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HKU Guest Lecture Corporate Finance

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The global Corporate Finance market has developed dynamically in 2015 so far, mainly driven by M&A. According to Dealogic the global M&A volume reached $3.0tr as of August 2015, the second fastest to the $3tr mark on record behind 2007. This guest lecture at the University of Hong Kong sets out to show basics of Corporate Finance and latest market trends.

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HKU Guest Lecture Corporate Finance

  1. 1. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Guest Lecture “Corporate Finance: Solutions & International Market Developments” University of Hong Kong – 15 September 2015, Dr. Ruediger Theiselmann
  2. 2. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 About corpfina The Corporate Finance Association (corpfina) e.V. was founded in 2013 as an international association to • foster interdisciplinary exchange of the international corporate finance community across all sectors. • further develop standards and early address trends in corporate finance. • foster new scientific and practical findings in regards to corporate finance. • intensify the dialogue between public, politicians and international rule-setting institutions regarding corporate finance. Authori- ties Issuers / Corporates Banks / Advisors Analysts / Media Investors
  3. 3. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Strategic View on Corporate Finance Corporate Strategy Growth Restructurings Organic Inorganic Financial Operational • Private M&A • Public Takeovers • Distressed M&A • New Ventures • Joint Ventures • Cooperations • Processes • Shut-downs • Procurement • (…) • Strengthen Equity • Adjust Debt • Improve Cash Flow • Divestments
  4. 4. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Core Areas of Corporate Finance M&A DCM Loans DCM Bonds ECM - Transaction Management - Valuation - Take-over Defense / Unsolicited Offers - Lending, i.e. Syndicated Loans, Club Deals and Private Placements - Leveraged Finance - Benchmark Bonds (Rated / Unrated) - High Yield Bonds - Hybrid Bonds - Private Placements - IPOs - Follow-ons - Convertibles - Share Buy Backs
  5. 5. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Focus on M&A Mergers & Acquisitions is inorganic growth (i.e. increasing output and business reach) or downsizing through a share or asset deal. Asset deal - Purchase of objects - All or selected assets of the target are being purchased - Unusual for common transactions, standard for distressed M&A, i.e. purchases out of insolvencies (all assets are being purchased without any liabilities) - Main advantages: not all assets and liabilities need to be purchased, higher potential for write-offs for the buyer - Main disadvantages: high complexity given that all purchased assets have to be identified; transfer of contracts requires consent of contracting partners Share deal - Purchase of rights - All or selected shares of the target are being purchased - Main advantages: Complexity significantly reduced compared to asset deal (only transfer of shares); no consent of contracting partners required; licenses / official permissions don´t cease to exist - Main disadvantages: Debt can´t be separeted and left behind; company can only be purchased as a whole – selection of certain assets impossible
  6. 6. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Focus on Equity Capital Markets Equity is non-repayable capital, not interest-bearing and subordinated compared to debt positions in case of the insolvency of the company/issuer. IPO Follow-on Convertible Equity-linked note; listed bond can or must be converted into new shares at maturity Increase of the share capital with or without subscription rights Issuance of shares on the stock markets for the first time
  7. 7. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Focus on Debt Capital Markets Debt is repayable capital, interest-bearing and senior compared to equity in case of the issuer‘s/borrower‘s insolvency. • Privately placed Bonds • US Private Placements • Euro Private Placements • German Schuldschein • Unitranche Facilities •Combination of debt and equity elements •Long tenors (up to 100 years) •Subordinated debt and interests • Credit business based on a loan agreement • Club Deals (3-5 banks) for small amounts • Syndicated Loans for huge transactions • Leveraged Finance: high yield, special risk profile • Listed debt securities • Risk categories: Investment Grade, Cross-Over, High Yield • Rated/Unrated Bonds Loans OtherHybrid
  8. 8. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Focus on Financial Restructurings Financial Restructurings improve the borrower‘s/issuer‘s financial situation through adjustments of the balance sheet and cash flow reliefs. New shareholder loans Conversion of debt into equity (Debt-Equity-Swap) Management-Buy-In New external shareholders (incl. financial sponsors) Additional contributions from existing shareholders Equity Subordinated loans Convertibles Bonus shares Silent partnerships Mezzanine Standstill Agreement Bridge Financing Restructuring Loans Cancellation of debt with/without clawback Subordinaton of Debt Payment in Kind Letters of Comfort Debt Sale-and-Lease-back-solutions Disposal of Real Estates to SPV Factoring Working Capital Management via SPV On-Balance Off-Balance Major Objectives Safeguard liquidity Safeguard surviving Valuation of the company Disposal of (non-core) assets
  9. 9. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Recent International Market Developments The Corporate Finance World Market has developed dynamically in 2015 so far, mainly driven by M&A*. • Global M&A volume reached $3.0tr as of August 2015, the second fastest to the $3tr mark on record, behind 2007 when it was reached on 23 July. • Global high yield DCM average deal size stands at $587m as of August 2015, up 19% from $493m (yoy), and the highest YTD average on record. • Global corporate loans volume stood at $1.54tr in 1H 2015, down 18% on the $1.87tr borrowed in 1H 2014 and was the lowest first half volume since 1H 2012. *Source: Dealogic
  10. 10. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Discussion on Corporate Finance
  11. 11. Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015 Contact Details & Disclaimer This document has been created and published by the Corporate Finance Association e.V. (corpfina), Frankfurt/Main, and is for information purposes only. Any information in this document is based on data obtained from sources believed by corpfina to be reliable, but no representations, guarantees or warranties are made by corpfina with regard to the accuracy, completeness or suitability of the data. Neither corpfina nor any of its respective representatives or employees accepts any responsibility or liability whatsoever for any expense, loss or damages arising out of or in any way connected with the use of all or any part of this document. No part of this document may be reproduced, distributed or transmitted in any manner without prior written permission of corpfina. This document or the manner of its distribution may be restricted by law or regulation in certain countries. Persons into whose possession this document may come are required to inform themselves about, and to observe any such restriction. By accepting this document, a recipient hereof agrees to be bound by the foregoing limitations. Copyright © corpfina 2015. All rights reserved. Corporate Finance Association (corpfina) e.V. MesseTurm | Friedrich-Ebert-Anlage 49 / FGS D-60308 Frankfurt am Main / Germany Phone: +49 (0) 69 907 458 22 | Fax: +49 (0) 69 717 03-100 Register: AG Frankfurt am Main, VR 15264 Email: info@corpfina.org

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