• Merger Model: Cash, Debt, and Stock Mix

    In this merger model lesson, you'll learn how a company might decide what mix of cash, debt, and stock it might use to fund... By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" ... might use to fund a merger or an acquisition - and you'll understand how to determine the appropriate amount of each one in a deal. 2:24 General Order of Funding for M&A Deals 4:49 Cash - How Much Can You Use? 9:56 Debt - How Much Can You Use? 14:08 Stock - How Much Can You Use? 16:32 Exceptions 18:03 Recap and Summary How Do You Determine the Cash / Stock / Debt Mix in an M&A Deal? Very common interview question, and you also need to know it for what you do on the job. 3 ways to fund a company, and to fund acquisitions of other companies...

    published: 21 Oct 2014
  • IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments

    In this IRR vs Cash tutorial, you’ll learn the key distinctions between the internal rate of return (IRR). By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn further distinctions on the cash-on-cash multiple or money-on multiple when evaluating deals and investments – and you’ll understand why venture capital (VC) firms target one set of numbers, whereas private equity (PE) firms target a different set of numbers. http://youtube-breakingintowallstreet-com.s3.amazonaws.com/109-05-IRR-vs-Cash-on-Cash-Multiples.xlsx Table of Contents: 1:35 Why Do IRR and Cash-on-Cash Multiples Both Matter? 3:05 What Do Private Equity vs. Venture Capital vs. Other Firms Care About? 8:30 How to Use These Metrics in R...

    published: 05 Aug 2014
  • Accretion Dilution - Rules of Thumb for Merger Models

    Learn about rules of thumb you can use to determine whether an acquisition will be accretive or dilutive in advance, based on the P/E multiples of the buyer and seller, the % cash, stock, and debt used, and the prevailing interest rates on cash and debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Here's an outline of what we cover in the lesson, and the step-by-step process you can follow to figure this out for yourself: Why Do We Care About Rules of Thumb for M&A Deals / Merger Models? It's a VERY common interview question - "How can you tell whether an M&A deal is accretive or dilutive?" People often believe, incorrectly, that there's no way to tell without building the entire model. But shortcuts always e...

    published: 17 Nov 2013
  • What Is A Cash Merger?

    Definition of cash merger where an acquiring firm buys the target firm's stock with cash, instead more common practice exchanging it own definition out buying its a happens when company's. The acquirer can pay cash outright for all the equity shares of target company, paying what is an 'all deal'all mergers and acquisitions occur with no exchange stock; parent company purchases a majority common 7 aug 2017 merger mode payment business acquisition in which used to buy stock acquired firm instead striking about 1990s, however, way they're being deal, roles two parties are clear cut, but deals also be funded combination. In the event of a cash only merger transaction, exchange ratio is not excluding any effects, what actual based on stock mergers and acquisitions (m&a) are complex, involving ...

    published: 10 Oct 2017
  • Episode 119: Introduction to Mergers and Acquisitions

    Go Premium for only $9.99 a year and access exclusive ad-free videos from Alanis Business Academy. Click here for a 14 day free trial: http://bit.ly/1Iervwb View additional videos from Alanis Business Academy and interact with us on our social media pages: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bit.ly/1ccT2QA Facebook: http://on.fb.me/1cpuBhW Twitter: http://bit.ly/1bY2WFA Google+: http://bit.ly/1kX7s6P Companies have a few options for achieving growth. The first is by growing organically through the development of new products and production capacity over time. The other option, is through what are known as mergers and acquisitions. A merger occurs when two companies agree to combine to form an entirely new company. The two companies will agree on a post-merger name, ...

    published: 18 Jul 2013
  • Why Do Stock Prices Often Drop After Mergers and Acquisition

    Professor Antonio Bernardo and student Feifei Li say acquiring firms are often overvalued. Visit UCLA Anderson School of Management http://www.anderson.ucla.edu/ Click here for more faculty videos from UCLA Anderson School of Management http://www.anderson.ucla.edu/x17273.xml

    published: 11 Sep 2008
  • National Finance offers 'cash buyout' to Oman Orix shareholders for merger

    Merger Offer National Finance Company has decided to offer cash buyout to the shareholders of Oman Orix Leasing Company as part of the merger deal between the two leading leasing firms. Solar EOR Project The world’s largest solar-based enhanced oil recovery (EOR) project, Miraah, is expected to begin delivering steam by August this year. Sohar Port Hutchison, which is the container terminal operator at Sohar Port, has launched a new auto gate system at its terminal. Meetaq Islamic Finance Bank Muscat’s Meethaq Islamic financing receivables rose to OMR902 million as of March 31, 2017 compared to OMR665 million for the same period of 2016. Stock Market Share prices on the Muscat Securities Market edged down on selling pressure Website: http://timesofoman.com Facebook: http://face...

    published: 15 May 2017
  • Bill Gross on Market Outlook, Henderson Merger

    Jun.07 -- Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund, talks about his current market view as he expects lower returns and holds a large cash position. He speaks with Bloomberg's Erik Schatzker on "Bloomberg Markets."

    published: 07 Jun 2017
  • What Working Capital Means in Valuation and Financial Modeling

    Why Does Working Capital Matter? Many places define it as Current Assets minus Current Liabilities - that is technically true, but it misses something important. By http://breakingintowallstreet.com/biws/ WHY does it matter? What is the point of this? How do you use it? How does it impact a company's value? It's really the CHANGE in Working Capital that matters for valuation and financial modeling purposes. Working Capital, by itself, does not tell you a terrible amount and could mean many different things... but when you also look at the CHANGE in WC, what it is as a % of revenue and other metrics, AND the company's business model, that's when you start gaining insights. What Does the "Change" in Working Capital Mean? Best NOT to use the official definition of Current Assets minus C...

    published: 11 Mar 2014
  • Price behavior after announced acquisition | Finance & Capital Markets | Khan Academy

    Stock Price Behavior After Announced Acquisition with Shares. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/simple-merger-arb-with-share-acquisition?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/acquisitions-with-shares?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks through the mechanics of how this happens a...

    published: 12 May 2011
  • Earnout Modeling in M&A Deals and Merger Models

    In this tutorial, you’ll learn how and why earn-outs are used in M&A deals, how they appear on the 3 financial statements, and how they impact the transaction assumptions and combined financial statements in a merger model. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 1:28 What Earn-Outs Are and Why You Use Them 7:46 How Earn-Outs Show Up on the 3 Statements 12:21 How Earn-Outs Impact Purchase Price Allocation and Sources & Uses 16:02 How Earn-Outs Affect the IS, BS, and CFS in a Merger Model 19:12 Recap and Summary What Earn-Outs Are and Why You Use Them Instead of paying for a company 100% upfront, the buyer offers to pay some portion of the price later on – *if certain conditions are ...

    published: 12 May 2015
  • Simple merger arbitrage with share acquisition | Finance & Capital Markets | Khan Academy

    Showing how a merger arbitrage player might act if they were sure that a transaction would go through. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/leveraged-buy-outs/v/basic-leveraged-buyout-lbo?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/price-behavior-after-announced-acquisition?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks ...

    published: 12 May 2011
  • Hedge fund strategies: Merger arbitrage 1 | Finance & Capital Markets | Khan Academy

    Simple case of merger arbitrage when there is an all cash acquisition. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/investment-consumption/v/risk-and-reward-introduction?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/hedge-funds/v/hedge-fund-strategies-long-short-2?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure...

    published: 11 May 2011
  • Free Cash Flow: How to Interpret It and Use It In a Valuation

    You'll learn what "Free Cash Flow" (FCF) means, why it's such an important metric when analyzing and valuing companies. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn how to interpret positive vs. negative FCF, and what different numbers over time mean -- using a comparison between Wal-Mart, Amazon, and Salesforce as our example. Table of Contents: 0:54 What Free Cash Flow (FCF) is and Why It's Important 2:26 What Positive FCF Tells You, and What to Do With It 3:56 What Negative FCF Tells You, and What to Do With It 4:38 Why You Exclude Most Investing and Financing Activities in the FCF Calculation 7:55 How to Use and Interpret FCF When Analyzing Companies 11:58 Wal-Mart vs. Amazon vs. Salesf...

    published: 20 May 2014
  • Cost of merger

    Did you liked this video lecture? Then please check out the complete course related to this lecture, Advanced Financial Management - Mergers and Acquisitions with 20+ Lectures, 2+ hours content available at discounted price(only Rs.450) with life time validity and certificate of completion. https://www.udemy.com/draft/373106/?couponCode=YTB10A This course is about Advanced Financial Management - Mergers and Acquisitions. Often we come across, many big companies announcing Mergers and Acquisitions. We also see many times two or more companies in same line of activity getting merged, as well as companies in different line of activities. But why do they Merge? What is the benefit of merging the entities? How the companies are valued for the purpose of merger? How the purchase value is de...

    published: 14 Nov 2015
  • Merger Model Interview Questions: What to Expect

    You’ll learn about the most common merger model questions in this tutorial, as well as what type of “progression” to expect and the key principles you must understand in order to answer ANY math questions on this topic. Table of Contents: 3:26 Question #1: The Basic Rules 5:23 Question #2: With Real Numbers 8:21 Question #3: Equity Value, Enterprise Value, and Valuation Multiples 12:17 Question #4: Ranges for the Multiples 14:26 Question #5: What if the Buyer is Twice as Big? 16:26 Recap, Summary, and Key Principles Question #1: The Basic Rules "A company with a P / E multiple of 25x acquires another company for a purchase P / E multiple of 15x. Will the deal be accretive or dilutive?" ANSWER: You can’t tell unless it’s a 100% Stock deal. If it is, it will be accretive because th...

    published: 11 Oct 2016
  • Junker and Chubbybuddy Merger! Cash IN NOW! Invest! BUY! My Stock Price will Sky-rocket!

    watch the video, its pretty self explanatory. I simply like the name Junker better.

    published: 15 Jun 2009
  • What is a Reverse Merger?

