• 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
  • 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
  • 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
  • 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
  • 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
  • Regulators Are Nervous about the Monsanto-Bayer Merger | Fortune

    The $66 Billion acquisition of Monsanto by Bayer is the largest cash transaction on record. Subscribe to Fortune - http://www.youtube.com/subscription_center?add_user=FortuneMagazineVideo FORTUNE is a global leader in business journalism with a worldwide circulation of more than 1 million and a readership of nearly 5 million, with major franchises including the FORTUNE 500 and the FORTUNE 100 Best Companies to Work For. FORTUNE Live Media extends the brand's mission into live settings, hosting a wide range of annual conferences, including the FORTUNE Global Forum. Website: http://fortune.com/ Facebook: https://www.facebook.com/FortuneMagazine Twitter: https://twitter.com/FortuneMagazine Fortune Magazine is published by Time Inc.

    published: 15 Sep 2016
  • 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
  • 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
  • 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
  • What Is The Meaning Of Merger?

    The combination of the two companies involves a transfer ownership, either through stock swap or cash payment between. See more merge definition if one thing merges with another, or is merged they combine come. Mergers & acquisitions meaning, importance, examples, case merger merge definition and meaning of by merriam webster. Merger definition & example merge meaning in the cambridge english dictionary. Mergers and acquisitions are commonly done to expand a company's reach, into new segments, or gain market share voluntary amalgamation of two firms on roughly equal terms one legal entity. What is mergers and acquisitions (m&a)? Definition from whatis. What is merger? Definition and meaning businessdictionary. To become combined or united 'all the shadows on wall mergersdefinition combinat...

    published: 19 Jun 2017
  • 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
  • Cost of merger

    Advanced Financial Management - Mergers and Acquisitions Do you want to learn any topic in Accounting, Advanced Accounting, Financial Management, Costing, Accounting, Management Accounting, Accounting Standards, Financial Reporting, Strategic Financial Management, Statistics, Operations Research or any subjects in CA / CMA / CS / MBA (Finance), B.Com. BBA, M.Com, etc.? Contact me at nrajca@gmail.com to create exclusive video content or courses for you. If you enjoyed this content make sure to check the full course. Click on the following link to avail discount. https://www.udemy.com/mergers-and-acquisitions/?couponCode=YTB This course is about Advanced Financial Management - Mergers and Acquisitions. Often we come across, many big companies announcing Mergers and Acquisitions. We also ...

    published: 14 Nov 2015
  • Applied Corporate Finance. M&A. Mergers & Acquisitions

    published: 03 Mar 2013
  • APG Cash Drawer and Cash Bases' customers profit from merger

    Two companies are now one: The integration of APG Cash Drawer and Cash Bases has been taking place over the last six months. Stephen Bergeron, VP Global Marketing at APG/Cash Bases explains how both companies and their consumers profit from the merger.

    published: 24 Feb 2016
  • Simple LBO Model - Case Study and Tutorial

    In this LBO Model tutorial, you'll learn how to build a very simple LBO model "on paper" that you can use to answer quick questions in PE (and other) interviews. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" This matters because in many cases, they'll ask you to calculate numbers such as IRR and multiple of invested capital very quickly and will not actually ask you to build a more complex model until later in the process. You should always START this exercise by looking at the actual question or set of questions they are asking you: "Calculate the purchase price required for ABC Capital to obtain a 3.0x multiple of invested capital (MOIC) if it plans to sell OpCo after five years at an EV / EBITDA multiple of 6....

    published: 17 Jun 2014
  • 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
Merger Model: Cash, Debt, and Stock Mix

Merger Model: Cash, Debt, and Stock Mix

  • Order:
  • Duration: 19:59
  • Updated: 21 Oct 2014
  • views: 18222
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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
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: 36407
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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
Episode 119: Introduction to Mergers and Acquisitions

Episode 119: Introduction to Mergers and Acquisitions

  • Order:
  • Duration: 4:31
  • Updated: 18 Jul 2013
  • views: 27670
videos
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
National Finance offers 'cash buyout' to Oman Orix shareholders for merger

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

  • Order:
  • Duration: 1:01
  • Updated: 15 May 2017
  • views: 54
videos
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
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

  • Order:
  • Duration: 21:50
  • Updated: 20 May 2014
  • views: 79259
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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
Regulators Are Nervous about the Monsanto-Bayer Merger | Fortune

