Merger cycle 1 signature event
Merger cycle 4
Merger Cycle 2
Merger cycle 3 signature event
Merger Cycle 2 signature event
Qualitatives
Merger Cycle 1
Gearing ratio
Epstein
A 25% phase 4 APP
Merger phase 1
Merger cycle 3
Merger success from the perspective of continuing major shareholders
Why TAPP
Merger Monday
Merger cycle 4 signature event
White Knight
3rd wave: Subprime aka
Merger success: selling company
Merger Phase 3
Revenue synergies
Merger phase 2
Merger Success: Dealmakers, bankers, advisers etc.
Event studies
Merger Phase 4
MergVal
typically allows subsidiary company to run their own operations (preserves subsidiary structure). They agree to limit their role to providing financing and developmental support as needed. (15% conglom discount)
Sellers seek to maximise the pv of cash equivalent returns over the period at which the board deems the company eligible to entertain offers (eg 6 months). (AMS: bidders + rounds)
evaluated on a cash flow effect basis only (as with all syn).
Merger boom legitimised, laggards criticised. Catch up deals. APP% quickly over 50%.
Share prices of target are always expected to increase following a serious bidder's EOI. This usually corresponds to a near-exact matching decline in the share price of acquirer (pay control premium) RMT.
Late cycle deals often over 100% APP until: increasing failures; declining target quality + reduced merger financing cause exhaustion peak
Netscape and Worldnet IPOs
% of long term debt to total capital. The after tax cost of equity is 2-2.5 times that of debt. WACC
qualitative. Only one subject: Chase/Bank one
merger evaluators who solely rely on subjective criteria
2002-08: Subprime
may be equiv to 3x the financial APP as the comparable %APP consummated in Phase 1
Universal Banking (Travelers/Citicorp). led to repeal of US Glass-Steagall Law. (Deregulation spurred merger activity) Commercial banks chasing IP profit and prestige.
1996-00: Dot Com 1
economy still perceived as in recession by many. A few 1-2 year cash paybook deals. APP 10-18%
Financing more available as overall M&A vol grows. APP = 20-35%
reflecting the synergy vs premium principles of modern best practice merger valuation (VG and IVE)
narrow self-interest. close as many deals as possible (deal flow and financial volume). No fee unless deals close; only min legal and no financial liability for value-destructive merger advice.
5 year min ownership position. reflects primacy of the party putting up risk capital: RMT: a) returns vs cost of capital. b) The deficit (APP) vs the pv of conservatively and independently determined NRS.
Financial Times: 13.01.2014. 'The date it is safe to do mergers again'. 3 major acquisitions announced on this date.
Facebook and LinkedIn IPOs
Countrywide financial acquisition
December 2011-19: Megaboom
1982-90: LBO
CF and synergies remain constant/increase very gradually during an M&A cycle but share price may triple. It better illustrates the importance of anticipatory purchase premium on APP (financial >%)
RJR Nabisco Acquisition
