Investment Banking Valuation, Leveraged Buyouts, and Mergers and Acquisitions

ISBN-10: 111828125X

ISBN-13: 9781118281253

Edition: 2nd 2013

List price: $140.00
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Investment Banking 2E focuses on the primary valuation methodologies currently used on Wall Street, namely comparable companies analysis, precedent transactions analysis, discounted cash flow analysis, and leveraged buyout analysis. These methodologies are used to determine valuation for public and private companies within the context of M&A transactions, LBOs, IPOs, restructurings, and investment decisions. They also form the cornerstone for valuing companies on a standalone basis, including an assessment of whether a given public company is overvalued or undervalued. Using a step-by-step, how-to approach for each methodology, Josh R. and Josh P. build a chronological knowledge base and define key terms, financial concepts, and processes throughout the book. The authors also provide context for the various valuation methodologies through a comprehensive overview of the fundamentals of LBOs and an organized M&A sale process, including key participants, concepts, financing sources and terms, strategies, and legal and marketing documentation. In the aftermath of the subprime mortgage crisis and ensuing credit crunch, the world of finance is returning to the fundamentals of valuation and critical due diligence for M&A, capital markets, and investment opportunities. This involves the use of more realistic assumptions governing approach to risk as well as a wide range of valuation drivers such as expected future company financial performance, discount rates, multiples, leverage levels, and financing terms. While valuation has always involved a great deal of "art" in addition to time-tested "science," the artistry is perpetually evolving in accordance with market developments and conditions. In this sense, this book is particularly topical--in addition to detailing the technical fundamentals behind valuation, the authors infuse practical judgment skills and perspective to help guide the science.
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Book details

List price: $140.00
Edition: 2nd
Copyright year: 2013
Publisher: John Wiley & Sons, Limited
Publication date: 6/28/2013
Binding: Hardcover
Pages: 448
Size: 7.75" wide x 10.50" long x 1.25" tall
Weight: 2.398

ROBERT F. BRUNER is the Distinguished Professor of Business Administration at the Darden School of the University of Virginia and Executive Director of the Batten Institute. He directs the Darden School's executive education course on mergers and acquisitions, and teaches the popular MBA elective on that topic. He is the author of over 250 case studies and a casebook, Case Studies in Finance: Managing for Corporate Value Creation, which has been adopted for use at over 200 schools. Bruner's articles have been published in the Journal of Financial Economics, the Journal of Accounting and Economics, the Journal of Financial and Quantitative Analysis, the Journal of Money, Credit, and Banking, and Financial Management. He has served as a consultant to over twenty corporations as well as to the U.S. Government, and prior to his academic career, worked as a commercial banker and venture capitalist. Bruner holds a BA from Yale University, and an MBA and DBA from Harvard University.

