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The Acquisitions, Disposals and IPOs 2018 Conference

Recent Deals, Trends & Developments
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    Despite all the news flow, uncertainty and challenges of the macro-political environment, 2016 has been a relatively good year for global M&A activity. The volumes were lower than the previous year, but 2015 was the second best year on record (only behind the dotcom peak in 2000). Given the cyclicality of the industry, the key question is whether 2015 was a peak, which marks the inflection point of the cycle, or if, while being slightly below 2015, 2016 is another good year which precedes a healthy 2017.

    All the key geographies face relevant economic and often social challenges:

    • The US faces the new Trump presidency and a highly fragmented society
    • The UK Brexit
    • Europe a new wave of populism, several key elections ahead and a mediocre economy
    • China with severe questions around the sustainability of its growth
    • And all the other emerging markets with the caveat of the potential impact of higher rates in the US

    Given the proven correlation of GDP growth with M&A activity, one could thing that the combination of all these factors will take a toll in the next few years.

    However, it is also proven that the M&A industry, and the broader advisory world, have been able to navigate the previous crises remarkably well. In fact, there are even counter-cyclical products that flourish when the traditional or “healthy” M&A is suffering, such as debt restructuring or liability management. Also, a world with lower earnings growth but more sanitized balance sheets, as it seems to be the case today, is a very good environment for domestic M&A, if only because it creates earnings growth through cost cutting.

    Similarly, given the lower investment returns, activist investors are emerging as a new catalyst for disposals or even full sale of the company. The higher market scrutiny is actually forcing CEOs to start thinking more like activists themselves, and embark in more thorough analyses to determine which assets or businesses are truly core, and which ones should be divested. All these factors provide opportunities that should, to a very large extent, offset the lack of other M&A transactions.

    Because there may be fewer transactions in other segments, it is hard to ignore the potential impact of Brexit. With a high level of uncertainty around the outcome of the negotiations, activity might be lower for the next few months, as some acquirers put their plans on hold, or as Private Equity buyers take a pause for breath until they learn more around the new framework. Brexit may be potentially good for inbound acquisitions, probably after a few months once the situation starts to stabilize, mostly due to the weaker sterling.

    Similarly, a slower economy growth could boost some domestic transactions aimed at cutting costs in a more challenging environment. Not to mention potential distressed situations.

    But more importantly than the short term impact on M&A activity, there is one question in the air, and that is if the UK will be able to retain its current status of preeminent location for the European financial industry in a post Brexit world.

    Listening to M&A practitioners, one of the issues that they find more concerning is that there is a lot of supply. The downturn has not eliminated much installed capacity in the industry. In fact, the aftermath of the crisis has brought a new competitor, the M&A boutiques, which have been founded by senior investment banking professionals which left bulge bracket investment banks with years of experience and trust relationships with key CEOs and board members. Some of these boutiques have been remarkably successful. And all of that, combined with a lower deal activity and an increased focus on controlling costs by the corporate world, is resulting in increased fee pressure.

    To fight this challenging environment, advisers have embarked in a series of initiatives with the objective of differentiating themselves and specialising in certain sectors. Technology transactions would be a good example. There is a strong buyer interest, both by large incumbents and by Private Equity buyers. And there is a specific skillset required, that often only highly specialized advisers have, which allows them to justify higher fees. This may become a template for other highly specialised and attractive sub-sectors in the advisory world.

    Lastly, the abundant investor liquidity and the search for dividend yield in a low interest rate environment have resulted in a constructive IPO market. In fact, there have been several dual-track processes in Europe where the IPO valuation resulted in a higher price for sellers than M&A valuations. The pity in 2016 was that this healthy IPO market was interrupted by several geo-political events that introduced significant uncertainty and effectively close down the equity market for several weeks (China fears in the beginning of the year, Brexit in June, and to a lesser extent the pre-US election weeks in late 2016). Let´s hope that 2017 shows a more consistent IPO market, with less volatility, which would result in much higher IPO volumes.

    This conference draws together the leading experts who will provide commentary on many of these themes and an insight into the key issues and trends affecting the industry. Attendees will have the opportunity to ask questions and exchange views with the expert presenters.

    I look forward to welcoming you on the day of the conference.

    Conference Agenda

    A Review of Recent Trends, Volumes and Challenges of the M&A Industry

    • The general climate for M&A, disposals and exits
    • Review of the deals volumes and valuations
    • Is cheap financing still a tailwind?
    • Geopolitical Concerns – what impacts on how a business operates
      • Growing corporate debt
      • The threat of cyber-attacks
      • Emerging market economies
      • The crisis in the Middle East
      • The implications of advances
    • How have capital markets changed?
    • Liquidity is still in the sidelines. Will the IPO market still be constructive?
    • What are the key trends expected for IPOs in 2017
    • Key sectors in 2016/2017
    • What to expect for 2018? Trends and future developments

    Acquisition & Disposal – Grooming a business for sale and matters to consider throughout the process

    • How to differentiate yourself in a world where there is plenty of supply
    • Consistency/intensity of client coverage
    • Creating long term trust relationships
    • Covering clients vs. covering specific transactions in a targeted manner
    • A proper client segmentation
    • Bringing content to clients
    • Creating a full client team (vs key man)
    • Brokerage relationship
    • Sticking your neck out when there are problems
    • Cultivating rising stars at the client
    • Board relationships matter
    • Managing conflicts
    • Different positioning for advisory shops vs. banks with ample spectrum of products
    • Being realistic vs. being commercial to win the mandate

    The IPO plan – How to prepare a company for an initial public offering?

    • Management Team
      • When best to appoint key managers and head of investor relations?
      • Independent CEO: when does it represent the best choice and why?
    • Corporate Governance
      • New board structure and independent directors – Timing is everything
      • Follow best practices
    • Business plan – What is strategical for a succesful IPO?
      • Get the company used to be accountable
      • Bottom-up approach, with P&L, balance sheet and cash flows
      • Capital structure and risk management
      • Creating financial track-record
    • The company’s equity story
      • Do your research
      • What are the segments of the industry that comand higher multiples? Stir your company towards what investors like
      • Operating track-record
      • Consistent acquisitions and divestitures: refocussing on your core business ahead of IPO
    • Financial disclosure
      • Define business segmentation and key KPIs
      • How to pepare for IPO?
        • Disclosure and reporting framework
        • Quarterly reporting
      • Historical financials – Do your homework
      • What about proformas?
    • Put the house in order – Anticipation is key
      • How to identify and tackle any potential issues
      • Internal due diligence – The sooner the better
      • Uplaoding to VDR – How to select and prepare all relevant documents
      • Monitoring the brand reputation ahead of IPO – Why not hire PR adviser? Costs vs Benefits
    • What can go wrong?
      • Pilot fishing – When the management is not well prepared for marketing
      • Disagreement with underwriters on disclosure
      • Severe market correction once the price range has been set
      • The 135 day rule – What to do when transaction is delayed and financials expire
      • Status of the books – Hedge fund orders vs. long only investors
      • Bad aftermarket
      • Transaction pulled – Ability to try again in the next window

    Activist Investment as a catalyst for M&A

    • Emergence of activist investors
      • What role do they play in the current market?
      • Good and bad activists – How to distinguish between the two
    • Activist strategies and ideal corporate targets
      • Gain board of director’s seats
      • Push for deep cost cutting
      • Mergers and acquisitions catalyst
      • Open letter to the Board
      • The bottom line
    • The “wolf pack” – Who are they?
    • Key activist situations in UK and investment track record
    • Typical activist requests to management teams
      • Divestitures
      • Spin-offs
      • Change/Increase shareholder compensation (dividends and buybacks)
      • Change in management team
    • In the shoes of an outside activist investor
      • What can a CEO learn from activist investors?
      • How would that create value?
      • Pros and conts of becomning an activist investor
    • Corporate defence strategies – Warding off hostile takeovers

    Disposals – How to run a good sellside process

    • How to prepare before hitting the market – The importance of vendor due diligence report
    • Length of the process and estimated timetable
      • Big names involved in the second phase may scare others
      • How many buyers should participate in second round?
    • Inviting buyers
      • The balance of confidentiality and competitive tension
      • The price of exclusivity
    • Discovering the irrational bidder
      • Their approach to valuation – When does it work/fail and why?
      • Tapping the less obvious pockets of money (pension funds, Asian buyers, Middle East Sovereign Wealth Funds, Mavericks…)
    • Management performance – How to motivate the team to meet the target
    • Improving revenue: never too late to set a higher price! Strategies of increasing the value of your sale
    • Sales & Purchase Agreement:
      • The importance of including the mark-up in final offer
      • Negotiating 2 SPAs in parallel

    Impact of Brexit

    • Potential scenarios of a new UK-EU commercial relationship
    • Risk of new UK regulatory framework differing substantially from EU standards
    • Brexit might lead to lower M&A volumes for some time
      • Domestic M&A activity
        • Lower volume expected short term (given correlation with GDP growth)
        • As situation and economy stabilizes, volumes should recover
        • Some sectors can see consolidation and cost cutting related deals
        • Opportunistic/distressed M&A
        • More stock-for-stock transactions
      • Inbound by foreign companies:
        • Slowdown until there is clear UK-EU framework
        • Once the regulatory framework is more clear, volumes may pick up supported by FX. UK targets will look more attractive
        • Inbounds from Chinese/Asian into the UK look resilient
      • Outbound from UK companies
        • Negatively impacted (uncertainty, FX)
        • Increased regulatory burdens for UK acquirers in EU transactions?
      • Slowdown of Private Equity dealmaking, impacted by uncertainty, but maybe more distressed acquisitions
      • Potential increase of US listings vs UK
        • Ability to retain EU passport for prospectus is key
      • Most affected industries
        • Financial industry
        • Other affected industries include insurers, automotive, media or consumer goods
      • Players favoured by Brexit
      • The role of London as European hub for deal making at risk?
      • The primacy of UK law for cross-border M&A is likely to prevail
      • Opportunities arising from Brexit
        • Lower regulation?
        • Lower taxes?

