View from the classroom: Professor Frederik P. Schlingemann teaches the Acquisition Finance program at the Amsterdam Institute of Finance, challenging commonly held assumptions with the results of the latest research in M&A.
There are many ways that lead to Rome and just about as many ways to valuate, structure and finance deals. Frederik P. Schlingemann, professor of finance at the Katz Graduate School of Business at the University of Pittsburgh, expands in the Acquisition Finance program on the common business school knowledge of the participants by going deep into the theory of the various models used in the acquisition process. Special attention is given to the deal structure and the role of the management of the companies involved during the deal. The goal is to give financial professionals a more realistic understanding of the chances of a successful transaction.
One of the more intriguing aspects of the program is the way the latest scientific research on M&A is integrated with the presented theory. All the different common formulas and assumptions in the deal process are held up to the insights of large data sets tracking hundreds of mergers and acquisitions over the decades. This leads to some uncomfortable conclusions, like the consistent errors in commonly used formulas or the realization that the oft-promised ‘synergy’ of a deal is very rarely materialized in the real world. Buyer beware: it’s easy to overvalue a deal based on overly optimistic projections.
Apples & oranges
One of the key messages that Schlingemann imparts on his students is that it’s vital to know the differences between the various forms of valuations of assets, cashflows and debts because they have a tendency to get mixed up during the deal. Every company does things its own way and external advisors all have their preferred tools and models. Schlingemann advises to search for common ground by selecting a single method and consistently adhering to it, in order to avoid getting caught up comparing apples to oranges. One example of this is the different ways certain forms of debt are treated by accountants and financials. An accountant would put a loan, that has been committed to but not yet paid out, on the books (influencing the valuation), but it would be left out in a snapshot made by a financial professional. Differences like these have an immediate impact on the valuation.
“Remember: an accurate valuation is not the same as a fair price”Prof. Frederik P. Schlingemann, University of Pittsburgh
To get a good grip on the various formulas used they are dissected factor by factor, exposing many common assumptions and the risks they pose when used in practice. To get a feel for the various moving parts of the equations some tough brain teasers are presented to the participants. Because the program is aimed at the seasoned finance professional it’s evident that the participants like the challenges and eagerly get to work on the puzzles.
The program is held at the DoubleTree by Hilton near Amsterdam Central Station. The location is the ideal springboard for the participants from abroad to discover Amsterdam and its vibrant financial ecosystem. Participating in the program also grants access to the AIF Alumni Network, connecting you to many professionals based in Amsterdam and all around the globe.
If we allow ourselves one small spoiler from the program: an accurate valuation is not the same as a good price on a deal!
Create value in your next deal. Join the challenging 3-day Acquisition Finance program by Prof. Frederik P. Schlingemann (University of Pittsburgh) at Amsterdam Institute of Finance. Learn more & reserve your place here.