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