Additional Resources
About the Authors
Structure of the Book
Valuation (Chapters 1-3)
Leveraged Buyouts (Chapters 4 & 5)
Mergers & Acquisitions (Chapters 6 & 7)
ValueCo Summary Financial Information
Comparable Companies Analysis
Summary of Comparable Companies Analysis Steps
Select The Universe of Comparable Companies
Study the Target
Identify Key Characteristics of the Target for Comparison Purposes
Screen for Comparable Companies
Locate The Necessary Financial Information
SEC Filings: 10-K, 10-Q, 8-K, and Proxy Statements
Equity Research
Press Releases and News Runs
Financial Information Services
Summary of Financial Data Primary Sources
Spread Key Statistics, Ratios, and Trading Multiples
Calculation of Key Financial Statistics and Ratios
Supplemental Financial Concepts and Calculations
Calculation of Key Trading Multiples
Benchmark the Comparable Companies
Benchmark the Financial Statistics and Ratios
Benchmark the Trading Multiples
Determine Valuation
Valuation Implied by EV/EBITDA
Valuation Implied by P/E
Key Pros and Cons
Illustrative Comparable Companies Analysis for ValueCo
Select the Universe of Comparable Companies
Locate the Necessary Financial Information
Spread Key Statistics, Ratios, and Trading Multiples
Benchmark the Comparable Companies
Determine Valuation
Bloomberg Appendix
Precedent Transactions Analysis
Summary of Precedent Transactions Analysis Steps
Select the Universe of Comparable Acquisitions
Screen for Comparable Acquisitions
Examine Other Considerations
Locate the Necessary Deal-Related and Financial Information
Public Targets
Private Targets
Summary of Primary SEC Filings in M&A Transactions
Spread Key Statistics, Ratios, and Transaction Multiples
Calculation of Key Financial Statistics and Ratios
Calculation of Key Transaction Multiples
Benchmark the Comparable Acquisitions
Determine Valuation
Key Pros And Cons
Illustrative Precedent Transaction Analysis for ValueCo
Select the Universe of Comparable Acquisitions
Locate the Necessary Deal-Related and Financial Information
Spread Key Statistics, Ratios, and Transaction Multiples
Benchmark the Comparable Acquisitions
Determine Valuation
Bloomberg Appendix
Discounted Cash How Analysis
Summary of Discounted Cash Flow Analysis Steps
Study the Target and Determine Key Performance Drivers
Study the Target
Determine Key Performance Drivers
Project Free Cash Flow
Considerations for Projecting Free Cash Flow
Projection of Sales, EBITDA, and EBIT
Projection of Free Cash Flow
Calculate Weighted Average Cost of Capital
Determine Target Capital Structure
Estimate Cost of Debt (r<sub>d</sub>)
Estimate Cost of Equity (r<sub>e</sub>)
Calculate WACC
Determine Terminal Value
Exit Multiple Method
Perpetuity Growth Method
Calculate Present Value and Determine Valuation
Calculate Present Value
Determine Valuation
Perform Sensitivity Analysis
Key Pros and Cons
Illustrative Discounted Cash Flow Analysis for ValueCo
Study the Target and Determine Key Performance Drivers
Project Free Cash Flow
Calculate Weighted Average Cost of Capital
Determine Terminal Value
Calculate Present Value and Determine Valuation
Bloomberg Appendix
Leveraged Buyouts
Leveraged Buyouts
Key Participants
Financial Sponsors
Investment Banks
Bank and Institutional Lenders
Bond Investors
Target Management
Characteristics of a Strong LBO Candidate
Strong Cash Flow Generation
Leading and Defensible Market Positions
Growth Opportunities
Efficiency Enhancement Opportunities
Low Capex Requirements
Strong Asset Base
Proven Management Team
Economics of LBOs
Returns Analysis-Internal Rate of Return
Returns Analysis-Cash Return
How LBOs Generate Returns
How Leverage Is Used to Enhance Returns
Primary Exit/Monetization Strategies
Sale of Business
Initial Public Offering
Dividend Recapitalization
Below Par Debt Repurchase
LBO Financing: Structure
LBO Financing: Primary Sources
Bank Debt
High Yield Bonds
Mezzanine Debt
Equity Contribution
LBO Financing: Selected Key Terms
Call Protection
Term Sheets
LBO Financing: Determining Financing Structure
Bloomberg Appendix
LBO Analysis
Financing Structure
Locate and Analyze the Necessary Information
Build the Pre-LBO Model
Build Historical and Projected Income Statement through EBIT
Input Opening Balance Sheet and Project Balance Sheet Items
Build Cash Flow Statement through Investing Activities
Input Transaction Structure
Enter Purchase Price Assumptions
Enter Financing Structure into Sources and Uses
Link Sources and Uses to Balance Sheet Adjustments Columns
Complete the Post-LBO Model
Build Debt Schedule
Complete Pro Forma Income Statement from EBLT to Net Income
Complete Pro Forma Balance Sheet
Complete Pro Forma Cash Flow Statement
Perform LBO Analysis
Analyze Financing Structure
Perform Returns Analysis
Determine Valuation
Create Transaction Summary Page
Illustrative LBO Analysis for ValueCo
Bloomberg Appendix
Mergers & Acquisitions
Sell-Side M&A
Auction Structure
Organization and Preparation
Identify Seller Objectives and Determine Appropriate Sale Process
Perform Sell-Side Advisor Due Diligence and Preliminary Valuation Analysis
Select Buyer Universe
Prepare Marketing Materials
Prepare Confidentiality Agreement
First Round
Contact Prospective Buyers
Negotiate and Execute Confidentiality Agreement with Interested Parties
Distribute Confidential Information Memorandum and Initial Bid Procedures Letter
Prepare Management Presentation
Set up Data Room
Prepare Stapled Financing Package
Receive Initial Bids and Select Buyers to Proceed to Second Round
Valuation Perspectives-Strategic Buyers vs. Finacial Sponsors
Second Round
Conduct Management Presentations
Facilitate Site Visits
Provide Data Room Access
Distribute Final Bid Procedures Letter and Draft Definitive Agreement
Receive Final Bids
Evaluate Final Bids
Negotiate with Preferred Buyer(s)
Select Winning Bidder
Render Fairness Opinion
Receive Board Approval and Execute Definitive Agreement
Obtain Necessary Approvals
Shareholder Approval
Financing and Closing
Negotiated Sale
Bloomberg Appendix
Buy-Side M&A
Buyer Motivation
Cost Synergies
Revenue Synergies
Acquisition Strategies
Horizontal Integration
Vertical Integration
Form of Financing
Cash on Hand
Debt Financing
Equity Financing
Debt vs. Equity Financing Summary-Acquirer Perspective
Deal Structure
Stock Sale
Asset Sale
Stock Sales Treated as Asset Sales for Tax Purposes
Section 338 Election
338(h)(10) Election
Buy-Side Valuation
Football Field
Analysis at Various Prices
Contribution Analysis
Merger Consequences Analysis
Purchase Price Assumptions
Balance Sheet Effects
Accretion/(Dilution) Analysis
Acquisition Scenarios-I) 50% Stock / 50% Cash; II) 100% Cash; and III) 100% Stock
Illustrative Merger Consequences Analysis for the BuyerCo / ValueCo Transaction
Bloomberg Appendix
Bibliography and Recommended Reading
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