Study Programmes 2015-2016
FINA0065-1  
Advanced Corporate Finance and Modeling
Duration :
30h Th
Number of credits :
Master in economics : general (120 ECTS)5
Master in management (120 ECTS)5
Master in management (120 ECTS)5
Master in business engineering (120 ECTS)5
Master in business engineering (120 ECTS)5
Lecturer :
Marie Lambert
Language(s) of instruction :
English language
Organisation and examination :
Teaching in the second semester
Units courses prerequisite and corequisite :
Prerequisite or corequisite units are presented within each program
Course contents :
The course's objective is twofold. First, the course provides students with a comprehensive understanding of the key capabilities CFOs need to acquire in order to create a successful finance function.
How to perform diagnostics on company's operating performance? How to lever on the key value drivers and improve its performance ? How to design value creating investment, financing or distribution strategies? How to generate external growth inside the company and structure a buyout (due diligence, buyout process and debt-quasi equity financing)?
 
The course also introduces students to equity research and fundamental analysis (sector, industry and company) with all its applications in portfolio management and company acquisitions (private deals).
 
Especially, the course provides 




























  • students with modeling tools and advanced techniques for capital budgeting and firm and equity valuation;
  • students with tools to conduct a fundamental analysis (due diligence) about one company;
  • for students an opportunity to develop a thorough understanding of how financing as well as the firm's dividend policy could affect the market value of the firm and distort investment decisions;
  • students with tools to design sound corporate strategies at each point of the firm financing cycle (leveraged recapitalization, leveraged buyout, management buyout);
  • students with financing tools (senior versus junior debt, bullet debt, mezzanine financing, debt push down mechanism, paid-in-kind and cash interests, club deals and syndication);
  • students with modeling tools to structure a private equity deal.


The course is structured as follows:

Introduction: Financial analysis (ratio analysis, vertical and horizontal common-size statements) and review of firm valuation techniques and capital budgeting

Part I: Fundamental equity analysis and equity research: sector, industry, company due diligences, private equity and leveraged buyout. Alternatives to the Free Cash Flow to the Firm approach (Free cash flows to the Equity) and Residual Income Approach (with applications for impairment tests).
Part II: Advanced techniques in Valuation and Capital Budgeting (NPV and sensitivity analysis, Monte Carlo simulation, decision trees, real options, ...). 

Part III: Corporate decisions and firm value (capital structure and inefficiency costs, dividend policy and stock repurchases, corporate governance - agency theory and compensation package)


Conclusions drawn on the firm financing cycle (LBO, MBO, LR, ...)
Learning outcomes of the course :
At the end of the Advanced Corporate Finance and Modeling course, students will










  • strengthen their knowledge and understanding in firm performance management and corporate finance. The course is designed to provide students with the modeling tools required to value an investment project or structure the acquisition of a firm;
 








  • develop their ability to professionally team work and their critical sense by proposing, in group, concrete solutions to a selection of key corporate finance challenges for managers;
 








  • master key skills for their future professional career. Through problem-based learning, students will be asked to research autonomously information, apply modelization tools as well as professionally present and defend, in English, their transversal view of real financial management problems.
 


This course contributes to the following Intended Learning Outcomes :


  •  Gaining the knowledge and understanding of one of the proposed fields of concentration or to gain deep knowledge in the field of the management being already specialized through a first University Master Degree. 
  • To understand, in management situations, the transversal tools of quantitative reasoning, information systems and project management.
  • To acquire the capacity to research autonomously and methodically the information needed to solve a complex, transversal management problem. 
  • Integrate autonomously researched information, tools, knowledge and context to build and propose, either individually or as part of a team, original, creative and viable solutions to concrete complex management problems, whether real or simulated, taking into account, when necessary, the human, social and legal context.
  • Providing concrete solutions to a management problem, integrating modelization methods 
  • Ability to speak 2 foreign languages: C1 in English and B2 in one other language.
  • Being capable of professional team work. 
  • Developing a critical sense (arguing).
  • Developing a transversal, global vision.
  • Creative conception of solutions 
  • Professional capacity for oral communication.
Prerequisite knowledge and skills :
The course will extend students' knowledge in corporate finance acquired during an initial bachelor's degree and/or the first year of the master in management. Basics of corporate finance are prerequisites for the course.
 
Students who need to acquire the prerequisites are invited to read the following chapters:
- Accounting statements and cash flows: working knowledge of key financial statements, i.e. income statement, balance sheet and cash flow statement  Please read Chapters 2 and 3 - Ross, Westerfield and Jaffe. 2008. Corporate Finance. New York: McGraw-Hill, 8th edition;
- Basics in capital budgeting: working knowledge of discounting/compounding, of Net Present Value (NPV) and Internal Rate of Return (IRR) concepts Please read Chapters 4 to 7 - Ross, Westerfield and Jaffe. 2008. Corporate Finance. New York: McGraw-Hill, 8th edition;
- Mean-variance analysis: working knowledge of the Capital Asset Pricing Model (CAPM) Please read Chapter 5 - Hillier, Grinblatt and Titman. 2012. Financial Markets and Corporate Strategy. New York: McGraw-Hill, 2nd European edition.
Planned learning activities and teaching methods :
Modules will be sequenced with lectures and discussions on a selection of case studies illustrating corporate financial decisions.

