Relacionar Columnas M and V 3Versión en línea mergers and valuations por alex kellett 1 MergVal 2 Epstein 3 Merger Cycle 2 signature event 4 Merger success: selling company 5 Merger cycle 3 6 Merger phase 2 7 White Knight 8 Merger cycle 4 signature event 9 Merger phase 1 10 Merger Phase 4 11 Merger cycle 4 12 A 25% phase 4 APP 13 Merger cycle 1 signature event 14 Qualitatives 15 Gearing ratio 16 Merger Monday 17 Merger cycle 3 signature event 18 Merger Cycle 1 19 Merger Cycle 2 20 Why TAPP 21 Merger Phase 3 22 3rd wave: Subprime aka 23 Merger Success: Dealmakers, bankers, advisers etc. 24 Revenue synergies 25 Merger success from the perspective of continuing major shareholders 26 Event studies Netscape and Worldnet IPOs 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) 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) 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. merger evaluators who solely rely on subjective criteria Financial Times: 13.01.2014. 'The date it is safe to do mergers again'. 3 major acquisitions announced on this date. RJR Nabisco Acquisition economy still perceived as in recession by many. A few 1-2 year cash paybook deals. APP 10-18% 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. Facebook and LinkedIn IPOs Merger boom legitimised, laggards criticised. Catch up deals. APP% quickly over 50%. Late cycle deals often over 100% APP until: increasing failures; declining target quality + reduced merger financing cause exhaustion peak 1982-90: LBO may be equiv to 3x the financial APP as the comparable %APP consummated in Phase 1 1996-00: Dot Com 1 December 2011-19: Megaboom evaluated on a cash flow effect basis only (as with all syn). Countrywide financial acquisition 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. Universal Banking (Travelers/Citicorp). led to repeal of US Glass-Steagall Law. (Deregulation spurred merger activity) Commercial banks chasing IP profit and prestige. Financing more available as overall M&A vol grows. APP = 20-35% qualitative. Only one subject: Chase/Bank one % of long term debt to total capital. The after tax cost of equity is 2-2.5 times that of debt. WACC 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 >%) reflecting the synergy vs premium principles of modern best practice merger valuation (VG and IVE) 2002-08: Subprime
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