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