Acquisition Agreements Course Objectives:
- Be introduced to how to set a target net asset value and understand the positives and the negatives of the underlying policies, estimates and uncertainties
- Get an overview of what is meant by “debt free, cash free” and why it is important
- Have explained to them what is meant by working capital and how to calculate working capital needs
- Master the principles of locked box agreements
- Gain an understanding of why and where earn outs are best used and their advantages and disadvantages
- Get to grips with the key trading arrangements and structures involving the entity for sale
This course can also be presented in-house via live webinar.
Background of the trainer:
The trainer is a UK qualified accountant with over 20 years experience of providing technical training on financial reporting regulations including IFRS, USGAAP and U.K. GAAP. His training sessions are designed to be practical, commercially relevant and interesting. The trainer has experience in training all over the world and has provided training for accountants, lawyers and those from a banking and corporate finance banking.
Acquisition Agreements Course Content:
The initial steps
- Setting the target Net Asset Value and understanding the main influences on price
- The importance of the statutory accounts and transactions in the critical window to completion
- Completion accounts – why they are necessary and what they can and should achieve
- What pricing options work best? Based on completion values or using a locked box structure
- Policies, estimates and uncertainties – understanding the positives and the negatives
Case study – assessment of typical accounting and financial policies and consideration of what could be used to your advantage and disadvantage. The case study will consider contentious issues such as contingencies and provisions, financial instruments and impairments.
Debt free cash free
- What is meant by debt free cash free and why it is important
- Reconciling the net proceeds amount
- What is meant by cash, cash equivalents and debt?
- Cash v non-cash transactions – how and why to tell the apart
- Some contentious matters – invoice financing and the increasing use of fair values (net present values)
Case study – examination of a typical balance sheet and consideration of what should be included as debt and what should not. This exercise will introduce issues such as invoice financing arrangements, non-controlling interests, preferred stock and compound financial arrangements (convertibles)
- What is meant by working capital
- What should be included and when is it significant – what types of business and industry
- Calculating working capital needs
- Cash movement restrictions
- Timing the transaction to maximise the advantage – the window dressing opportunities
Case study – calculating working capital requirements and identifying the fundamental uncertainties – how could these be used for or against you?
Locked box agreements
- What is a locked box provision and how does it work?
- Why such agreements exist compared to the traditional structures used
- What are the likely problem areas and what protections should be put in place?
Case study – comparing a transaction applying a locked box provision to a traditional arrangement with a balance due based on values in completion accounts.
- Why used and when are these best used?
- Typical performance indicators and measures
Case study – consideration of a typical earn out agreement identifying the issues which could arise and how they should be dealt with. This example will look at revenue targets, profits and earnings measures and impact on overall value (or share price).
Structured business arrangements
- Understanding key trading arrangements and structures involving the entity for sale
- Group companies and other related parties – associates and joint arrangements
- Inter-company transactions, asset transfers and other barter arrangements
- Service concessions, operating leases and possible ‘off balance sheet’ arrangements
Acquisition Agreements Course Summary:
This Acquisition Agreements course is designed to help lawyers understand and deal effectively with the financial issues arising from sale and purchase agreements. It will help them prepare for discussions and negotiations around working capital and completion accounts. Cash free debt free transactions, earn out agreements and the option to apply locked box provisions.
The course will also consider some of the key current issues such as the impact of the transition to new UKGAAP from 2014, the new IFRS on revenue recognition and leasing and the full impact of fair value accounting on sale and purchase negotiations. The course will help participants to add value to the transaction.
The course is designed to be highly practical and will include case studies that will reflect the actual sale and purchase process including the most common contentious areas.
What Redcliffe’s clients are saying about the course
“A very engaging and clear trainer who could communicate clearly and concisely”
“Very Good overview of locked box/completion accounts”
“Practical examples and a lot of relevant ground covered”
“Delivery was excellent, engaging and enjoyable”
“It highlighted a number of areas for me to be alert in my practice e.g. consolidation requirements and also clarified processes and calculations helpful to my role in supporting transactions”
“Good insight which was relevant to some acquisitions I will see / have seen”