analysis in an appendix of the Proposal) presenting it to the committee (suggested example below): 1. Executive summary 2. Macroeconomic conditions 3. Sector dynamics 4. Company Analysis Company Products Business model Customers Market Competition Strategy - Position Opportunity / Growth Management & Organizational structure 5. Credit analysis Company Share Price analysis Financial Overview (BS, CF, P&L Historic analysis) Peer group Benchmarking (BS, CF, P&L Historic analysis)
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6. Finance analysis raising leverage and equity finance Key parameters to finance the transaction (bank prospective) - Cash flow & Operational assumptions and profile - LBO metrics: EV - Leverage - Minimum Equity required - Company Transaction (private company) valuations min equity - Trading (public company) valuations min equity - LBO Transaction valuations (debt and equity) - Leverage finance markets & conditions Key addressable financing markets (domestic or international) Overview of indicative financing structures Debt Type, Quantum, Tenor, Pricing - Financial covenants - Refinancing Financing Graphs Analysis 7. Valuation analysis (investor prospective) - Company Valuation (Comparables, IRR and DCF method) - Valuation Football Field - Investors IRR sensitivity analysis 8. Acquisition structure 9. Risk Analysis SWOT 10. Main transaction terms - transaction - equity main terms - debt main terms B. Financial Analysis (Financial Overview - Structuring Valuation) You should develop your OWN model version (in MS Excel) including: 1. Introduction 2. Operational model & assumptions 3. Balance Sheet Adjustment 4. Valuation using the Comparables, LBO IRR and DCF method 5. Football Field 6. IRR & Sensitivity Analysis 7. Investment & Debt Graphs Examples of models will be provided. C. Term Sheet You should develop your OWN legal structure and terms sheets including the debt and equity terms (summary, a few lines for each term) in MS PowerPoint AND Adobe PDF examples of term sheets are in the Lecture notes, Readings and in Blackboard. Note: The assumptions that you will make and the reasons why you want to invest in that company are very important elements. In composite, your sections A, B and C (i.e. the coursework its entirety) you should develop a business plan for raising leverage finance.
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Group Project Submission - Time Plan and Instructions 1. Form a group with two other students (for a maximum of three students per group) and then record this information in Blackboard by filling in the Cases in Finance and Investments Group Project sign-up sheet, available in the Assessment folder. Please tend to this by 15th May 2013. 2. Choose a sector and pick a company. Once selected, post to the Group and topic company sign up discussion area in Blackboard, indicating which group member is leading which section (A, B or C). A link to the discussion area is in the aforementioned Assessment folder. 3. You can always change the company - the last date for any changes is 23.59 hours UK time, 12th June 2013. 4. Prepare parts A, B and C; namely your Leverage finance Case Proposal, Financial Analysis and Term Sheet. 5. Submit your work in the Assessment area for Cases in Finance and Investments in Blackboard by the stated deadline, 30th July 2013, 08:59 (UK time). ALL required submissions should be included in one zip folder with the component parts of your work in separate folders labeled with your companys name, as follows*: 1. Leverage finance Case Proposal (in MS PowerPoint AND Adobe PDF formats) 2. Financial Analysis (Financial Overview - Structuring Valuation) (in MS Excel format) 3. Term Sheet (in MS PowerPoint AND Adobe PDF formats) 4. Research folder (including ALL calculation, reports, data etc. that you have worked / reviewed) * Front page of each submission above you should have the following clearly legible: 1. Chosen company name 2. Investment professionals (group of students) names (last, first name + Imperial CID numbers) along with an indication of who led each element

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Group Submission checklist

1 2 3 4 In a group of three students Picked a sector and company Each group member to decide which part to lead on (A, B or C) Work saved to four separate folders, in the requested formats labelled: 'A Leverage finance Case Proposal ' 'B Leverage Finance Valuation Model ' 'C Leverage Finance Term Sheet' 'Research folder' Those four folders placed in one folder named with your group number and company choice, zipped and ready for uploading 5 Submit project in Blackboard by 30th July 2013, 08:59 (UK time)

Course Assessment Each students final course grade will be based on the following:

A group project worth 76% of the total grade for this course. The project is made up of an individual element (50%) and an overall group element (50%) An individual in class test worth 24% of the total grade for this course. This will consist of a surprise case study-based test delivered during the regular scheduling of the course.

Imperial College Library Databases & Resources A full list of Business databases can be found on the Library website:
http://www3.imperial.ac.uk/library/subjectsandsupport/business/databases

The section on company and financial information may be the most useful for the assignment: http://www3.imperial.ac.uk/library/subjectsandsupport/business/databases/companies Thomson One Banker Company analysis containing company overviews, news, prices, financials, estimates, filings, research reports, deals and more. Includes: o IBES History detail and Current detail providing estimates for more than 60,000 companies in 67 countries worldwide.
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Investext broker and equity research reports.Thomson One Banker contains Investext equity research reports. Access it from the link provided in the company and financial information page, or by searching the library catalogue. Access is via IP address recognition so you need to use an Imperial College computer. Equity reports can be found under the research section.

Thomson Reuters Deals Intelligence Contains insight and data on market activity via a range of regular research reports and ad-hoc analyses, including; industry-leading quarterly Investment Banking Reviews, Weekly Deals Scorecards, Monthly Deals Snapshots and ongoing Research Reports. Access is f ree but users are required to register. Further information on accessing databases can be found here: http://www3.imperial.ac.uk/library/find/howto For any questions on accessing or searching business databases contact the Business librarian Heather Lincoln, email h.lincoln@imperial.ac.uk or phone 020 7594 8611.

Course and Project Teaching Assistant (TA) support The Finance Programme Office will provide TA (teaching assistant) support with an Imperial PhD candidate, Lei Ding, who will cover the following subjects: A. Q & A regarding topics covered in class B. course project development C. specific technical topics / financial modeling These will already have been covered in class.

Lecturer, TA & Administration support - contacts For any questions regarding the course, in the first instance please contact the course TA: Lei Ding: l.ding09@imperial.ac.uk For any questions regarding the course administration please contact: Rash Rahim: r.rahim@imperial.ac.uk If you still have questions that have not been answered by the TA or Rash from the Finance Programmes team then please contact me by email or schedule a call with me: Lecturers email: andreas@imperial.ac.uk

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