Modeling Acquisitions and Buyouts

This course requires extensive accounting/finance/modeling background.

First class session: September 14, 2026 as it is a Langone class.

Overview

Recommended (but not required) course for grads: Modeling Financial Statements

Required prerequisite course for undergrads: Financial Statement Modeling

MBA ACCT-GB-3344 specializations:

• Accounting
• Financial Systems and Analytics

Undergrad ACCT-GB-6044 concentration: Accounting

This course is highly relevant for bankers, private and public equity investors, lenders, corporate finance professionals, project financiers, and consultants. The conceptual, practical, and technical knowledge gained in this course can give you a significant competitive edge during your interviews, internships, and jobs.

The salient topics covered are as follows:

• Efficient use of Excel to model various types of waterfalls such as debt waterfall and payments waterfall to various groups (sponsors and investors) in LBOs and private equity deals
• Avoiding and handling iterations
• Various measures of free cash flow depending upon the type of analysis -- valuation, credit risk analysis, credit waterfall
• Credit modeling for various types of debt and the credit mindset, including downside protection and derivatives
• How to model an acquisition including step-ups, deferred taxes, and accretion/dilution
• Project finance
• An intuitive understand of securitizations
• Share-based compensation
• Foreign currency transactions and translations

Exams and Grading

• Please read about the penalty for missing classes below.
• Almaris Assignments described below: 50%.
• Final exam described below: 50%

Penalty for missing classes and unapproved use of devices in class

Paper and pencil

Please bring paper and pen/pencil to take notes in class.

Unapproved device usage

Most of us are now addicted to devices, which impedes learning. You are allowed to use devices only when I ask you to use your computer in class. Otherwise, ALL device use is strictly prohibited, unless you have a qualified disability which allows you to use devices in class. Students using devices when not approved will be asked to leave the classroom. Each time you are asked to leave the class, you will be marked absent. This is very painful, awkward, and disruptive, and I hope I never have to do this, but I will not hesitate to enforce this policy.

Reasons for requiring attendance

Attendance is required for several reasons. First, you incorrectly assume you can catch up on a missed class by watching a recording (if available). Videos do not engage your brain as much as a live class. Second, less than 20% of you watch the recording (if available). You are then lost in class, which provides the wrong signals to me as an instructor. Third, your absence hurts class discussions. Fourth, you miss out on feedback if you do not work through the questions I pose in class. Fifth, I lose the feedback since there are fewer questions.

Attendance policy enforced after the add/drop period

The attendance policy below will be in effect only after the add/drop period.

Attendance sheet

After entering the class, please mark yourself present on the OneDrive sheet within the first 20 minutes (link posted on Brightspace after the add/drop period). You will be marked absent if you are more than 20 minutes late, unless it is due to factors beyond your control (traffic, subway delays, or interviews running late). You will also be marked absent if you leave the class early unless you have my permission or get it afterward. You will get an F in the course if you are caught cheating on the attendance sheet.

Mark yourself excused on the attendance sheet for excused absences

Without mandatory attendance, attendance is often below 50%. Therefore, though I dislike doing this, I penalize absences. If you anticipate being absent for good reasons, please email me well in advance. Please enter Excused on the attendance sheet described below to avoid the penalty if approved. You must update it; I will not mark you excused. If you miss a class due to emergencies and cannot tell me in advance, do not panic. Take care of the emergency first, and then email me. I will permit you to change the Absent to Excused. But if you miss a class without a valid reason, there is a penalty, as stated below.

Penalty for missing classes

For sections meeting in 150-190 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY missed session unless you were explicitly excused via email. Thus, if you miss two class sessions, you will lose two grades, and so on.

For sections meeting in 75-80 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY TWO missed sessions unless you were explicitly excused via email. Thus, if you miss four class sessions, you will lose two grades, and so on.

Seating and name tags

Please sit in the same seat in every class and display your name tags. For Zoom classes, you must keep your video on AT ALL TIMES. You must also have a good working headset or mic, as it is extremely rude to be inaudible and force me to ask you to repeat yourself.