Lectures will introduce the theoretical concepts and modeling/analytical tools, while case study analyses will enable students to use these tools to solve complex management problems.

Workshops with professionals in corporate finance (Private Equity, banker and/or Corporate Finance Advisory) will provide students with the market reality of their local economic region.
Mode of delivery (face-to-face ; distance-learning) :
The course is composed of face-to-face lectures, exercise sessions and case discussions.
Working sessions with professionals from global equity research, private equity and banking sectors will be organized (within the framework of the final course project - Leveraged Buyout Case).
 
Exercise sessions and case study analyses will be prepared through distance learning.
Recommended or required readings :
Recommended readings from the following books will be assigned during the class:



















  • Ross, Westerfield and Jaffe (eighth edition), Corporate Finance, McGraw-Hill
  • Grinblatt and Titman, Financial Markets and Corporate Strategy, McGraw-Hill, International Edition
  • Real Options: Managerial Flexibility and Strategy in Resource Allocation, Lenos Trigeorgis
  • Equity Asset Valuation Workbook, 3rd Edition by Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe November 2015, Paperback

Students are highly encouraged to refer to these books to improve their understanding of the key concepts and modelling tools used throughout the class. Students can acquire the case studies by following this link: https://cb.hbsp.harvard.edu/cbmp/access/40423583
Course material  The course material (slides, references to case studies and exercises) will be available on the course web page on lol@.
Additional readings
The following readings are recommended to students who need to deepen their knowledge in some prerequisites for the class:
Financial Statement Analysis : An introduction by Elaine Henry, CFA, and Thomas R. Robinson, CFA
Financial Reporting Mechanics - International Financial Statement Analysis, by Thomas Robinson, CFA, Jan Hendrik van Greuning, CFA, Elaine Henry, CFA and Michael A. Broihahn, CFA
Financial Reporting Standards by Elaine Henry, CFA , Jan Hendrik van Greuning, CFA, and Thomas R. Robinson, CFA
Understanding Income Statements by Elaine Henry, CFA and Thomas R. Robinson, CFA
Understanding Balance Sheets by Elaine Henry, CFA, and Thomas Robinson, CFA
Understanding Cash Flow Statements by Elaine Henry, CFA and Michael A. Broihahn, CFA
Financial Analysis Techniques by Elaine Henry, CFA, and Thomas R. Robinson, and Jan Hendrik van Greuning, CFA
Inventories by Michael Broihahn, CFA
Long-lived Assets by Elaine Henry, CFA and Elizabeth A. Gordon
Non-current (Long-term) Liabilities by Elizabeth A. Gordon and Elaine Henry, CFA
Assessment methods and criteria :
Student's final grade for the Advanced Corporate Finance and Modeling course is a weighted average of the student active participation to solving case studies and as well as their capacity to defend orally their point of views (40%), students' collective work (30%) and the final written exam (30%).


The final written exam will assess the student's capacity to propose concrete and original solutions to corporate challenges such as capital budgeting decisions, capital structure decisions, corporate strategy and firm merger and acquisition as well as to dividend policy and firm agency structure. The students are asked to analyse and propose solutions to a selection of mini case studies.


Through the case studies, students' capacity to use their modeling and analytical skills for solving specific management problems in corporate finance (financial distress, takeover, investment project,...) is tested. The group work on the case studies makes up 30% of the continuous evaluation. The students receive an individual grade making up 40% of their continuous evaluation on the basis of their oral presentations, the answers provided to questions during presentations and their active participation to other group presentations.


Relative weighting of individual assessment : 70%


Remark: Students who fail the first session exam, do not present themselves at the exam or do not participate to the class assignments will have to (re)take the exam in the second session organized in August/September.
Work placement(s) :
none
Organizational remarks :
Students have the opportunity to ask questions on the material during the class or at the end of each session. Upon request, Questions and Answers sessions with the tutor might be organized.
For each assignment, groups are allowed to a single meeting with the tutor to answer their questions.

Students are invited to regularly check the lol@ platform for announcements regarding the course.
Contacts :
Professor:
Marie Lambert - marie.lambert@ulg.ac.be
Tutors:
Joachim Davoli - joachim.davoli@ulg.ac.be
Boris Fays - boris.fays@ulg.ac.be
 
Items online :
Slides, exercises and case studies
Slides, exercises and questions on case studies are available under "documents" on lol@ platform.These documents and the reference textbooks are the mandatory material. Case studies will be handed out in the class.