Advanced Finance and Deal Craft

What this category covers

The category for people who already speak the language. This is the machinery behind serious deals and serious capital: building a model whose three statements actually tie, structuring a buyout and reading the debt schedule that decides whether it survives, tracing where carried interest comes from in a waterfall, allocating a purchase price and creating the goodwill that follows, and pricing decisions under uncertainty with tools most finance graduates have heard of but never built. Assumes Corporate Finance. Nearly every lesson is Advanced, and several go past what a general MBA covers.

Building the Model

• The Three-statement Model
• Making the Balance Sheet Tie
• The Debt Schedule
• The Revolver and the Circularity Problem
• Sensitivity and Scenario Tables
• Modelling Working Capital Properly

Structuring a Buyout

• The Leveraged Buyout in One Page
• Sources and Uses
• Sizing the Debt
• Covenant Headroom Modelling
• The Returns Bridge
• Management Incentive Plans

Where the Money Splits

• The Distribution Waterfall
• Preferred Return and Catch-up
• Where Carried Interest Comes From
• Fee Structures and Net Returns
• Purchase Price Allocation in a Deal
• Goodwill and What Creates It

Valuing the Hard Cases

• Earnouts as Contingent Consideration
• Discounted Cash Flow End to End
• Terminal Value and Its Assumptions
• Comparable Company Analysis
• Precedent Transaction Analysis
• The Control Premium

Deciding Under Uncertainty

• Sum-of-the-parts Valuation
• Real Options Thinking
• Monte Carlo for Business Decisions
• Decision Trees and Expected Value
• Auction Theory for Sellers
• Game Theory at the Negotiating Table

The Public Markets

• Going Public and the s-1
• Secondary Offerings and Dilution
• Tender Offers and Takeover Defence
• Recapitalizations
• The Option Pricing Method for Equity Value
• PWERM and Probability-weighted Exits

Allocating Value in a Cap Table

• The Backsolve Method in a 409A
• Convertible Bond Arbitrage
• CLO Structuring and the Equity Tranche
• Significant Risk Transfer Trades
• Total Return Swaps as Financing
• Cross-currency Basis and Funding Cost

Structured Credit and Derivatives

• Securitisation Waterfalls
• Contingent Value Rights
• Monte Carlo for Path-dependent Earnouts
• Structural Credit Models and Distance to Default
• Reduced-form Credit Models and the Hazard Rate
• The CDS-cash Basis and What It Prices

Project Finance and Stochastic Valuation

• Project Finance and the Non-recourse Ring-fence
• Debt Sculpting to a Target DSCR
• The Project Finance Model and Its Cash-flow Waterfall
• Risk-adjusted Discount Rates by Project Risk Class
• Stochastic Cash-flow Modelling with Correlated Drivers
• Certainty Equivalents versus Risk-adjusted Discounting

Related tools

• LBO Returns Calculator
• DCF & Terminal Value Calculator
• Comparable Company Multiples Calculator

Related case studies

• A Seller-Financed Home Services Purchase
• Five Small Shops, One Big Payday