Regulators Are Nervous about the Monsanto-Bayer Merger | Fortune

  • Order:
  • Duration: 2:25
  • Updated: 15 Sep 2016
  • views: 737
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The $66 Billion acquisition of Monsanto by Bayer is the largest cash transaction on record. Subscribe to Fortune - http://www.youtube.com/subscription_center?add_user=FortuneMagazineVideo FORTUNE is a global leader in business journalism with a worldwide circulation of more than 1 million and a readership of nearly 5 million, with major franchises including the FORTUNE 500 and the FORTUNE 100 Best Companies to Work For. FORTUNE Live Media extends the brand's mission into live settings, hosting a wide range of annual conferences, including the FORTUNE Global Forum. Website: http://fortune.com/ Facebook: https://www.facebook.com/FortuneMagazine Twitter: https://twitter.com/FortuneMagazine Fortune Magazine is published by Time Inc.
https://wn.com/Regulators_Are_Nervous_About_The_Monsanto_Bayer_Merger_|_Fortune
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: 39879
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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
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: 8051
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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
IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments

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

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  • Duration: 14:01
  • Updated: 05 Aug 2014
  • views: 19844
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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
What Is The Meaning Of Merger?

What Is The Meaning Of Merger?

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  • Duration: 0:42
  • Updated: 19 Jun 2017
  • views: 48
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The combination of the two companies involves a transfer ownership, either through stock swap or cash payment between. See more merge definition if one thing merges with another, or is merged they combine come. Mergers & acquisitions meaning, importance, examples, case merger merge definition and meaning of by merriam webster. Merger definition & example merge meaning in the cambridge english dictionary. Mergers and acquisitions are commonly done to expand a company's reach, into new segments, or gain market share voluntary amalgamation of two firms on roughly equal terms one legal entity. What is mergers and acquisitions (m&a)? Definition from whatis. What is merger? Definition and meaning businessdictionary. To become combined or united 'all the shadows on wall mergersdefinition combination of one more corporations, llcs, other business entities into a single entity; The mail merge )(1) to combine two files in such way that resulting file has same organization as individual definition is so there are no longer distinct elements. Definition of merge in english merging definition by the free dictionary. What is merger? Definition, meaning and example of merger. Meaning, pronunciation, translations and examples define merger the act or process of combining two more businesses into one business in a sentence mergers acquisitions (m&a) is area corporate finances, management strategy dealing with purchasing joining other companies combine cause to form single entity meaning, example sentences, no object 'the merchant bank merged another broker' unite merging sets datav tr. An example of a merger is two law firms joining into one merge meaning in hindi, what hindi dictionary, audio pronunciation, synonyms and definitions english mergers acquisitions (m&a) are transactions which the ownership companies, other business organizations or their operating units transferred 4 aug 2015 do you understand difference between an acquisition? Can explain why company might acquire, What merger? Definition businessdictionary. Merger investopedia. Learn more 23 apr 2012 the definition of merger in general and finance can be stated as follows 'merger is an absorption one or companies by a single 16 jun 2015 everything about mergers acquisitions meaning, reasons that it takes place, types, procedure involved, examples recent case definition, statutory combination two corporations transfer properties to surviving corporation. In practice, both companies surrender their stock and issue new as a company merge meaning, definition, what is to combine or join together, cause things do this. Mergers and acquisitions wikipedia. Owners of each pre merger firm continue as owners, and the resources merging entities are a usually involves combining two companies into single larger company. Mergers are effected by exchange of the pre merger stock (shares) for new firm. In hindi merge in shabdkosh. When two different companies join together to become one the definition of a merger i
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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: 29
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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
Cost of merger

Cost of merger

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  • Duration: 9:06
  • Updated: 14 Nov 2015
  • views: 462
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Advanced Financial Management - Mergers and Acquisitions Do you want to learn any topic in Accounting, Advanced Accounting, Financial Management, Costing, Accounting, Management Accounting, Accounting Standards, Financial Reporting, Strategic Financial Management, Statistics, Operations Research or any subjects in CA / CMA / CS / MBA (Finance), B.Com. BBA, M.Com, etc.? Contact me at nrajca@gmail.com to create exclusive video content or courses for you. If you enjoyed this content make sure to check the full course. Click on the following link to avail discount. https://www.udemy.com/mergers-and-acquisitions/?couponCode=YTB 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
Applied Corporate Finance. M&A. Mergers & Acquisitions