    What is a reverse merger? What is the process? A reverse merger is the most common alternative to an initial public offering (IPO) or direct public offering (DPO) for a company seeking to go public. A “reverse merger” allows a privately held company to go public by acquiring a controlling interest in, and merging with, a public operating or public shell company. The SEC defines a “shell company” as a publically traded company with (1) no or nominal operations and (2) either no or nominal assets or assets consisting solely of any amount of cash and cash equivalents. In a reverse merger process, the private operating company shareholders exchange their shares of the private company for either new or existing shares of the public company so that at the end of the transaction, the sharehol...

    published: 22 Jan 2015
  • WACC, Cost of Equity, and Cost of Debt in a DCF

    In this WACC and Cost of Equity tutorial, you'll learn how changes to assumptions in a DCF impact variables like the Cost of Equity, Cost of Debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn about WACC (Weighted Average Cost of Capital) - and why it is not always so straightforward to answer these questions in interviews. Table of Contents: 2:22 Why Everything is Interrelated 4:22 Summary of Factors That Impact a DCF 6:37 Changes to Debt Percentages in the Capital Structure 11:38 The Risk-Free Rate, Equity Risk Premium, and Beta 12:49 The Tax Rate 14:55 Recap and Summary Why Do WACC, the Cost of Equity, and the Cost of Debt Matter? This is a VERY common interview question: "If a compan...

    published: 23 Sep 2014
  • Enterprise Value: Why You Add and Subtract Items

    In this Enterprise Value lesson we take a look at the rules of thumb to figure out what should be added or subtracted when you calculate it. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" This also covers a short case study based on Vivendi (a leading media/telecom conglomerate based in France), Everyone knows the definition of Enterprise Value: Take Equity Value, add Debt and Preferred Stock (and others), and subtract Cash... But WHY do you do any of that? Enterprise Value represents the value of the company's CORE BUSINESS OPERATIONS to ALL THE INVESTORS in the company - equity, debt, preferred stock, etc. So focus on OPERATIONAL ITEMS and ALL INVESTORS when thinking about what to include... and what to exclu...

    published: 03 Jun 2014
  • The HerpieMillz Merger So They Can Go In On Other Blacks For Youtube Cash!

    CLICK HERE TO GO SEE LAMAR WILLS JR FACEBOOK PAGE! https://www.facebook.com/BrownPatchKidd cLICK HERE TO SEE HIS VINE PAGE https://vine.co/u/985279517239443456?mode=list CLICK HERE TO DONATE VIA PATREON https://www.patreon.com/tommysotomayor click here to donate to paypal paypal.me/tommysotomayor follow me on twitter http://www.twitter.com/tjsotomayor follow me on instagram at http://www.instagram.com/tjsotomayor

    published: 07 Nov 2016
  • TATA-Bharti Airtel Merger is Now Going to be a Reality | CNBC TV18

    TTSL, TTML To merget their consumer mobile businesses with Bharti Airtel Merger on a Debt-free cash-free basis TATA CMB-AIRTEL CNBC-TV18 is India's No.1 Business medium and the undisputed leader in business news. The channel's benchmark coverage extends from corporate news, financial markets coverage, expert perspective on investing and management to industry verticals and beyond. CNBC-TV18 has been constantly innovating with new genres of programming that helps make business more relevant to different constituencies across India. India's most able business audience consumes CNBC-TV18 for their information & investing needs. This audience is highly diversified at one level comprising of key groups such as business leaders, professionals, retail investors, brokers and traders, intermedia...

    published: 12 Oct 2017
  • Purchase Price in M&A Deals: Equity Value or Enterprise Value?

    In this tutorial, you’ll learn why the real price paid by a buyer to acquire a seller in an M&A deal is neither the Purchase Equity Value nor the Purchase Enterprise Value… exactly. http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 4:29: Problem #1: The Treatment of Debt 8:03: Problem #2: The Treatment of Cash 11:45: Recap and Summary Common questions: “In an M&A deal, does the buyer pay the Equity Value or the Enterprise Value to acquire the seller?” “What does it mean in press releases when they say the purchase consideration ‘includes the assumption of debt’? Does that mean the price is the Enterprise Value?” The Basic Definitions Equity Value: Value of ALL the company’s assets, but only to...

    published: 10 Mar 2016
  • Mergers and Acquisitions Public and Private Company Valuation, James Tompkins

    This is an advanced topic and assumes an understanding of all lectures in the “Corporate Finance Lecture Series” playlist on this channel. I begin by setting some themes. For example, do financial principles (e.g. risk and return) apply equally to both public and private companies? Is there is a logical minimum and maximum price when a target is bought by an acquirer? What are the impacts on these prices when the target is not liquid and/or there is a change in control between the target and acquirer? Next I tackle the big picture concepts of valuing the target considering valuation issues in both a public and private company setting. Is public company information relevant and useful to private company valuation? What are some other approaches to valuation beyond discounted cash flow? I ex...

    published: 03 Nov 2015
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Merger Model: Cash, Debt, and Stock Mix

Merger Model: Cash, Debt, and Stock Mix

  • Order:
  • Duration: 19:59
  • Updated: 21 Oct 2014
  • views: 20072
videos
In this merger model lesson, you'll learn how a company might decide what mix of cash, debt, and stock it might use to fund... By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" ... might use to fund a merger or an acquisition - and you'll understand how to determine the appropriate amount of each one in a deal. 2:24 General Order of Funding for M&A Deals 4:49 Cash - How Much Can You Use? 9:56 Debt - How Much Can You Use? 14:08 Stock - How Much Can You Use? 16:32 Exceptions 18:03 Recap and Summary How Do You Determine the Cash / Stock / Debt Mix in an M&A Deal? Very common interview question, and you also need to know it for what you do on the job. 3 ways to fund a company, and to fund acquisitions of other companies: use cash on-hand, borrow the money from other entities (debt), or issue equity (stock) to new investors. But how does a buyer in an M&A deal decide whether it should use… 50% debt and 50% stock vs. 33% debt, 33% stock, and 33% cash vs. 50% cash and 50% debt vs…. And the list goes on. Easiest: Think about the "cost" of each method, start with the cheapest method, use the most of THAT method that you can, and then move to the next cheapest method, and continue like that. GENERALLY: Cheapest: Cash, since interest rates on cash are lower than interest rates on debt, and tend to be low in general. Next Cheapest: Debt, since it is still cheaper than equity and since interest paid on debt is tax-deductible. Most Expensive: Stock, since the Cost of Equity tends to exceed the Cost of Debt… in theory and in practice. To Compare Them: Look at the "After-Tax Yields"… for debt and cash, just take the Interest Rate and multiply by (1 - Buyer's Tax Rate). Stock: Take the buyer's Net Income and divide by its Equity Value (or "flip" its P / E multiple). SO: Always start with cash, use the most you can, then move to debt, use the most you can, and finish up with stock. Cash - How Much is "The Most You Can?" Easy: Company has minimal cash and can't use anything, or it has a huge cash balance and can use all of it. More Common Case: Look at the company's "minimum" cash balance and use the excess cash above that to fund the deal. EX: Company has $500 million in cash right now, but its minimum cash balance to keep operating is $200 million… So it can use $300 million of its cash to fund the deal. How to Determine: Can be tough, but sometimes companies disclose it… ...or you can look back at historical cash balances and make a guesstimate based on that (what was its lowest cash balance in past years?). Debt - How Much Can You Use? So let's say you've now used $300 million of cash to fund the deal… but it's a deal for $1 billion total. How much debt can you use to fund the remainder? $700 million? $300 million? $500 million? Easiest Method: Calculate the key credit stats and ratios for the combined company - for example: Total Debt / EBITDA Net Debt / EBITDA EBITDA / Interest Expense And see what amount of debt makes these look "reasonable", in line with historical figures and also figures for comparable companies. EX: Let's say that if the company uses $500 million of debt, its Debt / EBITDA is 4x. Historically, it has been around 2-3x, and no peer company is levered at more than 3.5x. If that's the case, we'd say that 3.5x - 4.0x is probably the "maximum" (whatever amount of debt that means). Here: We have the Debt / EBITDA and other ratios for the Men's Wearhouse / Jos. A. Bank peer companies. Stock - Now What? Often used as the "method of last resort" because: A) It tends to be the most expensive method for most companies. B) Most acquirers don't like giving up ownership and diluting existing shareholders unless absolutely necessary. So in this example, if we've used $300 million of cash and $500 million of debt, we're still not quite at $1 billion... need an extra $200 million, which we can get by issuing stock. # of Shares = $200 million / Buyer's Share Price. Technically, there's no real "limit," but it would be very odd for a company to give up more than, say, 50% ownership to another company… unless they're very close in size. Exceptions: Buyer has an exceptionally high P / E multiple (Amazon) - stock might be the cheapest! Buyer wants to do a tax-free deal (Google / YouTube) and it's much bigger anyway, so won't make a difference. Companies are similarly sized - stock might always be necessary because cash/debt are implausible (mergers of equals). Summary Which purchase method do you use? MOST relevant when companies are closer in size… doesn't make much difference when the buyer is 100x or 1000x bigger than the seller. Order: 1. Cash - Any excess cash above the company's minimum cash balance. 2. Debt - To the upper range of the Debt / EBITDA of comparables (and other metrics). 3. Stock - For any remaining funding that's required; ideally give up well under 50% ownership.
https://wn.com/Merger_Model_Cash,_Debt,_And_Stock_Mix
IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments

IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments

  • Order:
  • Duration: 14:01
  • Updated: 05 Aug 2014
  • views: 21213
videos
In this IRR vs Cash tutorial, you’ll learn the key distinctions between the internal rate of return (IRR). By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn further distinctions on the cash-on-cash multiple or money-on multiple when evaluating deals and investments – and you’ll understand why venture capital (VC) firms target one set of numbers, whereas private equity (PE) firms target a different set of numbers. http://youtube-breakingintowallstreet-com.s3.amazonaws.com/109-05-IRR-vs-Cash-on-Cash-Multiples.xlsx Table of Contents: 1:35 Why Do IRR and Cash-on-Cash Multiples Both Matter? 3:05 What Do Private Equity vs. Venture Capital vs. Other Firms Care About? 8:30 How to Use These Metrics in Real Life 11:08 Key Takeaways Lesson Outline: 1. Why Does This Matter? Because there are DIFFERENT ways to judge the success of a deal - 2 of the main ones for leveraged buyouts (LBOs), growth equity investments, and venture capital investments are the internal rate of return (IRR) and the cash-on-cash (CoC) or money-on-money (MoM) multiple. Many investment firms will care a lot about one of these, but not the other, and will try to find investments that yield a high IRR or a high multiple… but not both. The Difference: IRR factors in the time value of money - it's the effective, compounded interest rate on an investment. Whereas the multiple is simpler and ignores timing (e.g., $1000 / $100 = 10x multiple). 2. What Do Different Firms Care About? Most venture capital (VC) firms and early-stage investors want to earn a multiple of their money back - they don't care that much about IRR, because they're going to be invested for a VERY LONG time and it's not exactly liquid… and they don't care what the stock market does. VC firms must be able to cover their losses with “the winners”! If they get 2x their capital back in 1 year (100% IRR) and then lose everything on another investment in 5 years’ time (0% IRR), the first result is completely irrelevant because they've only earned back 1x their capital. Perfect Example: Harmonix, maker of Guitar Hero - got VC investment in the mid-1990's, generated $0 in revenue for 5+ years, and then in 2005 released the hit video game Guitar Hero. Sold for $175 million to Viacom in 2006! Massive multiple, but likely a pathetic IRR since it took 10+ years to get there. Later-stage investors and private equity firms care more about IRR because the multiples will never be that high in late-stage deals, and because they are benchmarked against the public markets (e.g., the S&P 500) more. If the firm's IRR can't beat the stock market, why should you invest? Most PE firms target at least a 20-25% IRR depending on the economy, deal environment, valuations, etc… less when things are bad, more in frothy times. This makes it common to do "quick flip" deals where the company is bought and then sold at a MUCH higher multiple right after - simply to get a high IRR. Real-Life Example: Thoma Bravo (mid-market tech PE firm) bought Digital Insight from Intuit for $1.025 billion, and then sold it 4 months later for $1.65 billion to NCR. VERY high IRR - 316%! But only a ~1.6x money multiple, assuming no debt / no debt repayment. http://dealbook.nytimes.com/2013/12/02/sale-to-ncr-is-a-quick-profitable-flip-for-a-private-equity-firm/ 3. How Do You Use These Metrics In Real Life? How to calculate them: see the Atlassian or J.Crew models. IRR is straightforward and uses built-in Excel functions, but for the CoC or MoM multiple, you need to sum up all positive cash flows in the period and divide by the sum of all negative cash flows in that period, and flip the sign. In the case of Atlassian, the deal is great for Accel because they earn a 15x multiple, even though the IRR is "only" 35%... they do not care AT ALL because they are targeting the multiple, not the IRR. For T. Rowe Price, the multiple of 1.9x isn't great, but they do at least get a 14% IRR which is probably what they care about more since they are late-stage investors. For the J. Crew deal, both the IRR and the multiple are very low and below what PE firms typically target, so this deal would be problematic to pursue, at least with these assumptions. 4. Key Takeaways IRR and Cash-on-Cash or Money-on-Money multiples are related, but often move in opposite directions when the time period changes. Different firms target different rates and metrics (VC/early stage - multiples, ideally over 10x or 3-5x later on; PE/late stage - IRR, ideally 20%+). Calculation: IRR is simple, use the built-in IRR or XIRR in Excel; for the multiple, sum the positive returns/cash flows, divide by the negative returns/cash flows and flip the sign. Judging deals: Focus on multiples for earlier stage deals (and if you're pitching VCs to fund your company), and focus on IRR for later stage / growth equity / PE deals.
https://wn.com/Irr_Vs._Cash_On_Cash_Multiples_In_Leveraged_Buyouts_And_Investments
Accretion Dilution - Rules of Thumb for Merger Models

Accretion Dilution - Rules of Thumb for Merger Models

  • Order:
  • Duration: 13:25
  • Updated: 17 Nov 2013
  • views: 40120
videos
Learn about rules of thumb you can use to determine whether an acquisition will be accretive or dilutive in advance, based on the P/E multiples of the buyer and seller, the % cash, stock, and debt used, and the prevailing interest rates on cash and debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Here's an outline of what we cover in the lesson, and the step-by-step process you can follow to figure this out for yourself: Why Do We Care About Rules of Thumb for M&A Deals / Merger Models? It's a VERY common interview question - "How can you tell whether an M&A deal is accretive or dilutive?" People often believe, incorrectly, that there's no way to tell without building the entire model. But shortcuts always exist! Plus, this shortcut is very useful in real life. You can use it to "sanity check" your model, approximate the impact of a deal in advance, and so on. So it's a time-saver *and* a good way to check your work. Rules of Thumb for Merger Models AKA Accretion / Dilution Models: CONCEPT: An M&A deal is accretive if the combined company's EPS (Earnings Per Share) is higher than the buyer's standalone EPS prior to the transaction. It's dilutive if the combined EPS is lower, and it's neutral if the EPS is the same afterward. The outcome depends on price paid for the seller, the method of payment (cash, stock, or debt), the interest rate on debt and cash, and the buyer's P/E multiple, among other factors. In real life, it's very difficult to tell with high precision whether the deal will be accretive or dilutive without running the whole model - due to added costs, synergies, write-ups, timing differences, the cumulative impact of additional interest on debt and foregone interest on cash, etc... BUT you can approximate the impact with a simple rule of thumb: 1. Calculate the Weighted "Cost" of Acquisition for the Buyer... 2. And compare it to the Seller's "Yield" AT its purchase price. (i.e. Seller's Net Income / Equity Purchase Price) This step is essential - if the seller is currently valued at $900 million and the buyer pays $1 billion for the seller, you NEED to use the $1 billion actually paid for the seller or these yields won't be correct. 3. If the Seller's "Yield" is higher, it's accretive - otherwise, if it's lower, it's dilutive... Think of it as the buyer getting MORE *from* the seller than what it's paying for the seller, vs. getting LESS than what it's paying. 4. How do you calculate the Weighted "Cost" of Acquisition? You need to calculate the after-tax "cost" of each component, since Net Income is also after-tax. After-Tax Cost of Cash = Foregone Cash Interest Rate * (1 - Buyer's Tax Rate) After-Tax Cost of Debt = Interest Rate on Debt * (1 - Buyer's Tax Rate) After-Tax Cost of Issuing Stock = 1 / Buyer's P/E Multiple (i.e. take the reciprocal of the buyer's P/E multiple) That last one is effectively the buyer's "after-tax yield"... For example, if you buy 1 share of the buyer's stock, it's the Net Income you'd be entitled to with that 1 share... So in this example, 1 / Buyer's P/E Multiple = 1 / 11.3 x = 8.9%. That means that for each $1.00 of United stock you buy, you get $0.089 in Net Income. Finally, you calculate the Weighted Average Itself with this formula: Weighted Average Cost of Acquisition = Cost of Cash * % Cash Used + Cost of Stock * % Stock Used + Cost of Debt * % Debt Used And if this weighted average cost of acquisition is greater than the seller's yield, it's dilutive - otherwise, if the weighted average cost of acquisition is lower than the seller's yield, it's accretive. LIMITATIONS: This trick doesn't hold up if the tax rates for the buyer and seller are different, especially if they're VERY different. This also doesn't work if you also factor in write-ups / write-downs, synergies, the cumulative impact of interest paid on debt and foregone interest on cash, merger closing costs, integration costs, etc... And it also doesn't work if the acquisition closes mid-year or in between fiscal years - you need to adjust for that with stub periods and the calendarization of financials... But this is a common interview question, so who cares! It's still very useful to know, and will save you a lot of time in interviews and on the job.
https://wn.com/Accretion_Dilution_Rules_Of_Thumb_For_Merger_Models
What Is A Cash Merger?

What Is A Cash Merger?

