Scribd
Upload
18 views13 pages

M&A revision

Uploaded by

brysssa03
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
18 views13 pages

M&A revision

Uploaded by

brysssa03
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 13

I- M&A environnement

1- Key definitions
Merger : A corporate restructuring agreement that unites two or more existing companies into
one new company”

Acquisition : “When one company purchases most or all of another company's shares to gain
control of that company”

Consolidation : “Unification of two or more corporations by dissolution of existing ones and


creation of a single new corporation”

Takeover or buyout : “When the target company does not consent to the acquisition” • Also
called ‘unfriendly acquisition’ or ‘hostile takeover’ • A friendly takeover is an acquisition of
non-equals with a part of the target board consenting to the deal

The type of restructuration that the shareholders want to choose :

Strategic alliance : is a business arrangement in which two or more parties agree to pool their
resources for the purpose of accomplishing a specific task. This task can be a new project or
any other business activity. Each of the participants is responsible for profits, losses, and
costs associated with it.

Joint venture : Business arrangement in which two or more


parties agree to pool their resources for the purpose of
accomplishing a specific new project or business activity
through a new business entity owned by both companies

LBo :
LeveragedBuyout(LBO)“Acquisitionofanothercompanyusinga
significant amount of borrowed money to meet the cost of
acquisition”
ProminentlyinPrivateEquityw/highpotentialcompanyandtrusted
investors
MBO : ManagementBuyout(MBO):“A company’s management
team purchases the assets and operations of the business they
manage” Real-life example: Virgin Group in the UK

Strategic alliances with Fintechs


enables traditional private banks
to remain up to their customers’
growing demands

Multiplying partnerships with start-ups through International Hackathon, incubators, New


Digital Business division, Meet the Start-up, Open-Up, business angel platform, Start-up
Houses, etc.

Highlights: international workshops with fintechs and private clients led to develop a
cutting-edge wealth management platform “MyWealth”

The type of restructuring involved


in an M&A deal hints to the
motivations behind the deal
Horizental merger : Occurs between firms that operate in the
same industry may also occur with the acquisition of a business
operating at the same
Vertical merger : Strategy where by a company owns or controls its
suppliers , distributors , or retail locations to control its value or
supply chain

Spin off : Used by corporations to divest certain assets ,


adivision , or a subsidiary Makes part of a parent company into
a newly independent company
• In Spin-offs shareholders receive shares of the new company

el of the value chain in a different industry

Carve out : Used by corporations to divest certain assets ,


adivision ,or a subsidiary

• Makes part of a parent company into a newly independent


company
• The parent companysells shares of the subsidiary through an
IPO

2- Key facts

Worldwilde crisis result on growing M&A deals

Uruguay, Nigeria, new zeland become most attractive country for M&A
deals

In 2017 north American is the region that make more acquisitions

Financial sector mak more M&A than the others

3- Keys environnement

The SWOT Matrix remains the most and worst commonly used tool for business strategy
analysis

Marketing Mix strategy can be a useful tool to analyze a business/sector and to find out
potential differentiators
Innovation and business development are the most common tool to develop a competitive
edge

Porter 5 Forces is commonly used to analyze the impacts of a firm’s environment on its
profitability

A corporate development strategy may build on sophisticated models


extending Porter 5 Forces

II- Deal breakers

1- Key players

Only the external advisors cannot break a deal

- Key motivation for M&A deal :


Strategic realignment :
 Technological change
 Deregulation

Synergy :
 Economies of scale/scope
 Cross-selling

Diversification :
 Related Unrelated

Financial considerations :
 Belief target is undervalued Booming stock market Falling interest rates

Market power – dominate pricing :

Ego/Hubris – “I can do it”

Tax considerations-tax free, NOLs

Operations synergie are the most taken into consideration

The landscape of M&A Advisors is dominated by the investment banks for


large caps

2- Key regulations and tactics :

Regulators have the power to block a merger even when all


other stakeholders reach a solid agreement
Sherman anti trust act : Établit des sanctions pénales pour
entrave au commerce. Rend illégales les fusions créant des
monopoles

William act : Réglemente les offres publiques d'achat

Définit les obligations d'information :

- L'annexe 13 D doit être remplie auprès de la SEC dans les 10


jours suivant l'acquisition de 5 % des actions d'une autre
entreprise.

