Gearing ratio
A 25% phase 4 APP
Merger Phase 3
Why TAPP
Merger Cycle 1
Merger cycle 3
White Knight
Merger cycle 4
Merger success from the perspective of continuing major shareholders
Merger Success: Dealmakers, bankers, advisers etc.
Merger Monday
MergVal
Merger phase 2
Merger cycle 3 signature event
Merger cycle 1 signature event
Merger phase 1
Qualitatives
Merger success: selling company
Merger cycle 4 signature event
Revenue synergies
3rd wave: Subprime aka
Epstein
Merger Phase 4
Event studies
Merger Cycle 2 signature event
Merger Cycle 2
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)
December 2011-19: Megaboom
Late cycle deals often over 100% APP until: increasing failures; declining target quality + reduced merger financing cause exhaustion peak
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.
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.
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
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.
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)
1996-00: Dot Com 1
Facebook and LinkedIn IPOs
Universal Banking (Travelers/Citicorp). led to repeal of US Glass-Steagall Law. (Deregulation spurred merger activity) Commercial banks chasing IP profit and prestige.
may be equiv to 3x the financial APP as the comparable %APP consummated in Phase 1
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 >%)
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
RJR Nabisco Acquisition
Countrywide financial acquisition
2002-08: Subprime
1982-90: LBO
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)
economy still perceived as in recession by many. A few 1-2 year cash paybook deals. APP 10-18%
merger evaluators who solely rely on subjective criteria