    Legal Aspects of IPOs

    • Preparing the data room
    • Drafting the Prospectus
    • MD&A – Key aspects to be taken into account
    • Publicity guidelines
    • Regulating the participation of pre-IPO anchor investors
    • Legal framework for the analyst presentation
    • New regulations and trends with for the bookbuiding
    • Access to US demand – Fully SEC registered, 144A or Reg S
    • Underwriting agreement
    • Guidelines for stabilization period

    Technology M&A activity

    • Fintech revolution – How is it shaping financial services
      • Tech: an advisory niche solely for highly specialised advisers?
    • Record volume of technology M&A in 2015. 2016 on track
      • Case studies
    • Digital disruption – How does this affect business models
      • What industries
      • Blue-chips
      • Case studies
    • Dealmaking – How does the higher valuation of tech verticals since 2015 help?
      • Case study – Microsoft / Linkedin (50% premium and still below 2015 share price)
      • Lack of sizeable acquisitions by the FAAGs – What are the main factors?
    • What are the hottest tech verticals?
      • Which industry?
      • Where?
    • Catalysts for future M&A activity in the space:
      • Cash piles of large tech companies
      • Non-tech companies acquiring tech companies to ride digital transformation
      • Cost cutting in horizontal integrations
    • Unicorns – Are they back?
    • How are VC-backed startups valuing their exits, both M&A and IPOs?
    • Expectations for 2017

    Cross-Border M&A

    • Recent remarkable cross-border M&A activity – Case studies
    • Reasons for cross-border M&A
      • Access to natural resources
      • Tax inversions
      • Access to new customer bases and distribution
      • Chasing growth
      • Access to brands, intellectual property and large industrial assets
    • Global vs Regional dealmaking – Which industries and why
      • Case studies
    • Measuring financial synergies in cross-border M&A transactions
      • Case studies
    • Regulatory problems and nationalistic woes

    Legal Aspects of Acquisitions and Disposals

    • Letters of Intent
      • When to use them
    • Break-up fees
    • Irrevocable commitments in public tender offers
    • Share Purchase Agreement (“SPA”)
      • Key aspects of a good SPA
      • Price adjustment mechanisms
      • Reps & Warranties
      • Indemnification
      • Completion/closing obligations
      • Restriction on competition by the seller
    • From signing to closing
      • Management of the company from signing to closing
      • Change of directors/officers
      • Repayment of intercompany debt
    • Anti-Trust process
    • Transitional Servicer Agreements (“TSAs”) post-closing
    • Accounting principles

    The need for Divestitures…when it is time to let go?

    • How to make a thoughtful approach to divestitures – Best practise:
      • Least core assets/businesses and higher potential divestiture targets – An ongoing list
      • Prepare for suitors before you need a buyer
      • Shaping
      • Deals around buyer needs
    • Investing to prepare a divestiture is as important as investing for an acquisition – Industry experts on-board
    • The impact of active sale of the assets on RoE – Why it is the way to go?
      • An analyses of McKinsey report
      • Case studies
    • The business potential to turnaround
      • When to lose the grip
      • The cost of hesitation
      • Case studies
    • The “portfolio review” process – Is any of my assets worth more for someone else?
    • Servicing arrangements, organizational problems and talent retention issues

    The rise of the M&A boutiques in UK

    • Overview of the the emergence of boutiques in the last 5-10 years
      • How has this impacted the dealmaking?
      • Dealvolume – Which industries and slice of the market is taken by boutiques?
    • Going form a handful of personal relationships to a boutique advisory shop – The importance of trust relationships
    • Regulatory environment favours boutiques
      • Migration of talent from large banks – Decline in compensation at bulge bracket banks
      • Limited regulatory and political wrangling
    • How to create a brand?
    • How to win business without a balance sheet and a financing / capital markets unit
    • Key man risk

    Maximizing the revenue opportunity around M&A situations

    • Knowing when to take action – Key considerations
    • The turnaround process
      • Stabilize the situation
      • Assess the operational and financial alternatives
        • Business planning, financial forecasts, and related valuation
        • Analyse financial alternatives
      • Examining potential ancillary revenues
    • Maximising fees in each situation – The art of negotiation
    • Downward pressure on M&A fees
    • What are the options available:
      • Partnering up with other firms to win business
      • Partnering up with a balance sheet provider to offer financing
      • Bridge financing – The importance to remain solvent
    • Credit rating advisory
    • FX
    • Tails for future business

    Capital Markets Environment for IPOs

    • Capital Markets Environment for IPOs
    • Current equity capital markets environment
    • Market volatility: the biggest IPO enemy
    • Pipeline of IPOs in 2017
      • Largest transactions expected in UK / Europe
      • Hot sectors
    • Choosing where to list the company
      • Impact on valuation and liquidity
      • Out of the pockets costs
      • Non financial benefits
    • Emergence of pre-IPO “Anchor” investors
    • Minimum liquidity/freefloat for a successful IPO
    • The role of IPO advisers as an intermediary between the company and the underwriters
    • Retail investors participation
    • Snapchat: are the unicorn IPOs back?
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