Financial Due Diligence

Question 1

Commercial Due Diligence

Answer 1

Im Zusammenhang mit der Commercial Due Diligence werden oft die Market und Strategie Due Diligence genannt. Die Commercial Due Diligence vereint die Aspekte der Market und Strategic Due Diligence. Die Commercial Due Diligence analysiert die Markt-, Kunden- und Wettbewerbssituation des Zielunternehmens. Zudem wird die Nachhaltigkeit des Geschäftsmodells untersucht. Damit setzt sich die Commercial Due Diligence neben dem Markt mit der strategischen Ausrichtung des Zielunternehmens auseinander.

Question 2

Completed Contract (CC) Methode vs. Percentage of Completion (PoC) Methode

Answer 2

Für langfristige Projekte..

HGB : Nur Completed Contract Methode (gegebenenfalls auf Teilprojektebene)

IFRS: grundsätzlich percentange of completion method

Question 3

Share of Wallet

Answer 3

Umsatzanteil des Zielunternehmens bei den Hauptkunden. 30% Share of Wallet bedeutet, dass ein Kunde 30% der Produkte in einem Segment bei dem Zielunternehmen einkauft und die restlichen 70% bei Wettbewerbern.

Question 4

Budget vs Forecast

Answer 4

Das erste Planjahr des Business Plans wird gewöhnlich als Budget bezeichnet. Wird innerhalb des ersten Planjahres das Budget auf Basis der aktuellen Geschäftsentwicklung aktualisiert, wird dies als Forecast bezeichnet.

Question 5

LTM

Answer 5

last twelve months

Question 6

YTD vs. YTG

Answer 6

year to date vs. year to go

Question 7

All-cash deal vs all-stock deal

VS

Share deal and asset deal

Answer 7

All-cash deal:

The cash purchase of a target company. When an all-cash deal occurs, the equity portion of the parent company’s balance sheet remains unchanged. This is opposed to a all-stock deal, where equity on the balance sheet would be affected.

vs.

Share deal = buy shares of target

Asset deal = buy assets of target

Question 8

Umgekehrte Maßgeblichkeit

Answer 8

Maßgeblichkeit der Steuer- für die Handelsbilanz -> gilt nicht mehr seit BilMoGb

Question 9

Cost-to-Cost Methode

Answer 9

Leistungsfortschritt eines Projektes wird in Praxis gewöhnlich auf Basis der aktuellen Kosten im Verhältnis zu den Gesamtkosten (Cost-to-Cost) gemessen

zwecks Realisierung des Projektumsatzes..

Question 10

Eigenkapitalwert nach Bruttoverfahren

Answer 10

Nach dem Bruttoverfahren ist der Eigenkapitalwert die Differenz zwischen dem Unternehmenswert und den Nettofinanzverbindlichkeiten

Unternehmenswert

• Nettofinanzverbindlichkeiten

= Eigenkapitalwert vor Workxing Capital Anpassung

+ aktuelles working capital

• normales working capital

= Eigenkapitalwert nach Working Capital Anpassung

Question 11

RWA

Answer 11

risk weighted assets (regulatory)

captures credit, market and operational risks

Question 12

CoRep

Answer 12

Common solvency ratio reporting, abgekürzt CoRep, ist ein internationales (europäisches) Projekt der CEBS um den grenzüberschreitenden Datenaustausch finanzieller Informationen (größtenteils Zahlungsunfähigkeiten von Unternehmen) zu homogenisieren, zu vereinfachen und zu beschleunigen. Es handelt sich um eine „Risiko-Beurteilung“ basierend auf Pillar I von Basel II.

Question 13

FinRep

Answer 13

Das Financial Reporting (abgekürzt FinRep) ist ein Verfahren für einen vom Committee of European Banking Supervisors und anschließend der Europäischen Bankaufsichtsbehörde (EBA) veröffentlichter Bericht zur standardisierten finanziellen Berichterstattung und -übermittlung für Finanz- und Kreditinstitutionen.

Der Bericht ist für Kreditinstitute konzipiert, die IAS/IFRS für ihre erschienenen Finanzberichte verwenden und ähnliche Berichte periodisch an deren Aufsichtsinstanzen übermitteln müssen. Ab Juni 2017 müssen alle Kreditinstitute eine FinRep-Meldung erstellen

FinRep ermöglicht den einheitlichen einfachen und grenzenüberschreitenden Datenaustausch.

Question 14

eop

Answer 14

end of period

Question 15

Kreditersatzgeschäft

Answer 15

Kreditkarten

Factoring (im Sinne von Fremdfinanzierung durch Forderungsverkauf..)

