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The Structuring of Leveraged Transactions

Understand the commercial and structuring aspects of LBOs & MBOs and learn how to apply them in this advanced course

A tall glass building with a modern twist and beautiful architecture

A one-day course

Private Equity and how it creates value

  • The three key stages of Private Equity value creation
    • The Acquisition
    • Operations - Extracting and boosting value during ownership
    • Exit - How to exit successfully
  • PE 101 Value creation: The traditional PE value creation model
    • The three key value drivers
  • PE 102 Value creation: Additional methods for enhancing value
    • Liquidity events pre-sale
    • Using junior debt to optimise the capital structure
    • Leveraging the fund to boost returns with appropriate guidance on leveraged transactions
    • Vendor loans – how they enhance value
  • Selecting the investment - the 5 critical issues for sponsors
  • Liquidity events (exits)
    • Hard exits vs soft exits

Structuring the deal – the key issues for Lenders & Sponsors

  • Deriving the funding structure
    • Funding sources and uses
  • Security/collateral generally
    • The tension between lenders and sponsors
  • Ranking and priority of senior funded deb vs junior debt
    • Contractual vs Structural subordination
  • Tax issues
    • Group tax relief
    • Thin cap rules
    • Transfer pricing

Private Equity Fund Structure and key terms

  • Review of typical (Luxco) fund structure
  • Investment period (how long)
  • Preferred return (rate, calculation)
  • The carried interest (European vs US approach)

Funding sources (summary key aspects)

  • Senior debt: key facilities & issues
  • Junior debt instruments
  • Second Lien
  • Mezzanine
  • PIK
  • High Yield Notes
  • Senior and Junior
  • Unitranche / Direct lending
  • Classic
  • Bifurcated

Developing the optimum financial structure

  • Optimising the capital structure
  • Using cash flow to gauge debt capacity
  • Using EBITDA multiples to measure senior and junior debt capacity
  • The role of junior debt in the capital structure
  • Debt profiling - striking the right balance between amortising and bullet tranches
  • Impact on leveraged buyout transactions
  • How it affects ‘headroom’ (i.e. the ‘cushion’)
  • How different lenders approach this – role of reinvestment risk

Negotiating the debt package (lender’s perspective)

  • Lender’s approach
  • The various ‘scenarios’
  • Role of the Credit Agreement

Our course trainer is a consultant, public speaker and author with expertise in private equity, debt advisory, restructuring and infrastructure. He is a Senior Advisor to KPMG Finland, a Senior Advisor to Reorg EMEA Covenants, the leading provider of information to the European High Yield community, and a Senior Consultant to Grant Thornton UK.

Training programmes are provided to a wide range of blue-chip clients in Europe, Africa, the Middle and the Far East, North America and Australasia. In-house clients include banks (BNP Paribas, Société Générale, ING, Barclays Capital, Bank of China, RBS, SEB); lawyers (Baker & McKenzie, Skadden Arps, Sullivan & Cromwell, Cadwalader, Latham & Watkins, Weil, White & Case); advisory firms (Lazard, PWC, M&A International, KPMG, EY, Deloitte); PE firms (Cinven, Advent, Barings Asia, Waterland); corporates (Siemens, Airbus, Turkcell, Candy Crush, Gunvor, Statkraft) and governmental bodies (the UKLA, the EBRD, the ECGD, Omani Oil Corp.)

He qualified in South Africa both as a Chartered Accountant, with Deloitte and as a lawyer with Hofmeyr where he was involved in structuring many high-profile project financings, including those for the BMW 3 Series, Ford Sierra, GM, Sappi and Mondi.

When he moved to London and joined Lazard Brothers as a corporate finance executive, he was involved in a wide range of public and private transactions. Subsequently, he joined Hoare Govett as an assistant director, where he acted as an advisor to smaller listed companies and was involved in several syndicated Euro-Equity Initial Public Offerings.

In 1991, he joined ABN Amro’s cross-border M&A team before being transferred to MeesPierson Corporate Finance as a Director in Cross-Border M&A, where he was also involved in many deals in Central Europe. During this time, he was a member of the EU-PHARE programme and advised the Estonian government on its privatisation programme.

He is the Programme Director at the City Business School, London, for Infrastructure Finance for the M. Sc. programme in Business Administration and Finance. He is a member of the Institute of Chartered Accountants in England and Wales and the South African Institute of Chartered Accountants. He completed a BA and an LLB at the University of Natal and a B. Compt. (Hons.) at UNISA.

  • The Sponsor’s View– PE firms approach deals from a very different perspective to corporations. The course identifies the three main value drivers and other ways in which PEs generate value in a leveraged deal (Value Creation 102) and goes on to describe the criteria used to evaluate deals.
  • Structuring the Deal– The programme provides a framework or toolkit for participants (from all jurisdictions) to identify the critical structuring issues that lenders and sponsors need to address in structuring the deal. Participants will be able to use this toolkit to determine how to structure deals in any jurisdiction.
  • Debt Financing Options– There are very wide ranges of funding instruments used in LBOs, but not all are suitable for every deal with highly leveraged transactions (e.g. the lien is used only in very large syndicated LBOs). Participants will learn about the various instruments used in PE transactions.
  • Debt Capacity and Profiling– The objective of an LBO is to optimise, not maximise, the debt. The training will guide with case studies and models on how this can be achieved using the various instruments in LBOs and leveraged finance transactions.
  • The Lenders’ View – Debt lies at the heart of any LBO and the programme will provide insight into the key issues lenders consider when approaching the debt package. Not all lenders are the same, institutions, banks and direct lenders all approach matters from differing angles and it is essential to understand these differences.
  • Equity Financing – The key issue for management and PE. The course includes a model that illustrates how parties structure the ‘Sweet Equity” and “Institutional Strip”. Private equity ratchets are also discussed and illustrated with a Model.
  • Management– Studies have shown that the management team, and not the debt, is the most important component of a successful deal. The programme describes the essential attributes PE firms look for in the management team.

The course will make use of a case study which will cover various aspects covered in the content.

  • Our leveraged transactions course trainer has deep experience in private equity having advised on the first MBO over 30 years ago.
  • He has had exposure to private equity from a global perspective having presented programs to KPMG, EY, Investment banks, Commercial lenders and PE firms in Europe, Africa, North America, Asia and Australasia.
  • The trainer’s career also includes stints in commercial and investment banking, accountancy, tax and law thus providing insight from a wide range of perspectives.
  • Through the trainer’s wide experience, he has developed a 360-degree perspective of private equity from the perspective of a lawyer, advisor to PE firms, advisor to senior and junior debt providers and from a legal perspective.
  • Through the trainer’s role as a Senior Consultant to Grant Thornton and as a Senior Advisor to KPMG Finland, he retains exposure to PE transactions.

Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS
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