Almaris Assignments

• When and how to access the tests: After the first week of class, you can view the online assignments at https://www.almaris.com/assess/ using your official NYU email (no aliases) and the most recent password emailed to you by Almaris. The Almaris password is different from NYU or Stern passwords.
• Support: Almaris staff will reply to your emails only if they pertain to technical issues with the Almaris system, not deadline extensions. Please contact Stern IT for technical issues with your network.
• Password retrieval: To retrieve the password, use your full email with the domain name as it appears in Brightspace. The domain name could be @nyu.edu for some of you, while it could be @stern.nyu.edu for others. I do not control this mess.
• Length: Some assignments are short; others are long. Please manage your time.
• Deadlines: Almaris tests list the deadlines. I may update the deadlines as the course progresses.
• NO EXTENSIONS will be granted for any reason except medical or family emergencies. If you have religious or personal conflicts, please submit the assignments early. The related materials are covered well in advance of the assignments. Please do not email me to request extensions unless you have a medical or family emergency.
• Late: Assignments are marked LATE if you do not meet or exceed the passing score described below before the deadline. There is no additional penalty for lateness other than a low score.
• Passing score: Assignments have a passing score of 100% or less.
  • Passing score 100%: I set the passing score to 100% on an assignment if I want you to ace it. In reality, there is no passing score. Whatever score you get on your last attempt is your final score. You are graded on accuracy but not the number of attempts. There is a difference between passing a test and getting full credit. If you get 80/100 on your final attempt, you pass, but you do not score 100.
  • Passing score less than 100%: I set the passing score to less than 100% on an assignment if I do not require you to ace it. Any score above that score is rounded up to 100%. For example, if the passing score is 90%, and you get 93%, your score is rounded up to 100%. I do the rounding up in a separate spreadsheet. You will see only the raw score online.
• Free to you and NYU: Almaris is not affiliated with Stern in any way. It is offering these tests to Stern at no charge.
• Data privacy and no marketing: Your data is not shared with any third party. It is not used for any promotion or marketing.
• No data retention: Your data is not retained. It is deleted in approximately two weeks after the end of the course.

Almaris Exams

• Please log in to Almaris as soon as you receive these instructions via email. You will see inactive links to your exams and instructions.
• Unless communicated to you differently in class, the midterm exam covers topics covered until the midterm, and the final exam covers the entire course.
• The instructions at the top of the login screen will tell you how many parts the exam has and their weights.
• Please report any problems such as wrong deadlines or missing parts of the exam to me immediately.
• Log in to Almaris right before your exam. Refresh your screen to see active links for the exam.
• Your final score on each part of the exam will be max(score1, score2 - 7, score3 - 14, score4 - 21, score5 - 28).
• You must answer all questions without help from another student or anyone else. Any such communication will be construed as cheating. If the exam is online, email your questions to the TA AND me. Whichever one of us reads the message first will respond. If the exam is held in class, you can ask the proctor.
• If the exam is online, please keep your email open during the exam and check it periodically. Any updates/corrections will be sent via email.
• Manage your time. Extra time will NOT be allowed.
• If you want us to grade your incomplete or incorrect spreadsheet manually, submit it within FIVE MINUTES of the end of the exam. Do not email it; look for Assignment on NYU Brightspace. If you submit the spreadsheet for manual grading, you will be considered to have used up your five attempts. Therefore, your maximum score on that spreadsheet can only be 72/100 due to the penalty for multiple attempts.

Important computer tips for the final

• DO NOT WORK ON A SPREADSHEET WITHIN A BROWSER. Save the spreadsheet to your computer, work on it, and save it periodically. If you navigate away from the spreadsheet in a browser, ALL YOUR WORK WILL BE LOST.
• Organize your computer files and designate a directory to save your exam files.
• Restart your computer before the exam to minimize problems.
• Bring an external mouse with a scroll wheel to speed up test-taking. Do not waste time using the trackpad or the internal mouse.
• Maximize screen space by hiding the Excel ribbon and browser menus. The more the screen you see, the faster and more accurate you are.
• Bring a computer with as big a screen as possible.
• Do not use an unfamiliar computer.

NYU Stern Policies

Please read the NYU Stern Policies for this course.

Help and Office

• Me: dgode@stern.nyu.edu, 212-998-0021, Office: KMC 10-86.
• Teaching assistant: Please check NYU Brightspace.

Administrative and System Requirements

Videotaping

Classes are normally not videotaped, except for EMBA classes. If the class is videotaped, the link is posted to Brightspace by NYU Stern IT within a day.

Registered Students Only

Only registered students can attend classes. I cannot override this NYU Stern rule. We do not allow unregistered students to "audit" a class.

Albert and NYU Brightspace

You must be in Albert and NYU Brightspace before starting the first class. If you register late, there might be a delay of a day before you appear in these systems. If you cannot access these systems after a day, please contact the relevant REGISTRAR. I cannot add you to these systems regardless of what someone in IT tells you.

