Master ACRONYM LIST Flashcards
What are the various private investment channels?
FLICD
Fund of fund Listed PE Vehicles Indirect Investments Co-investment Direct Investments
What are the characteristics in investment into infrastructure?
MUCS
Mgmt involvement (not part of ownership)
Upfront Capital high
Contracts heavily used, regulated pricing
Stable Cashflows, so lower returns
What are the key characteristics of Direct Investments into Private Companies?
CLIMBFR
Control and influence Liquidity Info prior to investment (due diligence) Monitoring (reporting) Board representation Financial structure Rewards to asset managers
What are the key Characteristics of an Infrastructure Investment?
DSLR
Diversified Benefits
Stable Cashflows and Economic Security
Long-Term Duration & Attractive long term returns
Regulator Rates or Inflation Protection
What are the Processes that are used to execute on active Asset Management Strategies?
PBRMAD
Performance Incentives Business Plan Development Recruiting Senior Management Monitor Financial Performance Active participation in Management Development of Value Creation Strategies
What are the typical risks when Investing in Infrastructure?
UPSLCC
Uniqueness of Sub-Sector - Low correlation accross
Political & Regulatory Risks - diverse areas
Stage of Development - Cost/return risk
Liquidity - due to size and limited buyers
Credit market Risk - refinancing issues / assumptions
Currency volatility - Global investment expose Risk
What are the Key benefits of PPP Infrastructure Investments to Governments?
BESTIICE
Budgetary Certainty over time
Expose State Owned Assets to Private Sector
Stimulate Economy with Joint Ventures
Transfer Skills from Private to Public Sector
Incentivize Private Sector Timely Project Delivery
Improve Efficiency
Create Diversified Economy
Extract Long-Term value for money transfer from public to private
What are some of the Main Characteristics of Private Equity Investments?
ASSHOSS
Ability to Leverage Balance Sheet Strong Cash Flows w/ potential for margin increase Shorter Investment Horizon (5-7 years) Higher Return Expectations Organic Growth or through Acquisitions Strong Management Team Strong or Leading Market Position
What 3 Pieces of Information are received after the Buyer & Seller enter exclusivity?
ABS
Actual Results
Board Approved Projections
Senior Management
What are some of the practical issues that exist with Bridge Valuations?
DOCTR
Different Valuation Methods Used Output Fails to explain value drivers Complex Time Consuming Reclassification of cash flow line items create noise
What Core Differences are seen when evaluating market transactions against a targeted company?
CPPQB
Company Size Differs
Profitability, Historical growth/forecasted growth
Product and Geographic Diversification
Quality and Sophistication of Management Teams
Buyer Synergies that may have impacted Market Transaction Valuations
Financial Investors looking @ growth companies will seek financing sources that achieve what objectives?
MOPE
Minimize Equity Injections
Optimize Cash Conversion from EBITDA
Provide Payment flexibility that matches inv. holding periods
Expansion and Facilitation of future growth
What are the Main drawbacks of issuing corporate bonds?
OIIL
Obligations to file public fin statements to public co protocols
Inability to renegotiate financing terms without replacing facility
Increased overhead costs including annual bond rating costs and higher stakeholder relations costs
Lack of flexibility with respect to covenant breaches
What are the decisions that can be made to transform the business?
OREAR
Optimize tax structure Restructure to cut staff Expand into new products Accretive M&A Refinance to lower WACC
What are the ways to create value at investee level?
BAMVILLL
Business restructuring Accretive asset acquisitions Multiple expansion Value accretive investments Increase post-tax profit Lower WC requirements Lower WACC Lower capex
What are a few typical EOI Tactics / Strategies?
CARPI
Communicate Comfort & Knowledge
Acknowledge Vendor Concerns but remain vague
Range of Values Provided
Provide Detailed Breakdown of due diligence timeline
Identify Management Team objectives and express capability to meet
What are some Key Considerations during the LOI Stage?
FMVCE
Communicate Timeline Valuation Figures are refined and quoted Funds access is expressed Exclusivity with purchase price / work. cap adjustments Managerial kickers are available
What are the Five Requirements that are finalized with exclusivity?
TLCFN
Tax Structuring
Lender Financing
Completing Final Price negotiations
Finalizing Proposed Management incentive plans
Negotiating purchase agreement and shareholder Ag.
