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CBV Module VI - Private Investments > Master ACRONYM LIST > Flashcards

Master ACRONYM LIST Flashcards

1
Q

What are the various private investment channels?

A

FLICD

Fund of fund
Listed PE Vehicles
Indirect Investments
Co-investment
Direct Investments
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2
Q

What are the characteristics in investment into infrastructure?

A

MUCS

Mgmt involvement (not part of ownership)
Upfront Capital high
Contracts heavily used, regulated pricing
Stable Cashflows, so lower returns

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3
Q

What are the key characteristics of Direct Investments into Private Companies?

A

CLIMBFR

Control and influence
Liquidity
Info prior to investment (due diligence)
Monitoring (reporting)
Board representation
Financial structure
Rewards to asset managers
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4
Q

What are the key Characteristics of an Infrastructure Investment?

A

DSLR

Diversified Benefits
Stable Cashflows and Economic Security
Long-Term Duration & Attractive long term returns
Regulator Rates or Inflation Protection

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5
Q

What are the Processes that are used to execute on active Asset Management Strategies?

A

PBRMAD

Performance Incentives
Business Plan Development
Recruiting Senior Management
Monitor Financial Performance
Active participation in Management
Development of Value Creation Strategies
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6
Q

What are the typical risks when Investing in Infrastructure?

A

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

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7
Q

What are the Key benefits of PPP Infrastructure Investments to Governments?

A

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

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8
Q

What are some of the Main Characteristics of Private Equity Investments?

A

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
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9
Q

What 3 Pieces of Information are received after the Buyer & Seller enter exclusivity?

A

ABS

Actual Results
Board Approved Projections
Senior Management

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10
Q

What are some of the practical issues that exist with Bridge Valuations?

A

DOCTR

Different Valuation Methods Used
Output Fails to explain value drivers
Complex
Time Consuming
Reclassification of cash flow line items create noise
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11
Q

What Core Differences are seen when evaluating market transactions against a targeted company?

A

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

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12
Q

Financial Investors looking @ growth companies will seek financing sources that achieve what objectives?

A

MOPE

Minimize Equity Injections
Optimize Cash Conversion from EBITDA
Provide Payment flexibility that matches inv. holding periods
Expansion and Facilitation of future growth

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13
Q

What are the Main drawbacks of issuing corporate bonds?

A

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

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14
Q

What are the decisions that can be made to transform the business?

A

OREAR

Optimize tax structure
Restructure to cut staff
Expand into new products
Accretive M&A
Refinance to lower WACC
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15
Q

What are the ways to create value at investee level?

A

BAMVILLL

Business restructuring
Accretive asset acquisitions
Multiple expansion 
Value accretive investments
Increase post-tax profit
Lower WC requirements
Lower WACC
Lower capex
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16
Q

What are a few typical EOI Tactics / Strategies?

A

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

17
Q

What are some Key Considerations during the LOI Stage?

A

FMVCE

Communicate Timeline
Valuation Figures are refined and quoted
Funds access is expressed 
Exclusivity with purchase price / work. cap adjustments
Managerial kickers are available
18
Q

What are the Five Requirements that are finalized with exclusivity?

A

TLCFN

Tax Structuring
Lender Financing
Completing Final Price negotiations
Finalizing Proposed Management incentive plans
Negotiating purchase agreement and shareholder Ag.

19
Q

What are the Key advantages of being a Public Company?

A

HIIAE

Higher Visibility
Improved Valuation
Increased Employee Motivation & Retention
Access to capital 
Enhanced liquidity
20
Q

What are the Factors for considerations that companies contemplate when Going Private?

A

RIISD

Risks of Litigation
Increased Regulations
Illiquidity in Public Markets
Scrutiny of Public Companies for doing so
Disadvantages of Private movement (long, costly)

21
Q

What are the specified types of transactions addressed by the 61-101 Provision?

A

BRII

Business Combinations
Related Party Transactions
Insider Bids
Issuer Bids

22
Q

what are the main ways to increase top line revenue growth with investee companies?

A

GRIN

geographic expansion 
revitalize underperforming subsidiary
implement a new market strategy to 
     increase volume
new market segments
23
Q

what are the ways in which a company can extract value from M&A / Divestment

A

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

24
Q

what are the main questions to ask in evaluating pricing of M&A transactions?

A

MTSS

multiples arbitrage?
transformative/tuck in?
synergies included in purchase price?
synergies - how will they be realized?

25
Q

what are the three key results of a dividend recap?

A

CAT

cap structure may result in higher valuations
additional leverage will leverage future returns to shareholders
tax benefit of new cap structure

26
Q

what are the main reasons for a PE manager to refinance capital structure

A

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

27
Q

what are the key advantages of trade sales?

A

SEC

special purchaser synergies
expedited process
control of process

28
Q

what are the disadvantages of trade sales

A

DMRS

discount embedded in consideration
mgmt resistance, as they may b replaced
regulatory approval on cross border
safeguard of info

29
Q

what are the main disadvantages of IPOs

A

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

30
Q

What are the main downfalls of private equity investments?

A

MIILE

miscalculation of synergies
insufficient due diligence
improper deal structure 
lack of strategy 
entry price is too high
31
Q

What are the Main Aspects of building an internal Valuation Process?

A

VACAIE

Valuation Committees
Audit Reviews
Consistency
Appropriate Valuation Frequency
Independence
External Independent Valuations / Valuation Reviews
32
Q

What are some Examples of Subject Experts in Valuation?

A

TAROT

Technology Consultants
Actuarial Consultants
Real Estate
Oil & Gas Engineers / Consultants
Timber/Renewables Resource Appraisers
33
Q

What are the common areas of PPA?

A

DCPCC

debt balances
cash accounts in regards to FX
pension deficits / enviro liabilities
cash balances
capital lease classifications
34
Q

what are the key items to remember in identifying normalized NWC levels in a PPA?

A

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
35
Q

what are the key conditions on holdbacks?

A

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

36
Q

what are the considerations to keep in mind when using a VTB or contingent consideration in a transaction?

A

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)

37
Q

what are the major areas that buyers look for affirmation in representation from a vendor?

A

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)
38
Q

what are the major areas that a buyer will seek qualification statements in lieu of absolute representation?

A

MMK

materiality threshold (ie. stating a % of 
    confidence or variance)
MAC clause --> material adverse change
knowledge is all disclosed
39
Q

What are the main disadvantages of being a public company?

A

DRISLE

Disclosure requirements
Risk of thin trading / downward stock price
Increased costs
Short termism
Loss of Control 
Exposure to civil liability

CBV Module VI - Private Investments (14 decks)

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