Computer Requirements

You need to bring a computer to every class. If you have any technical questions, please contact Stern IT at (212-998-0180) or servicedesk@stern.nyu.edu, or NYU IT at +1 (212) 998-3333 or askit@nyu.edu. I cannot help you with your computer issues.

Excel 365 Desktop Version Required

The desktop version of Excel 365 is required. Excel Online and Google Sheets are NOT OK. Read this page regarding Excel 365 Desktop access for NYU students.

Materials

• I use my materials. Therefore, no textbook is required, and you need not purchase anything.

Schedule

• A detailed document is provided in the course materials. It lists the sequence of topics, related pages from the materials, related spreadsheets, and related assignments. The outline below is a summary.

1. Acquisitions: Identifying and modeling synergies

Revenue-related synergies

• Joint customers
• Joint channels
• Complementary products
• Access to new geographic markets
• Speed of build-out
• Shared branding
• Marketing talent
• Blocking competitive entry

Expense-related synergies

• Redundant resources
• Improved capacity utilization
• Management talent
• Access to cheaper debt
• Tax synergies: Covered briefly; details covered in the tax course

2. Acquisitions: Modeling consideration paid and acquired assets

Consideration paid

• Components of purchase consideration
  • Cash paid
  • Debt assumed
  • Equity issued
  • Contingent consideration: Equity-classified and liability-classified earnouts
  • Replacement stock awards issued to employees
• Premium paid
  • Understanding premium over book value versus premium over market value
  • Modeling control premium

Modeling acquired assets

• Trading, available-for-sale, and held-to-maturity securities: Difficulty of valuing Level III securities
• Receivables and allowances: Misleading days of receivables and allowance ratios after an acquisition
• Raw materials, work-in-process, and finished goods inventories: Misleading gross margin and days of inventory ratios after an acquisition
• PP&E: Distorted accumulated depreciation to gross PP&E ratios after an acquisition; distorted PP&E turnover after an acquisition
• Favorable leases and contracts
• Intangible assets
  • Brands and trademarks
  • Customer relationships
• Deferred tax assets are covered in the next section

Modeling acquired pre-tax liabilities

• Accounts payable and accrued expenses: Misleading days payable after an acquisition
• Deferred revenues: Understated future revenues, misleading days of deferred revenues
• Unfavorable contracts

Modeling deferred tax liabilities and assets

• Book basis versus tax basis in acquisitions and resulting deferred tax assets and liabilities

Goodwill

• What goodwill represents

3. Acquisitions: Drivers of accretion and dilution

• Modeling the effect of fresh-start accounting on post-combination financial statements
• Drivers of EPS accretion/dilution
  • Synergies
  • Relative pricing
  • Accounting step-ups
  • Integration costs
• Commonly used non-GAAP measures and their pitfalls

4. Leveraged buyouts: Modeling changes in capital structure

Identifying LBO targets

• Borrowing capacity
• Superior management and cost controls
• Capital structure optimization and investor groups with higher risk tolerance
• Debt market considerations
• Target pricing

Modeling sources of financing and their waterfall

• Bank debt
  • ABL facilities
  • Revolving credit facilities
  • Term loans A, B, and C; Balloon, bullet, and amortizing loans
  • 2nd Lien loans
• Public debt
  • Senior notes
  • Senior subordinated notes [See advanced structures such as PIKs and converts below]
• Equity contribution
  • Rollover equity
• Cash on hand

Modeling exit strategies and multiples

• Exit via an IPO
• Sale to a strategic buyer

5. LBO: Modeling advanced debt and equity structures

• Modeling Payment-in-Kind bonds
  • Applicable High Yield Discount Obligation (AHYDO) Rules
• Modeling convertible debt
• Modeling interest rate and currency swaps

6. Bankruptcies

• Modeling fresh start accounting and new capital structure after a bankruptcy
• Modeling cancellation of debt income
• Modeling tax attributes after a bankruptcy
  • NOLs
  • Reduction in tax basis

7. Step acquisitions and non-controlling interest

• Equity method investments
• Gaining control
• Non-controlling interests
• Transactions with non-controlling interests

8. Modeling corporate breakups

• Split-offs
• Split-ups
• Spin-offs
• Equity carve-outs
• Leveraged spin-offs
• Cash-rich split-offs

9. Modeling project finance

• Modeling project finance and non-recourse loans
• Modeling YieldCos

10. Modeling tax-efficient structures

• Sale leasebacks
• Inverted lease
• Partnership flip

11. Modeling securitizations

• Why companies securitize
• Variable interest entity rules

12. Final exam

Check online.