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  • Duration: 0:47
  • Updated: 10 Oct 2017
  • views: 3
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Definition of cash merger where an acquiring firm buys the target firm's stock with cash, instead more common practice exchanging it own definition out buying its a happens when company's. The acquirer can pay cash outright for all the equity shares of target company, paying what is an 'all deal'all mergers and acquisitions occur with no exchange stock; parent company purchases a majority common 7 aug 2017 merger mode payment business acquisition in which used to buy stock acquired firm instead striking about 1990s, however, way they're being deal, roles two parties are clear cut, but deals also be funded combination. In the event of a cash only merger transaction, exchange ratio is not excluding any effects, what actual based on stock mergers and acquisitions (m&a) are complex, involving many partiesairways begin discussions. What is cash merger? Definition and meaning businessdictionary. Cash merger meaning in the cambridge english dictionary. Cash received in mergers fairmark exchange ratio definition, formula and explanation. Capital gains tax share reorganisation, takeover or merger gov. Nov 2014 you must pay capital gains tax on any cash get as part of the takeover work out what proportion total shares (of that class) you're 1 2006 is a merger? The case for taxing mergers like stock salesin merger, neither assets nor in lieu fractional merger or spinoff, and reporting your broker reports could trigger warning flags irs can pick up does reverse mean my stocks? In takeovers, acquiring company agrees to certain dollar amount each share. What is a stock for merger and how does this corporate action all cash deal investopedia. Stock or cash? The trade offs for buyers and sellers in mergers the difference between cash & stock what is a forward merger? What cashout Definition of merger calculating gains. Occurs when the targeted firm's stockholders or shareholders do 8 sep 2015 corporations sometimes create merger transactions that exchange both cash and shares of one stock for a currently held tax rules depend on reason you received. What happens when you hold stock in a company that merges into another one? There are different tax corporate finance, tender offer is type of public takeover bid. In a cash merger, the acquirer uses to buy target company. What is cash merger? Definition and meaning businessdictionary what out the difference between & stock mergers budgeting money. First, let's be clear about what we mean by a stock for merger. How to report cash in lieu on schedule d the motley fool. What is a merger? The case for taxing cash law ecommons. What happens to stocks when companies merge? . The tender offer is a public, cash or securities may be offered to the target company's shareholders, although in which offers david offenberg, christo. What is the difference between all different types of stocks & symbols for same company? a merger formal type acquisition that combines two or more business enterprises were independent into single en
https://wn.com/What_Is_A_Cash_Merger
Episode 119: Introduction to Mergers and Acquisitions

Episode 119: Introduction to Mergers and Acquisitions

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  • Duration: 4:31
  • Updated: 18 Jul 2013
  • views: 28436
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Go Premium for only $9.99 a year and access exclusive ad-free videos from Alanis Business Academy. Click here for a 14 day free trial: http://bit.ly/1Iervwb View additional videos from Alanis Business Academy and interact with us on our social media pages: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bit.ly/1ccT2QA Facebook: http://on.fb.me/1cpuBhW Twitter: http://bit.ly/1bY2WFA Google+: http://bit.ly/1kX7s6P Companies have a few options for achieving growth. The first is by growing organically through the development of new products and production capacity over time. The other option, is through what are known as mergers and acquisitions. A merger occurs when two companies agree to combine to form an entirely new company. The two companies will agree on a post-merger name, like Exxon and Mobil combining to form ExxonMobil, and determine how to structure the new organization as well as staff operations. An acquisition occurs when one company purchases another company. The company that is purchased is then absorbed by the purchasing company and ceases to exist on its own. In some situations a company will purchase another, but allow it to operate independently and even keep its original name, such as when Disney purchased Pixar in 2006. This can be to ease the uncertainty associated with an acquisition as well as ensure the acquired company continues operations smoothly. In the case of Disney and Pixar, Pixar had proven to be successful prior to the acquisition and both companies wanted that success to continue unhindered by a new culture and even new staff. When classifying mergers and acquisitions we can label them as either horizontal or vertical. A horizontal merger or acquisition occurs when the two companies generally produce the same products and serve similar customers. The rationale behind such a merger is the newly merged company will be able to better compete in their respective industry by taking advantage of economies of scale and even technological innovation. It's also worth noting that horizontal acquisitions and mergers can allow companies to expand their product mix and potentially increase revenues by appealing to a wider customer base. Office Depot and Office Max, two retailers who sell similar products and serve similar customers, are currently in the process of completing a merger. This merger is meant to allow these companies the opportunity to compete more effectively against Internet retail giant Amazon. The joining of Office Depot and Office Max is an example of a horizontal merger. In 2012, Facebook acquired popular photo-sharing application Instagram for $1 billion in cash and stock. In addition to giving Facebook access to Instagram's successful mobile platform, it also eliminated a potential competitor while giving Facebook access to an additional group of customers. Facebook's acquisition of Instagram is an example of a horizontal acquisition since they both operate in a similar industry, providing a similar product to similar customers. Now a vertical merger or acquisition occurs when the two companies operate at different stages of the production cycle. Because these companies operate at different stages of the production cycle, the merger or acquisition can create increased operating efficiencies and reduce costs. For example, Google purchased Motorola Mobility in 2012 for $12.5 billion. Motorola Mobility is of course the manufacturer of handset devices while Google was beginning to producing and licensing its Android Operating System. In an effort to control both the hardware and software side of selling smartphones, Google acquired Motorola Mobility. This vertical acquisition allowed Google the opportunity to leverage Motorola Mobility's knowledge of the handset market as well as its staff and operations as opposed to starting from scratch or continuing to rely entirely on other companies for handsets. Coffee giant Starbucks also used a vertical acquisition to expand its offering of pastries and breads by purchasing San Francisco-based Bay Bread LLC, and its La Boulange bakery brand for $100 million in cash in April of this year. Although Starbucks had already sold pastries, this acquisition gave Starbucks control over a key player in the production cycle: the producer. Instead of purchasing pastries and other baked products from another business in the supply chain, Starbucks is now able to produce them in-house reducing its costs in the process. To subscribe to Alanis Business Academy for access to additional business content select the following link: http://www.youtube.com/subscription_center?add_user=mattalanis To access the Alanis Business Academy Youtube channel select the following link: http://www.youtube.com/user/mattalanis
https://wn.com/Episode_119_Introduction_To_Mergers_And_Acquisitions
Why Do Stock Prices Often Drop After Mergers and Acquisition

Why Do Stock Prices Often Drop After Mergers and Acquisition

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  • Duration: 3:39
  • Updated: 11 Sep 2008
  • views: 7171
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Professor Antonio Bernardo and student Feifei Li say acquiring firms are often overvalued. Visit UCLA Anderson School of Management http://www.anderson.ucla.edu/ Click here for more faculty videos from UCLA Anderson School of Management http://www.anderson.ucla.edu/x17273.xml
https://wn.com/Why_Do_Stock_Prices_Often_Drop_After_Mergers_And_Acquisition
National Finance offers 'cash buyout' to Oman Orix shareholders for merger

National Finance offers 'cash buyout' to Oman Orix shareholders for merger

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  • Duration: 1:01
  • Updated: 15 May 2017
  • views: 59
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Merger Offer National Finance Company has decided to offer cash buyout to the shareholders of Oman Orix Leasing Company as part of the merger deal between the two leading leasing firms. Solar EOR Project The world’s largest solar-based enhanced oil recovery (EOR) project, Miraah, is expected to begin delivering steam by August this year. Sohar Port Hutchison, which is the container terminal operator at Sohar Port, has launched a new auto gate system at its terminal. Meetaq Islamic Finance Bank Muscat’s Meethaq Islamic financing receivables rose to OMR902 million as of March 31, 2017 compared to OMR665 million for the same period of 2016. Stock Market Share prices on the Muscat Securities Market edged down on selling pressure Website: http://timesofoman.com Facebook: http://facebook.com/timesofoman Twitter: http://twitter.com/timesofoman
https://wn.com/National_Finance_Offers_'Cash_Buyout'_To_Oman_Orix_Shareholders_For_Merger
Bill Gross on Market Outlook, Henderson Merger

Bill Gross on Market Outlook, Henderson Merger

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  • Duration: 10:12
  • Updated: 07 Jun 2017
  • views: 1999
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Jun.07 -- Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund, talks about his current market view as he expects lower returns and holds a large cash position. He speaks with Bloomberg's Erik Schatzker on "Bloomberg Markets."
https://wn.com/Bill_Gross_On_Market_Outlook,_Henderson_Merger
What Working Capital Means in Valuation and Financial Modeling

