D&A
Give this one a try later!
- Non-cash expenses which are meant to be the proxy of aging / decay of
a company's capital plant and intangible assets
- Not all expenses companies incur show up on their income statements
right away (some are capitalized)
- Appear on CFS instead because they support the generation of revenue
far into the future instead of just during the current period
- Examples: factory construction, purchase of patents / trademarks, R&D
- D&A captures aging process as a percentage of the initial cost of these
long-term assets
Cash out, investment:
,Give this one a try later!
- Equity purchase
- Equity for add on acquisitions
- Additional equity infusions if company gets in financial trouble
MAC
Give this one a try later!
Material adverse change - often in LOIs to stipulate that a buyer can
withdraw its bid if the target's performance deteriorates significantly during
a certain period
Growth Equity
Give this one a try later!
- Capital to help young, profitable, high growth businesses grow faster
- Typically minority stake (10-30%) as common/preferred or warrants
- $10.0mm - $100.0mm, 0% leverage
- Emphasis on: Revenue growth, Margin expansion, exit multiple expansion
Valuation - DCF
Give this one a try later!
- Relies on two assumptions: 1. Financial value of any company depends
solely on what cash profits or dividends it can generate for its owners over
, time 2. the value of cash profits today is different from the value of cash in
the future
What goes into working capital?
Give this one a try later!
What is necessary to fund daily operations
Incurrence covenants
Give this one a try later!
- Both for bank debt and subordinated debt (bonds)
- Prevent company from taking actions that would harm the covenant
holder unless the holder agrees
1. May not incur debt which is more senior in the capital structure (security
of their investments obviously depends on them being senior in the capital
structure)
2. May not incur more debt which would cause it to exceed a total leverage
ratio or total debt quantum
3. May not spend cash on certain types of capital investments or
acquisitions or shareholder dividends without the lender's approval
- No periodic tests for incurrence covenants
CIM received...
Give this one a try later!
, - Generally by 30-100+ bidders
- Targets business, industry, strategy, historical financials / projected
performance
- Simple LBO model (how much would we pay to achieve target IRR)
- Light diligence
- 10 page summary to IC and can then sign an IOI (non binding first round
bid)
How do you become an equity holder?
Give this one a try later!
- Provide bootstrap / angel / VC funding
- Buy shares during an IPO or on the open market once the company is
trading publicly
- Buy options, warrants or other equity-granting instruments
- Be granted stock, options or warrants in lieu of cash compensation
- Provide equity funding in an LBO
Characteristics of capital structure
Give this one a try later!
1. Riskiness
2. Expected rate of return
3. Seniority
IRR
Give this one a try later!
Give this one a try later!
- Non-cash expenses which are meant to be the proxy of aging / decay of
a company's capital plant and intangible assets
- Not all expenses companies incur show up on their income statements
right away (some are capitalized)
- Appear on CFS instead because they support the generation of revenue
far into the future instead of just during the current period
- Examples: factory construction, purchase of patents / trademarks, R&D
- D&A captures aging process as a percentage of the initial cost of these
long-term assets
Cash out, investment:
,Give this one a try later!
- Equity purchase
- Equity for add on acquisitions
- Additional equity infusions if company gets in financial trouble
MAC
Give this one a try later!
Material adverse change - often in LOIs to stipulate that a buyer can
withdraw its bid if the target's performance deteriorates significantly during
a certain period
Growth Equity
Give this one a try later!
- Capital to help young, profitable, high growth businesses grow faster
- Typically minority stake (10-30%) as common/preferred or warrants
- $10.0mm - $100.0mm, 0% leverage
- Emphasis on: Revenue growth, Margin expansion, exit multiple expansion
Valuation - DCF
Give this one a try later!
- Relies on two assumptions: 1. Financial value of any company depends
solely on what cash profits or dividends it can generate for its owners over
, time 2. the value of cash profits today is different from the value of cash in
the future
What goes into working capital?
Give this one a try later!
What is necessary to fund daily operations
Incurrence covenants
Give this one a try later!
- Both for bank debt and subordinated debt (bonds)
- Prevent company from taking actions that would harm the covenant
holder unless the holder agrees
1. May not incur debt which is more senior in the capital structure (security
of their investments obviously depends on them being senior in the capital
structure)
2. May not incur more debt which would cause it to exceed a total leverage
ratio or total debt quantum
3. May not spend cash on certain types of capital investments or
acquisitions or shareholder dividends without the lender's approval
- No periodic tests for incurrence covenants
CIM received...
Give this one a try later!
, - Generally by 30-100+ bidders
- Targets business, industry, strategy, historical financials / projected
performance
- Simple LBO model (how much would we pay to achieve target IRR)
- Light diligence
- 10 page summary to IC and can then sign an IOI (non binding first round
bid)
How do you become an equity holder?
Give this one a try later!
- Provide bootstrap / angel / VC funding
- Buy shares during an IPO or on the open market once the company is
trading publicly
- Buy options, warrants or other equity-granting instruments
- Be granted stock, options or warrants in lieu of cash compensation
- Provide equity funding in an LBO
Characteristics of capital structure
Give this one a try later!
1. Riskiness
2. Expected rate of return
3. Seniority
IRR
Give this one a try later!
