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