What Working Capital Means in Valuation and Financial Modeling

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  • Duration: 19:41
  • Updated: 11 Mar 2014
  • views: 84537
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Why Does Working Capital Matter? Many places define it as Current Assets minus Current Liabilities - that is technically true, but it misses something important. By http://breakingintowallstreet.com/biws/ WHY does it matter? What is the point of this? How do you use it? How does it impact a company's value? It's really the CHANGE in Working Capital that matters for valuation and financial modeling purposes. Working Capital, by itself, does not tell you a terrible amount and could mean many different things... but when you also look at the CHANGE in WC, what it is as a % of revenue and other metrics, AND the company's business model, that's when you start gaining insights. What Does the "Change" in Working Capital Mean? Best NOT to use the official definition of Current Assets minus Current Liabilities... First off, cash and debt should be excluded altogether because they are not operational line items and therefore won't factor in when calculating a company's Free Cash Flow in any type of valuation. Also, it's easier to think of this in terms of the *individual items* that comprise these Current, "Operating" Assets and Liabilities. Most Common Current, Operating Assets: Accounts Receivable, Inventory, and Prepaid Expenses. Commonality: Paid for them upfront in cash or represent cash payments you're waiting on. INCREASING these will cost you cash! Most Common Current, Operating Liabilities: Deferred Revenue, Accounts Payable, and Accrued Liabilities. Commonality: You get cash from these! When they increase, your cash flow goes up because you're getting cash in advance (Deferred Revenue) or because you're delaying payments (AP and AL). So with the "Change" in Working Capital, you're seeing which group of items increases by a greater amount: Current Assets Excluding Cash? or Current Liabilities Excluding Debt? If this Change is NEGATIVE, then Current Assets are increasing by MORE than Current Liabilities! Interpretation: Company might be spending a lot on Inventory, might be waiting too long for customer payments, might be paying suppliers very quickly... If this Change is POSITIVE, then Current Liabilities are increasing by more than Current Assets! Interpretation: Could be collecting a lot of cash upfront, might have no or minimal inventory, or might just be delaying payments to suppliers. Examples and Real World Interpretations: Wal-Mart's Change in Working Capital: It's always negative due to huge Inventory expenditures - since WMT is an offline retailer, it MUST pay for Inventory in advance before selling it. It does keep suppliers waiting a fair amount since its AP balance is also high and increasing each year, but Inventory spending outweighs that. This means that as Wal-Mart's business grows, it requires ADDITIONAL cash to keep growing! But as a % of revenue, this is very small so it makes a minimal impact. It will reduce the company's valuation in a DCF, though, because this will push down Free Cash Flow. Amazon's Change in Working Capital: Amazon's Change in WC, by contrast is positive each year. It's still spending a lot on inventory... and actually, as a % of revenue the change is higher than Wal-Mart's each year... BUT it is also not paying suppliers as quickly and is accruing more to the Accounts Payable balance each year. For WMT, the increase in Inventory exceeds the increase in AP every year... for Amazon it's the opposite! Plus, the Deferred Revenue from customers paying in cash in advance for products boosts Amazon's cash flow. The end result: for Amazon, the Change in Working Capital boosts its Free Cash Flow and therefore its valuation in a DCF - quite significantly since it exceeds Net Income. Salesforce's Change in Working Capital: Salesforce also has a positive Change in Working Capital... No inventory required since it's a subscription software company! BUT it still has AR, and Deferred Commissions - must be paid upfront to sales reps in cash and then recognized over term of subscription. The Net Change still ends up being positive, though, thanks to that huge increase in Deferred Revenue each year... subscriptions are often sold months or years in advance, but the cash is collected UPFRONT. So as Salesforce grows, it doesn't require additional cash - it actually GENERATES additional cash. This will increase its Free Cash Flow and therefore increase its valuation in a DCF. Summary - What Does the Change in Working Capital Mean? As the business grows, does it generate MORE cash than you expect... or it does it REQUIRE additional cash to grow? Makes a big difference for a DCF analysis when you value a company based on its cash flows, but also makes a difference for how much funding the business needs to grow, and even what happens when that business gets acquired. Further Resources http://youtube.breakingintowallstreet.com.s3.amazonaws.com/107-04-WMT-AMZN-CRM-Working-Capital.xlsx
https://wn.com/What_Working_Capital_Means_In_Valuation_And_Financial_Modeling
Price behavior after announced acquisition | Finance & Capital Markets | Khan Academy

Price behavior after announced acquisition | Finance & Capital Markets | Khan Academy

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  • Duration: 4:04
  • Updated: 12 May 2011
  • views: 44780
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Stock Price Behavior After Announced Acquisition with Shares. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/simple-merger-arb-with-share-acquisition?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/acquisitions-with-shares?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks through the mechanics of how this happens and details what is likely to happen in the public markets because of the transaction (including opportunities for arbitrage). About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
https://wn.com/Price_Behavior_After_Announced_Acquisition_|_Finance_Capital_Markets_|_Khan_Academy
Earnout Modeling in M&A Deals and Merger Models

Earnout Modeling in M&A Deals and Merger Models

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  • Duration: 21:50
  • Updated: 12 May 2015
  • views: 8826
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In this tutorial, you’ll learn how and why earn-outs are used in M&A deals, how they appear on the 3 financial statements, and how they impact the transaction assumptions and combined financial statements in a merger model. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 1:28 What Earn-Outs Are and Why You Use Them 7:46 How Earn-Outs Show Up on the 3 Statements 12:21 How Earn-Outs Impact Purchase Price Allocation and Sources & Uses 16:02 How Earn-Outs Affect the IS, BS, and CFS in a Merger Model 19:12 Recap and Summary What Earn-Outs Are and Why You Use Them Instead of paying for a company 100% upfront, the buyer offers to pay some portion of the price later on – *if certain conditions are met.* Example: “We’ll pay you $100 million for your company now, and if you achieve EBITDA of $20 million in 2 years, we’ll pay you an additional $50 million then.” Earn-outs are VERY common for private company / start-up acquisitions in tech, biotech, pharmaceuticals, and related “high-risk industries.” EA acquired PopCap for $750 million upfront, and offered an earn-out that varied based on PopCap Games’ cumulative EBIT over the next 2 years. The schedule was as follows: 2-Year Earnings Under $91 Million: Nothing 2-Year Earnings Above $110 Million: $100 million 2-Year Earnings Above $200 Million: $175 million 2-Year Earnings Above $343 Million: $550 million Why Use an Earn-Out? You see them most often when the buyer and the seller disagree on the seller’s value or expected financial performance in the future. Earn-outs are a way for the buyer and seller to compromise and say, “We don’t really know how we’ll perform in the future, but if we reach a target of $X in revenue or EBITDA, you’ll pay us more for our company.” The buyer will almost always want to base the earn-out on the seller’s standalone Net Income, while the seller prefers to base it on revenue, partially so the seller can spend a silly amount to reach these revenue targets. As a compromise, EBIT or EBITDA are sometimes used. How Earn-Outs Show Up on the 3 Statements Balance Sheet: Earn-Outs are recorded as “Contingent Consideration,” a Liability on the L&E side. Income Statement: You record changes in the value of the Contingent Consideration here, i.e. if the probability of paying out the earn-out changes, you show it as a Loss or Gain here. It’s a Loss if the probability of paying the earn-out increases, and a Gain if the probability decreases. Cash Flow Statement: When the earn-out is paid out in cash to the seller, it’s a cash outflow here. You also have to add back or subtract changes in the Contingent Consideration value here, reversing what is listed on the Income Statement. How Earn-Outs Impact Purchase Price Allocation and Sources & Uses Earn-outs do not affect the Sources & Uses schedule for the initial transaction since no cash is paid out yet. Earn-outs *increase* the amount of Goodwill created in an M&A deal because they boost the Liabilities side of the Balance Sheet, which, in turn, requires higher Goodwill on the Assets side to balance it. How Earn-Outs Affect the IS, BS, and CFS in a Merger Model You tend to leave the Income Statement impact blank in a merger model unless you have detailed estimates for the seller’s future performance. You SHOULD factor in the cash payout of the earn-out on the combined Cash Flow Statement – you can assume a 100% chance of payout, or some lower probability. The payout will appear in Cash Flow from Financing and reduce cash flow and the company’s cash balance. RESOURCES: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-08-Earnout-Modeling.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-08-JAZZ-Earnouts.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-08-EA-PopCap.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-08-EA-PopCap-2.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-08-Earnout-Article-MA-Journal.pdf
https://wn.com/Earnout_Modeling_In_M_A_Deals_And_Merger_Models
Simple merger arbitrage with share acquisition | Finance & Capital Markets | Khan Academy

Simple merger arbitrage with share acquisition | Finance & Capital Markets | Khan Academy

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  • Duration: 4:22
  • Updated: 12 May 2011
  • views: 41511
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Showing how a merger arbitrage player might act if they were sure that a transaction would go through. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/leveraged-buy-outs/v/basic-leveraged-buyout-lbo?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/price-behavior-after-announced-acquisition?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks through the mechanics of how this happens and details what is likely to happen in the public markets because of the transaction (including opportunities for arbitrage). About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
https://wn.com/Simple_Merger_Arbitrage_With_Share_Acquisition_|_Finance_Capital_Markets_|_Khan_Academy
Hedge fund strategies: Merger arbitrage 1 | Finance & Capital Markets | Khan Academy

Hedge fund strategies: Merger arbitrage 1 | Finance & Capital Markets | Khan Academy

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  • Duration: 5:02
  • Updated: 11 May 2011
  • views: 86186
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Simple case of merger arbitrage when there is an all cash acquisition. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/investment-consumption/v/risk-and-reward-introduction?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/investment-vehicles-tutorial/hedge-funds/v/hedge-fund-strategies-long-short-2?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure to the market (so they could, in theory, do well in an "up" or "down" market as long as they were good at picking the good companies). Today, hedge funds represent a huge class investment funds. They are far less regulated than, say, mutual funds. In exchange for this, they aren't allowed to market or take investments from "unsophisticated" investors. Some use their flexibility to mitigate risk, other use it to amplify it. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
https://wn.com/Hedge_Fund_Strategies_Merger_Arbitrage_1_|_Finance_Capital_Markets_|_Khan_Academy
Free Cash Flow: How to Interpret It and Use It In a Valuation

Free Cash Flow: How to Interpret It and Use It In a Valuation

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  • Duration: 21:50
  • Updated: 20 May 2014
  • views: 87311
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You'll learn what "Free Cash Flow" (FCF) means, why it's such an important metric when analyzing and valuing companies. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn how to interpret positive vs. negative FCF, and what different numbers over time mean -- using a comparison between Wal-Mart, Amazon, and Salesforce as our example. Table of Contents: 0:54 What Free Cash Flow (FCF) is and Why It's Important 2:26 What Positive FCF Tells You, and What to Do With It 3:56 What Negative FCF Tells You, and What to Do With It 4:38 Why You Exclude Most Investing and Financing Activities in the FCF Calculation 7:55 How to Use and Interpret FCF When Analyzing Companies 11:58 Wal-Mart vs. Amazon vs. Salesforce: Free Cash Flow Across Sectors 19:33 Recap and Summary What is Free Cash Flow? Normally it's defined as Cash Flow from Operations minus Capital Expenditures. Tells you the company's DISCRETIONARY cash flow - after paying for expenses and working capital requirements like inventory and capital expenditures, how much cash flow can it put to use for other purposes? If the company generates a lot of Free Cash Flow, it has many options: hire more employees, spend more on working capital, invest in CapEx, invest in other securities, repay debt, issue dividends or repurchase shares, or even acquire other companies. If FCF is negative, you need to dig in and see if it's a one-time issue or recurring problem, and then figure out why: Are sales declining? Are expenses too high? Is the company spending too much on CapEx? If FCF is consistently negative, the company might have to raise debt or equity eventually, or it might have to restructure itself or cut costs in some other way. Why Do You Exclude Most Investing and Financing Activities Other Than CapEx? Because all other activities are, for the most part, "optional" and non-recurring. A normal company does not NEED to buy stocks or issue dividends or repurchase shares... those are all optional uses of cash. All it NEEDS to do to keep its business running is sell products to customers, pay for expenses, and keep investing in longer-term assets such as buildings and equipment (PP&E). Debt repayment and interest expense are "borderline" because some variations of Free Cash Flow will include them, others will exclude them, and some will include interest expense but not debt principal repayment. How Do You Use Free Cash Flow? It's used in a DCF (or at least, a variation of it) to value a company; it's also used in a leveraged buyout (LBO) model to determine how much debt a company can repay. And you can calculate it on a standalone basis for use when comparing different companies. The key is to DIG IN and see why Free Cash Flow is changing the way it is - Organic sales growth? Artificial cost-cutting? Accounting gimmicks? Different working capital policies? IDEALLY, FCF will be increasing because of higher units sales and/or higher market share, and/or higher margins due to economies of scale. Less Good: FCF is growing due to cost-cutting, CapEx slashing, or FCF is growing in spite of falling sales and profits... because of a company playing games with Working Capital, non-core activities, or CapEx spending. Wal-Mart vs. Amazon vs. Salesforce Comparison Main takeaway here is that Wal-Mart's FCF is all over the place, but Cash Flow from Operations is MOSTLY growing, so that appears to be driven by the also growing organic sales. The company is doing some odd things with CapEx and Working Capital, which led to fluctuations in FCF - not exactly "bad" or "good," just neutral and requires more research. With Amazon, they've increased CapEx spending massively in the past 2 years so that has pushed down CapEx. CFO is growing, driven by organic revenue growth (no "games" with Working Capital), but it's very difficult to assess whether all that CapEx spending will pay off in the long-term. With Salesforce, FCF is definitely growing organically (Revenue growth leads directly to CFO growth, and CapEx varies a bit but not as much as with Amazon), but the company is also spending a ton on acquisitions... will it continue? If CapEx as a % of revenue stays low, it will most likely continue to spend on acquisitions - unlikely to issue dividends, repurchase shares, etc. since it's a growth company. Further Resources http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Free-Cash-Flow.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Walmart-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Amazon-Financial-Statements.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/105-10-Salesforce-Financial-Statements.pdf
https://wn.com/Free_Cash_Flow_How_To_Interpret_It_And_Use_It_In_A_Valuation
Cost of merger

Cost of merger

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  • Duration: 9:06
  • Updated: 14 Nov 2015
  • views: 565
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Did you liked this video lecture? Then please check out the complete course related to this lecture, Advanced Financial Management - Mergers and Acquisitions with 20+ Lectures, 2+ hours content available at discounted price(only Rs.450) with life time validity and certificate of completion. https://www.udemy.com/draft/373106/?couponCode=YTB10A This course is about Advanced Financial Management - Mergers and Acquisitions. Often we come across, many big companies announcing Mergers and Acquisitions. We also see many times two or more companies in same line of activity getting merged, as well as companies in different line of activities. But why do they Merge? What is the benefit of merging the entities? How the companies are valued for the purpose of merger? How the purchase value is determined? You will have answers to all these questions in this course. Merger & Acquisitions are basically Investment decisions but made under uncertainty. Mergers are resorted to enhance the wealth for the owners / share holders. When two entities gets merged / acquired, wealth for the merged entity is expected to be higher than the wealth when they are individual entities. But, arriving at the value of the business to be merged is not an easy task because it would involve many complications like Legal issues, Tax Complications, Accounting effects on Financial Reports, etc. Hence, Mergers & Acquisitions are strategic decisions focusing on maximization of growth and value of the firm. In this course you will learn how to value the business as well as the strategic benefits to look for while considering merger. You will understand the two forms or structures in Merger and the valuation models covering 1. Asset Based Valuation. 2. Earnings or Dividend based Valuation. 3. Capital Asset Pricing Model based valuation. 4. Free cash flow model. The real benefit of merger can be measured only on the basis of price paid for the merger. Hence, valuation of business is the core element in the Merger. This course is presented in simple lecture style, to the point, focussing straight on the subject matter. This course has video lectures (black board writing model) explaning the concepts of Merger, Acquisitions, Synergy, Valuation Models, etc. This course is structured in self paced learning style. Take this course to understand the nuances in Valuation aspects of Merger and Acquisitions. • Category: Business What's in the Course? 1. Over 23 lectures and 3.5 hours of content! 2. Understand Why Business Entities opt for Merger 3. Understand different structures of Merger 4. Understand Strategic benefits of Merger 5. Understand Valuation Models related with Merger Course Requirements: 1. This is a basic level course. Students can take fresh approach to this course. 2. No prior knowledge in Financial Management is required. Who Should Attend? 1. Any one who is interested in Knowing about Valuation Aspects of Merger Deals 2. CA / CMA / CS / CPA / CFA / CIMA Students 3. Entrepreneurs 4. Finance Mangers
https://wn.com/Cost_Of_Merger
Merger Model Interview Questions: What to Expect

Merger Model Interview Questions: What to Expect

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  • Duration: 18:39
  • Updated: 11 Oct 2016
  • views: 9119
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You’ll learn about the most common merger model questions in this tutorial, as well as what type of “progression” to expect and the key principles you must understand in order to answer ANY math questions on this topic. Table of Contents: 3:26 Question #1: The Basic Rules 5:23 Question #2: With Real Numbers 8:21 Question #3: Equity Value, Enterprise Value, and Valuation Multiples 12:17 Question #4: Ranges for the Multiples 14:26 Question #5: What if the Buyer is Twice as Big? 16:26 Recap, Summary, and Key Principles Question #1: The Basic Rules "A company with a P / E multiple of 25x acquires another company for a purchase P / E multiple of 15x. Will the deal be accretive or dilutive?" ANSWER: You can’t tell unless it’s a 100% Stock deal. If it is, it will be accretive because the Cost of Acquisition is 1 / 25, or 4%, and the Seller’s Yield is 1 / 15, or 6.7%. Since the Seller’s Yield is higher, it will be accretive. For Cash and Debt deals, or deals with a mix of all three, you’d calculate the Weighted Cost of Acquisition by using Foregone Interest Rate on Cash * (1 – Buyer’s Tax Rate) * % Cash + Interest Rate on Debt * (1 – Buyer’s Tax Rate) * % Debt + 1 / (Buyer’s P / E Multiple) * % Stock and compare that to the Seller’s Yield. Question #2: With Real Numbers “Let’s say it is a 100% Stock deal. The Buyer has 10 shares at a share price of $25.00, and its Net Income is $10. It acquires the Seller for a Purchase Equity Value of $150. The Seller has a Net Income of $10 as well. Assume the same tax rates for both companies. How accretive is this deal?” ANSWER: The buyer’s EPS is $10 / 10 = $1.00. It must issue 6 additional shares to do the deal, so the Combined Share Count is 10 + 6 = 16. Since both companies have the same tax rate and since no Cash or Debt is used, Combined Net Income = $10 + $10 = $20, and Combined EPS = $20 / 16 = $1.25, so the deal is 25% accretive. Question #3: Equity Value, Enterprise Value, and Valuation Multiples “What are the Combined Equity Value and Enterprise Value in this same deal? Assume that Equity Value = Enterprise Value for both the Buyer and Seller.” ANSWER: Combined Equity Value = Buyer’s Equity Value + Value of Stock Issued in the Deal = $250 + $150 = $400. Combined Enterprise Value = Buyer’s Enterprise Value + Purchase Enterprise Value of Seller = $250 + $150 = $400. The Combined EV / EBITDA multiple won’t be affected by the mix of Cash, Stock, and Debt, but the P / E multiple will be. It’s 20x here ($400 / $20), but it will change for non-100%-Stock deals. Question #4: Ranges for the Multiples “Without doing any math, what ranges would you expect for the Combined EV / EBITDA and P / E multiples, and why?” ANSWER: They should be somewhere in between the Buyer’s multiples and the Seller’s purchase multiples. It’s almost never a simple average because of the relative sizes of the Buyer and Seller – and for P / E, the purchase method also plays a role. Question #5: What if the Buyer is Twice as Big? "What happens if the Buyer is twice as big, i.e. it has an Equity Value of $500 and Net Income of $20?" ANSWER: The deal becomes *less* accretive because the company making it accretive, the Seller, now has a lower weighting. The Buyer was previously $250 / $400 of the total, but is now only $500 / $650, which is ~63% vs. ~77%, so we’d expect accretion to fall by 10-15%, which it does. The Combined Multiples will all be closer to the Buyer’s multiples now as well. Recap, Summary, and Key Principles Principle #1: If the Seller’s Yield is above the Weighted Cost of Acquisition, it’s accretive; dilutive if the opposite. Principle #2: Combined Equity Value = Buyer’s Equity Value + Value of Stock Issued in the Deal. Principle #3: Combined Enterprise Value = Buyer’s Enterprise Value + Purchase Enterprise Value of Seller. Principle #4: The Combined P / E Multiple is affected by the Cash / Debt / Stock mix, but the Combined EV / EBITDA Multiple is not. Principle #5: The Combined Multiples will be in between the Buyer’s multiples and the Seller’s purchase multiples – exact numbers depend on sizes of the Buyer and Seller. RESOURCES: https://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-11-Merger-Model-Interview-Questions-Slides.pdf https://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-11-Merger-Model-Interview-Questions.xlsx
https://wn.com/Merger_Model_Interview_Questions_What_To_Expect
Junker and Chubbybuddy Merger! Cash IN NOW! Invest! BUY! My Stock Price will Sky-rocket!