Leasing

Verbriefung

Question 17

Schufa

Answer 17

Schutzgemeinschaft für allgemeine Kreditsicherug

größte Kreditschutzorganisation in Deutschland

Question 18

Loan portfolios

Seasoning and vintage risk

Answer 18

Seasoning:

Young loan portfolios exhibit lower loan losses than older ones. On the day a loan is made the bank
knows most things about borrowers and lends to creditworthy ones. As time goes by some
borrowers lose their jobs or their health, for example, consume their financial buffers and find
themselves unable to service their debts. Loan losses rise. The faster a loan book grows the more
understated its loan losses but the bigger the risk that when the portfolio seasons that losses will be
higher than expected.

Vintage

Loan portfolios can be divided into groups based on when loans were made. When an economy
slows dramatically banks typically begin to talk about the various vintages in their portfolios. This
allows management to highlight a growing proportion of sensible post-crisis lending or the
concentration of losses in loans made by the previous team. It is a basic tenet of bank risk
management not to have a single vintage of a mature bank’s loan book represent too large a
proportion of the total. See also ‘Seasoning’.

Question 19

CRR

Answer 19

Credit requirements regulation

Question 20

IFRS 9

Answer 20

requires banks to classify loans into three categories, each with its own provision requirement

1. Performing

12 month ECL (expected credit losses = PD*LGD)

No significant increase in credit risk

interest revenue based on gross carrying amount

2. Underperforming

Lifetime ECL

Credit risk increased significantly

Interest revenue based on gross carrying amount

3. Non-Performing

Lifetime ECL

Credit risk increased significantly & objective evidence of impairment

interest revenue based on net carrying amount

Question 21

IFRS 3

Answer 21

Business Combinations

Question 22

capital ratios

Answer 22

CET 1 ratio = CET1 capital/RWA

Tier 1 ratio = (CET1+AT1)/RWA

Total capital ratio = (CET1+AT1+T2)/RWA

Question 23

IRBA

Answer 23

internal ratings-based approach

Either bank uses standardised or internal ratings-based models.

Standardised = regulator determines risk weighting for RWAs

IRBA = bank will determine the risk weights for specific assets based on its assessment of historical losses, thus generating its own values for LGD and PD

Question 24

3 pillars

Answer 24

The accord in operation: Three pillars[edit]

Basel II uses a “three pillars” concept – (1) minimum capital requirements (addressing risk), (2) supervisory review and (3) market discipline.

The Basel I accord dealt with only parts of each of these pillars. For example: with respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a simple manner while market risk was an afterthought; operational risk was not dealt with at all.

The first pillar: Minimum capital requirements[edit]

The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk, and market risk. Other risks are not considered fully quantifiable at this stage.

The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized approach, Foundation IRB, Advanced IRB and General IB2 Restriction. IRB stands for “Internal Rating-Based Approach”.

For operational risk, there are three different approaches – basic indicator approach or BIA, standardized approach or TSA, and the internal measurement approach (an advanced form of which is the advanced measurement approach or AMA).

For market risk the preferred approach is VaR (value at risk).

As the Basel II recommendations are phased in by the banking industry it will move from standardised requirements to more refined and specific requirements that have been developed for each risk category by each individual bank. The upside for banks that do develop their own bespoke risk measurement systems is that they will be rewarded with potentially lower risk capital requirements. In the future there will be closer links between the concepts of economic and regulatory capital.

The second pillar: Supervisory review[edit]

This is a regulatory response to the first pillar, giving regulators better ‘tools’ over those previously available. It also provides a framework for dealing with systemic risk, pension risk, concentration risk, strategic risk, reputational risk, liquidity risk and legal risk, which the accord combines under the title of residual risk. Banks can review their risk management system.

The Internal Capital Adequacy Assessment Process (ICAAP) is a result of Pillar 2 of Basel II accords.

The third pillar: The Market Discipline[edit]

This pillar aims to complement the minimum capital requirements and supervisory review process by developing a set of disclosure requirements which will allow the market participants to gauge the capital adequacy of an institution.

Market discipline supplements regulation as sharing of information facilitates assessment of the bank by others, including investors, analysts, customers, other banks, and rating agencies, which leads to good corporate governance. The aim of Pillar 3 is to allow market discipline to operate by requiring institutions to disclose details on the scope of application, capital, risk exposures, risk assessment processes, and the capital adequacy of the institution. It must be consistent with how the senior management, including the board, assess and manage the risks of the institution.

When market participants have a sufficient understanding of a bank’s activities and the controls it has in place to manage its exposures, they are better able to distinguish between banking organizations so that they can reward those that manage their risks prudently and penalize those that do not.

These disclosures are required to be made at least twice a year, except qualitative disclosures providing a summary of the general risk management objectives and policies which can be made annually. Institutions are also required to create a formal policy on what will be disclosed and controls around them along with the validation and frequency of these disclosures. In general, the disclosures under Pillar 3 apply to the top consolidated level of the banking group to which the Basel II framework applies.