Applied Corporate Finance. M&A. Mergers & Acquisitions

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  • Duration: 2:00:03
  • Updated: 03 Mar 2013
  • views: 50280
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https://wn.com/Applied_Corporate_Finance._M_A._Mergers_Acquisitions
APG Cash Drawer and Cash Bases' customers profit from merger

APG Cash Drawer and Cash Bases' customers profit from merger

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  • Duration: 3:34
  • Updated: 24 Feb 2016
  • views: 279
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Two companies are now one: The integration of APG Cash Drawer and Cash Bases has been taking place over the last six months. Stephen Bergeron, VP Global Marketing at APG/Cash Bases explains how both companies and their consumers profit from the merger.
https://wn.com/Apg_Cash_Drawer_And_Cash_Bases'_Customers_Profit_From_Merger
Simple LBO Model - Case Study and Tutorial

Simple LBO Model - Case Study and Tutorial

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  • Duration: 13:25
  • Updated: 17 Jun 2014
  • views: 108395
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In this LBO Model tutorial, you'll learn how to build a very simple LBO model "on paper" that you can use to answer quick questions in PE (and other) interviews. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" This matters because in many cases, they'll ask you to calculate numbers such as IRR and multiple of invested capital very quickly and will not actually ask you to build a more complex model until later in the process. You should always START this exercise by looking at the actual question or set of questions they are asking you: "Calculate the purchase price required for ABC Capital to obtain a 3.0x multiple of invested capital (MOIC) if it plans to sell OpCo after five years at an EV / EBITDA multiple of 6.0x." So they're giving you the exit multiple and the return on investment that the PE firm is targeting, and you have to figure out the initial purchase price by "working backwards." Here's how we interpret each line in this case study and use it in the model: "OpCo currently has EBITDA of $250mm, and ABC believes that the new management team could keep EBITDA flat for the next 5 years." This tells you to make the initial EBITDA $250mm and keep it at that level for 5 years - skip revenue, COGS, OpEx, and everything else because none of that matters if this is all they give you. "ABC Capital has obtained debt financing of $750mm at 10% interest, and OpCo expects working capital to be a source of funds at $6mm per year." The initial debt balance is $750mm and there's a 10% interest rate, so the interest expense will be $75mm per year. In the "Cash Flow Statement Adjustments", since Working Capital is a SOURCE of funds it will add $6mm to cash flow each year. "OpCo requires capital expenditures of $35mm per year, and it has a tax rate of 40%. Assume no transaction fees, zero minimum cash required, and that PP&E on the balance sheet remains constant for the next 5 years." Also in the CFS section, CapEx = $35mm per year, and Depreciation also equals $35mm per year since the PP&E balance does not change at all. So you can also fill in the Depreciation figure on the Income Statement. No transaction fees and no minimum cash requirement simplify the purchase price and debt repayment - although we don't even have debt repayment here. "Assume that excess cash is NOT used to repay debt, and instead simply accumulates on the Balance Sheet." This makes the final numbers easier to calculate, since interest expense will never change and you can simply add up cash generated to get to the final cash number at the end. PROCESS: 1. Start with the Income Statement - EBITDA is $250mm per year. Subtract Depreciation of $35mm per year, and interest of $75mm per year. So EBIT = $140mm. Taxes = $140mm * 40%, so Net Income = $140mm - $56mm = $84mm. 2. On the simplified CFS, Net Income = $84mm, Depreciation = $35mm, Change in Working Capital = $6mm, CapEx = ($35mm), so Cash Generated per year = $90mm. 3. EBITDA Exit Multiple = 6.0x, and final year EBITDA = $250mm, so Exit EV = $1.5B. Subtract the outstanding debt of $750mm and add the cash generated in this period of $450mm, so Equity Proceeds = $1.2B. 4. Targeted MOIC = 3.0x so the PE firm would have to invest $400mm in the beginning. $400mm equity + $750mm debt = $1.150B, so the purchase multiple is $1,150 / $250 = 4.6x. Further Resources http://youtube-breakingintowallstreet-com.s3.amazonaws.com/109-04-Simple-LBO-Model.pdf http://youtube-breakingintowallstreet-com.s3.amazonaws.com/109-04-Simple-LBO-Model.xlsx
https://wn.com/Simple_Lbo_Model_Case_Study_And_Tutorial
What is a Reverse Merger?

What is a Reverse Merger?

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  • Duration: 5:12
  • Updated: 22 Jan 2015
  • views: 3150
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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.
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