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