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