Junker and Chubbybuddy Merger! Cash IN NOW! Invest! BUY! My Stock Price will Sky-rocket!

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  • Duration: 1:00
  • Updated: 15 Jun 2009
  • views: 30
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watch the video, its pretty self explanatory. I simply like the name Junker better.
https://wn.com/Junker_And_Chubbybuddy_Merger_Cash_In_Now_Invest_Buy_My_Stock_Price_Will_Sky_Rocket
What is a Reverse Merger?

What is a Reverse Merger?

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  • Duration: 5:12
  • Updated: 22 Jan 2015
  • views: 3445
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What is a reverse merger? What is the process? A reverse merger is the most common alternative to an initial public offering (IPO) or direct public offering (DPO) for a company seeking to go public. A “reverse merger” allows a privately held company to go public by acquiring a controlling interest in, and merging with, a public operating or public shell company. The SEC defines a “shell company” as a publically traded company with (1) no or nominal operations and (2) either no or nominal assets or assets consisting solely of any amount of cash and cash equivalents. In a reverse merger process, the private operating company shareholders exchange their shares of the private company for either new or existing shares of the public company so that at the end of the transaction, the shareholders of the private operating company own a majority of the public company and the private operating company has become a wholly owned subsidiary of the public company. The pre-closing controlling shareholder of the public company either returns their shares to the company for cancellation or transfers them to individuals or entities associated with the private operating business. The public company assumes the operations of the private operating company. At the closing, the private operating company has gone public by acquiring a controlling interest in a public company and having the public company assume operations of the operating entity. A reverse merger is often structured as a reverse triangular merger. In that case, the public shell forms a new subsidiary which new subsidiary merges with the private operating business. At the closing the private company, shareholders exchange their ownership for shares in the public company and the private operating business becomes a wholly owned subsidiary of the public company. The primary benefit of the reverse triangular merger is the ease of shareholder consent. That is because the sole shareholder of the acquisition subsidiary is the public company; the directors of the public company can approve the transaction on behalf of the acquiring subsidiary, avoiding the necessity of meeting the proxy requirements of the Securities Exchange Act of 1934. The SEC requires that a public company file Form 10 type information on the private entity within four days of completing the reverse merger transaction (a super 8-K). Upon completion of the reverse merger transaction and filing of the Form 10 information, the once private company is now public. Form 10 information refers to the type of information contained in a Form 10 Registration Statement. Accordingly, a Super 8-K is an 8-K with a Form 10 included therein.
https://wn.com/What_Is_A_Reverse_Merger
WACC, Cost of Equity, and Cost of Debt in a DCF

WACC, Cost of Equity, and Cost of Debt in a DCF

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  • Duration: 17:56
  • Updated: 23 Sep 2014
  • views: 70698
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In this WACC and Cost of Equity tutorial, you'll learn how changes to assumptions in a DCF impact variables like the Cost of Equity, Cost of Debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn about WACC (Weighted Average Cost of Capital) - and why it is not always so straightforward to answer these questions in interviews. Table of Contents: 2:22 Why Everything is Interrelated 4:22 Summary of Factors That Impact a DCF 6:37 Changes to Debt Percentages in the Capital Structure 11:38 The Risk-Free Rate, Equity Risk Premium, and Beta 12:49 The Tax Rate 14:55 Recap and Summary Why Do WACC, the Cost of Equity, and the Cost of Debt Matter? This is a VERY common interview question: "If a company goes from 10% debt to 30% debt, does its WACC increase or decrease?" "What if the Risk-Free Rate changes? How is everything else impacted?" "What if the company is bigger / smaller?" Plus, you need to use these concepts on the job all the time when valuing companies… these "costs" represent your opportunity cost from investing in a specific company, and you use them to evaluate that company's cash flows and determine how much the company is worth to you. EX: If you can get a 10% yield by investing in other, similar companies in this market, you'd evaluate this company's cash flows against that 10% "discount rate"… …and if this company's debt, tax rate, or overall size changes, you better know how the discount rate also changes! It could easily change the company's value to you, the investor. The Most Important Concept… Everything is interrelated - in other words, more debt will impact BOTH the equity AND the debt investors! Why? Because additional leverage makes the company riskier for everyone involved. The chance of bankruptcy is higher, so the "cost" even to the equity investors increases. AND: Other variables like the Risk-Free Rate will end up impacting everything, including Cost of Equity and Cost of Debt, because both of them are tied to overall interest rates on "safe" government bonds. Tricky: Some changes only make an impact when a company actually has debt (changes to the tax rate), and you can't always predict how the value derived from a DCF will change in response to this. Changes to the DCF Analysis and the Impact on Cost of Equity, Cost of Debt, WACC, and Implied Value: Smaller Company: Cost of Debt, Equity, and WACC are all higher. Bigger Company: Cost of Debt, Equity, and WACC are all lower. * Assuming the same capital structure percentages - if the capital structure is NOT the same, this could go either way. Emerging Market: Cost of Debt, Equity, and WACC are all higher. No Debt to Some Debt: Cost of Equity and Cost of Debt are higher. WACC is lower at first, but eventually higher. Some Debt to No Debt: Cost of Equity and Cost of Debt are lower. It's impossible to say how WACC changes because it depends on where you are in the "U-shaped curve" - if you're above the debt % that minimizes WACC, WACC will decrease. Otherwise, if you're at that minimum or below it, WACC will increase. Higher Risk-Free Rate: Cost of Equity, Debt, and WACC are all higher; they're all lower with a lower Risk-Free Rate. Higher Equity Risk Premium and Higher Beta: Cost of Equity is higher, and so is WACC; Cost of Debt doesn't change in a predictable way in response to these. When these are lower, Cost of Equity and WACC are both lower. Higher Tax Rate: Cost of Equity, Debt, and WACC are all lower; they're higher when the tax rate is lower. ** Assumes the company has debt - if it does not, taxes don't make an impact because there is no tax benefit to interest paid on debt.
https://wn.com/Wacc,_Cost_Of_Equity,_And_Cost_Of_Debt_In_A_Dcf
Enterprise Value: Why You Add and Subtract Items

Enterprise Value: Why You Add and Subtract Items

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  • Duration: 23:40
  • Updated: 03 Jun 2014
  • views: 20997
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In this Enterprise Value lesson we take a look at the rules of thumb to figure out what should be added or subtracted when you calculate it. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" This also covers a short case study based on Vivendi (a leading media/telecom conglomerate based in France), Everyone knows the definition of Enterprise Value: Take Equity Value, add Debt and Preferred Stock (and others), and subtract Cash... But WHY do you do any of that? Enterprise Value represents the value of the company's CORE BUSINESS OPERATIONS to ALL THE INVESTORS in the company - equity, debt, preferred stock, etc. So focus on OPERATIONAL ITEMS and ALL INVESTORS when thinking about what to include... and what to exclude! Table of Contents: 1:19 What Enterprise Value Means 2:10 The 3 Key Rules of Thumb 5:15 Walk-Through of Vivendi's Assets and What to Subtract 11:08 How to Determine the Proper Treatment for Certain Assets 12:33 Excel Calculations for Assets Subtracted 13:30 Walk-Through of Vivendi's Liabilities & Equity and What to Add 15:14 How to Determine the Proper Treatment for Certain Liabilities 17:04 Excel Calculations for Liabilities Added 18:57 The Equity Section and Noncontrolling Interests 19:45 Recap and Summary The Three Rules of Thumb: 1. Is this item a *long-term funding source* for the company? In other words, will the funds we raise from this item help fund our business for years to come? If so, you should ADD this item when calculating Enterprise Value! Examples: Debt, Preferred Stock, Noncontrolling Interests (Minority Interests), Capital Leases, Unfunded Pension Obligations, Restructuring/Environmental Liabilities... 2. Will this item cost an acquirer of the company something extra when they go to buy it? And is it NOT something that will be repaid out of the company's normal operating cash flows (e.g., Accounts Payable)? If so, ADD it when calculating Enterprise Value! Examples: Debt, Preferred Stock. 3. Is this item NOT an operating asset? In other words, could the company continue to operate even WITHOUT this particular asset and be fine? If so, SUBTRACT it when calculating Enterprise Value! (These items often "save acquirers money" when buying the company.) Examples: Cash, Liquid Investments, Net Operating Losses, Assets from Discontinued Operations or Assets Held for Sale... How Does Each Item In Our Analysis Satisfy This Criteria? ITEMS THAT YOU SUBTRACT: Cash - Non-operating asset, the company doesn't "need" it to run its business beyond a certain low, minimum level. Liquid Investments - Also non-operating, the company has no need to invest in the stock market if it sells normal products/services. Equity Investments - Non-operating, not recorded in this company's revenue/expenses, doesn't "need" it to run the business. Other Non-Core Assets - Typically items that will be sold off or discontinued soon, so they're the very definition of "non-operating." NOLs - Also non-operating since long-term tax savings from these are not required to run the business. ITEMS THAT YOU ADD: Debt - Long-term funding source, and an acquirer has to repay it. Preferred Stock - Long-term funding source, and an acquirer has to repay it. Noncontrolling Interests - Long-term funding source, but this one's mostly for *comparability*... the company has recorded 100% of revenue and expenses from this company, so we want to capture 100% of its value as well (see our dedicated lesson on this one). Unfunded Pension Obligations - They're a long-term funding source! "Work for us now, we'll pay you a bit less, but we'll take care of you when you retire! Really!" To the company, very much like super-long-term debt.... but owed to employees, not outside investors. Plus, an acquirer has to pay for these somehow... Capital Leases - Also a long-term funding source, sort of like debt used to fund PP&E... these leases are used to fund operations and must be repaid. Restructuring & Legal Liabilities - Increases the cost to an acquirer, and they are also "long-term funding" of a sort - "Instead of paying for these expenses right now, we'll take care of them far into the future and reflect that liability." The Bottom-Line The Enterprise Value calculation is always somewhat subjective, and you'll see it done different ways. Everyone agrees on certain items (Cash, Debt, Preferred Stock), but the treatment of others varies by group, firm, industry, etc. As long as you can justify and explain how you calculated it, you'll be fine - even if someone else wants to change it later. To do that, keep in mind the 3 key rules of thumb above. Further Resources http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-07-VIV-Equity-Value-Enterprise-Value.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-07-VIV-Annual-Financial-Statements-Notes.pdf
https://wn.com/Enterprise_Value_Why_You_Add_And_Subtract_Items
The HerpieMillz Merger So They Can Go In On Other Blacks For Youtube Cash!

