Relier Pairs M and V 3Version en ligne mergers and valuations par alex kellett 1 Qualitatives 2 Merger phase 1 3 MergVal 4 Merger cycle 4 5 Merger Cycle 2 signature event 6 3rd wave: Subprime aka 7 Revenue synergies 8 Event studies 9 Merger Phase 3 10 Merger Monday 11 Epstein 12 Why TAPP 13 Merger Phase 4 14 Merger cycle 1 signature event 15 Merger cycle 3 16 Gearing ratio 17 Merger cycle 3 signature event 18 Merger cycle 4 signature event 19 Merger Success: Dealmakers, bankers, advisers etc. 20 Merger success from the perspective of continuing major shareholders 21 Merger success: selling company 22 A 25% phase 4 APP 23 Merger Cycle 2 24 Merger phase 2 25 White Knight 26 Merger Cycle 1 December 2011-19: Megaboom 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 Universal Banking (Travelers/Citicorp). led to repeal of US Glass-Steagall Law. (Deregulation spurred merger activity) Commercial banks chasing IP profit and prestige. 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). qualitative. Only one subject: Chase/Bank one 1996-00: Dot Com 1 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) Financial Times: 13.01.2014. 'The date it is safe to do mergers again'. 3 major acquisitions announced on this date. Merger boom legitimised, laggards criticised. Catch up deals. APP% quickly over 50%. 1982-90: LBO reflecting the synergy vs premium principles of modern best practice merger valuation (VG and IVE) Facebook and LinkedIn IPOs RJR Nabisco Acquisition 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. % of long term debt to total capital. The after tax cost of equity is 2-2.5 times that of debt. WACC 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 >%) Countrywide financial acquisition 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. Netscape and Worldnet IPOs 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) 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. 2002-08: Subprime
