Investment Banking FOCUS NOTES provides acomprehensive, yet streamlined, review of the basic skills andconcepts discussed in Investment Banking: Valuation,Leveraged Buyouts, and Mergers & Acquisitions, SecondEdition. The focus notes are designed for use both as acompanion to the book, as well as on a standalone basis.Investment Banking focuses on the primary valuationmethodologies currently used on Wall Street--namely,comparable companies analysis, precedent transactions analysis, DCFanalysis, and LBO analysis--as well as detailed M&Aanalysis from both a sell-side and buy-side perspective. Our focusnotes seek to help solidify knowledge of these core financialtopics as true mastery must be tested, honed, and retested overtime.

About the Authors viiIntroduction viiiChapter 1: Comparable Companies Analysis 1Overview of Comparable Companies Analysis 3Step I: Select the Universe of Comparable Companies 4Step II: Locate the Necessary Financial Information 7Step III: Spread Key Statistics, Ratios, and Trading Multiples 9Step IV: Benchmark the Comparable Companies 27Step V: Determine Valuation 33Key Pros and Cons 38Chapter 2: Precedent Transactions Analysis 39Overview of Precedent Transactions Analysis 41Step I. Select the Universe of Comparable Acquisitions 42Step II. Locate the Necessary Deal-Related and Financial Information 46Step III. Spread Key Statistics, Ratios, and Transaction Multiples 49Step IV. Benchmark the Comparable Acquisitions 64Step V. Determine Valuation 66Key Pros and Cons 67Chapter 3: Discounted Cash Flow Analysis 69Overview of Discounted Cash Flow Analysis 71Step I. Study the Target and Determine Key Performance Drivers 73Step II. Project Free Cash Flow 75Step III. Calculate Weighted Average Cost of Capital 91Step IV. Determine Terminal Value 106Step V. Calculate Present Value and Determine Valuation 112Key Pros and Cons 118Chapter 4: Leveraged Buyouts 119Overview of Leveraged Buyouts 121Key Participants 122Characteristics of a Strong LBO Candidate 127Economics of LBOs 132Primary Exit / Monetization Strategies 134LBO Financing: Structure 136LBO Financing: Primary Sources 138LBO Financing: Selected Key Terms 142LBO Financing: Determining Financing Structure 150Chapter 5: LBO Analysis 153Overview of LBO Analysis 154Financing Structure 154Valuation 155Step I. Locate and Analyze the Necessary Information 158Step II. Build the Pre-LBO Model 159Step III. Input Transaction Structure 167Step IV. Complete the Post-LBO Model 173Step V. Perform LBO Analysis 188Chapter 6: Sell-Side M&A 201Overview of Sell-Side M&A 203Auctions 205Organization and Preparation 209First Round 218Second Round 229Negotiations 236Closing 241Negotiated Sale 246Chapter 7: Buy-Side M&A 247Overview of Buy-Side M&A 248Buyer Motivation 250Acquisition Strategies 254Form of Financing 259Deal Structure 264Buy-Side Valuation 273Merger Consequences Analysis 278Index 295