The HerpieMillz Merger So They Can Go In On Other Blacks For Youtube Cash!

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  • Duration: 43:09
  • Updated: 07 Nov 2016
  • views: 4910
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CLICK HERE TO GO SEE LAMAR WILLS JR FACEBOOK PAGE! https://www.facebook.com/BrownPatchKidd cLICK HERE TO SEE HIS VINE PAGE https://vine.co/u/985279517239443456?mode=list CLICK HERE TO DONATE VIA PATREON https://www.patreon.com/tommysotomayor click here to donate to paypal paypal.me/tommysotomayor follow me on twitter http://www.twitter.com/tjsotomayor follow me on instagram at http://www.instagram.com/tjsotomayor
https://wn.com/The_Herpiemillz_Merger_So_They_Can_Go_In_On_Other_Blacks_For_Youtube_Cash
TATA-Bharti Airtel Merger is Now Going to be a Reality | CNBC TV18

TATA-Bharti Airtel Merger is Now Going to be a Reality | CNBC TV18

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  • Duration: 33:46
  • Updated: 12 Oct 2017
  • views: 105
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TTSL, TTML To merget their consumer mobile businesses with Bharti Airtel Merger on a Debt-free cash-free basis TATA CMB-AIRTEL CNBC-TV18 is India's No.1 Business medium and the undisputed leader in business news. The channel's benchmark coverage extends from corporate news, financial markets coverage, expert perspective on investing and management to industry verticals and beyond. CNBC-TV18 has been constantly innovating with new genres of programming that helps make business more relevant to different constituencies across India. India's most able business audience consumes CNBC-TV18 for their information & investing needs. This audience is highly diversified at one level comprising of key groups such as business leaders, professionals, retail investors, brokers and traders, intermediaries, self-employed professionals, High Net Worth individuals, students and even homemakers but shares a distinct commonality in terms of their spirit of enterprise. Subscribe to our Channel: https://www.youtube.com/user/CNBCTV18 Like us on Facebook: https://www.facebook.com/cnbctv18india/ Follow us on Twitter: https://twitter.com/CNBCTV18News Website: http://www.moneycontrol.com/cnbctv18/
https://wn.com/Tata_Bharti_Airtel_Merger_Is_Now_Going_To_Be_A_Reality_|_Cnbc_Tv18
Purchase Price in M&A Deals: Equity Value or Enterprise Value?

Purchase Price in M&A Deals: Equity Value or Enterprise Value?

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  • Duration: 15:29
  • Updated: 10 Mar 2016
  • views: 20280
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In this tutorial, you’ll learn why the real price paid by a buyer to acquire a seller in an M&A deal is neither the Purchase Equity Value nor the Purchase Enterprise Value… exactly. http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 4:29: Problem #1: The Treatment of Debt 8:03: Problem #2: The Treatment of Cash 11:45: Recap and Summary Common questions: “In an M&A deal, does the buyer pay the Equity Value or the Enterprise Value to acquire the seller?” “What does it mean in press releases when they say the purchase consideration ‘includes the assumption of debt’? Does that mean the price is the Enterprise Value?” The Basic Definitions Equity Value: Value of ALL the company’s assets, but only to common equity investors (shareholders). Enterprise Value: Value of ONLY the core business operations, but to ALL investors (equity, debt, etc.). So when you calculate Enterprise Value, starting with Equity Value… Add Items When: They represent other investors (Debt investors, Preferred Stock investors, etc.) or long-term funding sources (Capital Leases, Unfunded Pensions) Subtract Items When: They are not related to the company’s core business operations (side activities, cash or excess cash, investments, real estate, etc.) The Confusion The problem is that many sources say Enterprise Value is what it “really costs to acquire a company.” But that’s not exactly true – yes, sometimes Enterprise Value is closer, but it depends on the deal terms and the items in Enterprise Value. We know, WITH CERTAINTY, that if you acquire 100% of a company, you must pay for 100% of its common shares. So the Purchase Equity Value is sort of a “floor” for the purchase price in an M&A deal. But should you really add the seller’s Debt, Preferred Stock, and other funding sources, and subtract 100% of the seller’s cash balance to determine the “real price”? There are many problems with that approach, but we’ll look at two of them here: PROBLEM #1: Does Debt really increase the purchase price? It depends, because debt can be either “assumed” (kept) or “refinanced” (replaced with new debt or paid off). Debt is Assumed: Does not increase the amount the buyer “really pays” for the seller. Debt is Repaid with the Buyer’s Cash: Does increase the amount the buyer “really pays”. Existing Debt is Replaced with New Debt: Increases the amount the buyer “really pays,” but the buyer still isn’t paying more cash. PROBLEM #2: Does Cash really reduce the purchase price? A buyer can’t just “take” a seller’s entire cash balance following a deal – all companies need a certain “minimum cash balance” to keep operating, paying the bills, etc. That portion of cash is actually a core business operating asset. Enterprise Value: As a simplification, we ignore the minimum cash and subtract all cash instead. So if a company operating by itself always needs some minimum amount of cash, it certainly still needs a minimum amount of cash in an M&A deal. Other Complications Transaction Fees: These always exist, and will always increase the price the buyer pays (lawyers, accountants, bankers, etc.). Unfunded Pensions, Capital Leases, etc.: These don’t necessarily have to be “paid” or “repaid” upon change of control… so they may not even affect the price, even though they factor into Enterprise Value. Extra Cash: What if the buyer’s cash + seller’s cash are used to fund the deal? Then the real price paid may not even be comparable to the seller’s Equity Value or Enterprise Value. The Bottom Line You have to distinguish between the *valuation* of a company or deal and the *actual price paid*. Equity Value and Enterprise Value are useful for valuation, but less useful for determining the real price paid. The real price paid may be between Equity Value and Enterprise Value, above them, or even below them, depending on the terms of the deal – due to the treatment of debt and cash, fees, and liabilities that don’t affect the cash cost of doing the deal. When you see language like “Including assumption of net debt,” that means the approximate Purchase Enterprise Value for the deal, because they are calculating it as Purchase Equity Value + Debt – Cash. But it’s still not what the buyer actually pays – it’s just a way to value the deal and get multiples like EV / EBITDA. RESOURCES: https://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-10-Purchase-Price-MA-Deals.pdf
https://wn.com/Purchase_Price_In_M_A_Deals_Equity_Value_Or_Enterprise_Value
Mergers and Acquisitions Public and Private Company Valuation, James Tompkins

Mergers and Acquisitions Public and Private Company Valuation, James Tompkins

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  • Duration: 2:17:34
  • Updated: 03 Nov 2015
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This is an advanced topic and assumes an understanding of all lectures in the “Corporate Finance Lecture Series” playlist on this channel. I begin by setting some themes. For example, do financial principles (e.g. risk and return) apply equally to both public and private companies? Is there is a logical minimum and maximum price when a target is bought by an acquirer? What are the impacts on these prices when the target is not liquid and/or there is a change in control between the target and acquirer? Next I tackle the big picture concepts of valuing the target considering valuation issues in both a public and private company setting. Is public company information relevant and useful to private company valuation? What are some other approaches to valuation beyond discounted cash flow? I explore these and other issues using “real life” data when Media General announced its acquisition of Meredith in September 2015.
https://wn.com/Mergers_And_Acquisitions_Public_And_Private_Company_Valuation,_James_Tompkins