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