What are the Key advantages of being a Public Company?
HIIAE
Higher Visibility Improved Valuation Increased Employee Motivation & Retention Access to capital Enhanced liquidity
What are the Factors for considerations that companies contemplate when Going Private?
RIISD
Risks of Litigation
Increased Regulations
Illiquidity in Public Markets
Scrutiny of Public Companies for doing so
Disadvantages of Private movement (long, costly)
What are the specified types of transactions addressed by the 61-101 Provision?
BRII
Business Combinations
Related Party Transactions
Insider Bids
Issuer Bids
what are the main ways to increase top line revenue growth with investee companies?
GRIN
geographic expansion
revitalize underperforming subsidiary
implement a new market strategy to
increase volume
new market segments
what are the ways in which a company can extract value from M&A / Divestment
RADCO
revenue synergies for cross-selling
acquire a competitor
divest non-core assets
cost synergies by allowing consolidation of manufacturing
opportunity to acquire new business lines
what are the main questions to ask in evaluating pricing of M&A transactions?
MTSS
multiples arbitrage?
transformative/tuck in?
synergies included in purchase price?
synergies - how will they be realized?
what are the three key results of a dividend recap?
CAT
cap structure may result in higher valuations
additional leverage will leverage future returns to shareholders
tax benefit of new cap structure
what are the main reasons for a PE manager to refinance capital structure
DRAMP
dividend recap
reduce financial covenants
achieve lower Cost of capital than existing
match duration of debt to expected hold
poor performance may lead to new amended structure with better cov package
what are the key advantages of trade sales?
SEC
special purchaser synergies
expedited process
control of process
what are the disadvantages of trade sales
DMRS
discount embedded in consideration
mgmt resistance, as they may b replaced
regulatory approval on cross border
safeguard of info
what are the main disadvantages of IPOs
TVRPV
time and cost
valuation vis a vis trade sales may not account for potential special purchaser synergies if they sold via trade sale
reporting requirements
public markets focus on short term results
volatility of public markets
What are the main downfalls of private equity investments?
MIILE
miscalculation of synergies insufficient due diligence improper deal structure lack of strategy entry price is too high
What are the Main Aspects of building an internal Valuation Process?
VACAIE
Valuation Committees Audit Reviews Consistency Appropriate Valuation Frequency Independence External Independent Valuations / Valuation Reviews
What are some Examples of Subject Experts in Valuation?
TAROT
Technology Consultants Actuarial Consultants Real Estate Oil & Gas Engineers / Consultants Timber/Renewables Resource Appraisers
What are the common areas of PPA?
DCPCC
debt balances cash accounts in regards to FX pension deficits / enviro liabilities cash balances capital lease classifications
what are the key items to remember in identifying normalized NWC levels in a PPA?
BBTC
buyers want higher
buyers/sellers may decide on post-closing
adjustment
TTM average WC is a good starting point
closing date working capital balances
take time to complete
what are the key conditions on holdbacks?
NLNETP
nature of triggering event may factor into the period of the holdback
litigation may be subject to WC adj, as well as enviro, tax liabs, etc
negotiation point always, with usually 0-20% of vendor proceeds for a period
escrow agent usually used to hold
triggering event lapses, holdback is released
proceeds are used to pay for the triggering liability
what are the considerations to keep in mind when using a VTB or contingent consideration in a transaction?
VBELT
VTBs transfer risk with contingent performance
buyers are incentivized to negotiate longer maturities
earn outs transfer risk to vendor more
legal documents reflect the motivations of the term earn out
terms of VTB can cause issues (rate, pmt, term)
what are the major areas that buyers look for affirmation in representation from a vendor?
FAPQ
financial statements
assets are sufficient to meet ongoing
needs
projected results are done confidently
quality of assets is as stated (ie. A/R is good, assets are depreciated
accordingly)
what are the major areas that a buyer will seek qualification statements in lieu of absolute representation?
MMK
materiality threshold (ie. stating a % of
confidence or variance)
MAC clause --> material adverse change
knowledge is all disclosed
What are the main disadvantages of being a public company?
DRISLE
Disclosure requirements Risk of thin trading / downward stock price Increased costs Short termism Loss of Control Exposure to civil liability