- Les offres publiques d'achat doivent rester ouvertes pendant


au moins 20 jours ouvrables.

Industry specific laws : Applies to Banking,


communications, railroads, defense, insurance, public
utilities, etc.

Environnemental laws , labor and benefits laws , Applicable


foreign laws

Bcp litiges le reste pas impornatn

M&A is a mug’s game: 70%–90% of acquisitions are


abysmal failures not materializing any synergy

3- Key phases :
Negotiation is an iterative process in M&A that can take a few
weeks up to several years

III- Valuation

PV vs NPV

Present value tells you what you'd need in today's dollars to


earn a specific amount in the future. Net present value is
used to determine how profitable a project or investment may
be.

Discount rate vs Interest rate

The discount rates are charged on the commercial banks or


depository institutions for taking overnight loans from the
Federal Reserve Banks, whereas the interest rate is charged
on the loan which the lender gives to the borrower by the
lender.

After taxes and reinvestmfore debt repayments

FCFF = (Earnings before interest & taxes (1-tax rate)


+ Depreciation
– ΔNet Working Capital1)2
– Gross Capital Expenditures3
1Excludes cash in excess of normal operating requirements.
2Cash from operating activities.
3Cash from investing activities.
4Cash from financing activities.

> Available to repay


- Lenders
- Shareholders
> After taxes and reinvestment
> Before debt repayments

Def :

NOPAT : net operating profit after tax is a company's after-tax


operating profit for all investors, including shareholders and debt
holders.

EPIAT :
CAPEX : Capital expenditure or capital expense is the money an
organization or corporate entity spends to buy, maintain, or improve
its fixed assets, such as buildings, vehicles, equipment, or land

OPEX : Opex (operational expenditure) is the money a company or organization spends on


an ongoing, day-to-day basis to run its business.

FCFE
> Available for paying dividends or repurchasing
common equity
> After taxes, debt repayments, new issues, and all
reinvestment

FCFE = (Net Income + Depreciation


– ΔNet Working Capital1)2
– Gross Capital Expenditures3
+ (New Preferred Equity Issues – Preferred
Dividends
+ New Debt Issues
– Principal Repayments)4
1Excludes cash in excess of normal operating requirements.
2Cash from operating activities.
3Cash from investing activities.
4Cash from financing activities.
FCFF is widely used for valuing target firms because
it does not require an estimate of financing needs.
FCFE is used primarily in the absence of debt or for
valuing equity in LBOs and financial service firms
Alternative Methods to DCF
Most common

 Market Approach – Similar to real estate


valuations
 – Comparable companies
 – Comparable transactions
 – Same industry or comparable
industry
 Asset oriented approach
 – Tangible book value
 – Liquidation value
 – Break-up value
 Replacement Cost approach
 Weighted average method
Most valuationson Wall Street are relative valuations
 – 85% of equity research

 – 50%+ of all acquisition valuations

 – Rules of thumb as basis for final valuation judgments

Relative methodology steps : lative Valuation: 3 Step


1. ID comparable assets and MV
2. Standardize MVs with price multiples.
3. Harmonize relative values

MVT =(MVC/IC)xIT

Asset-Based: Tangible Book Value (TBV) : determines the


potential value per share of a company in the event that it
must liquidate its assets. Assets such as property and
equipment are considered tangible assets.

 TBV = total equity value – goodwill


= (total assets - total liabilities) –
goodwill

Asset-Based: Liquidation Method : Liquidation value is an asset-


based method based upon the value that the business would
immediately receive upon selling the asset on the open market.
Immediately means selling the asset within a six to twelve month period.

Asset-Based: Break-Up Value : The breakup value is obtained by


taking the total assets of each component and deducting the total
liabilities. If the current breakup value exceeds the current market value
of the company, it will pay off to sell off the components of the company
in order to increase the shareholder value.

Intangible assets :

Assets do not have physical form

Deal Structuring Process


Deal structuring involves identifying
– The primary goals of the parties
involved in the transaction (Strategic
versus financial?) – Alternatives to
achieve these goals; and – How to
share risks
The appropriate deal structure is
that which
– Satisfies as many of the primary
objectives of the parties
involved as necessary to reach
agreement – Subject to an
acceptable level of risk
• Public company vs. private/closely
held needs

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy