• 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • Minority Stake Acquisition (Equity Investments, Part 1)

    Here's an outline of what we'll cover in this free Minority Stake Acquisition tutorial: Why Does This Matter? By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" The way you reflect minority stake purchases on the financial statements differs from what you do for acquisitions of entire companies, and from greater than 50% ownership acquisitions. We create an item called "Equity Investments" AKA "Investments in Equity Interests" AKA "Associate Companies" on the Balance Sheet to reflect cases where we own less than 50% of other companies. It's also very, very common to see these deals in the news... we're looking at a ~$2.6 billion deal here between Liberty Media and Charter Communications Liberty Media is a large holdin...

    published: 10 Dec 2013
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • Mergers and Acquisitions

    Describes the different types of corporate takeovers and the sources of gains (if any) from these takeovers. Explains the differences between stock and cash transactions.

    published: 06 Jul 2015
  • 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
  • How Equity Value & Enterprise Value Change in M&A Deals

    In this tutorial, you will learn how Equity Value and Enterprise Value change after an M&A deal takes place. You will also learn how the combined company’s Equity Value and Enterprise Value relate to the Equity Value and Enterprise Value of the buyer and seller in the deal. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 1:01 Why Equity Value and Enterprise Value Matter, and the Rules 4:11 Excel Demonstration of Changes in an M&A Deal 9:49 Why the Rules Don’t Work in Real Life How Equity Value and Enterprise Value Change in M&A Deals A common interview question goes something like: “Company A acquires Company B using 100% debt – what is the combined company’s Enterprise Value?” Another commo...

    published: 14 Apr 2015
  • 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
  • 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

    published: 06 Nov 2011
  • Private Company Valuation

    In this tutorial, you’ll learn how private companies are valued differently from public companies, including differences in the financial statements, the public comps, the precedent transactions, and the DCF analysis and WACC. Get all the files and the textual description and explanation here: http://www.mergersandinquisitions.com/private-company-valuation/ Table of Contents: 1:29 The Three Types of Private Companies and the Main Differences 6:22 Accounting and 3-Statement Differences 12:04 Valuation Differences 16:14 DCF and WACC Differences 21:09 Recap and Summary The Three Type of Private Companies To master this topic, you need to understand that “private companies” are very different, even though they’re in the same basic category. There are three main types worth analyzing...

    published: 11 May 2016
  • Majority of Sprint shares vote to receive cash in merger

    Majority of Sprint shares vote to receive cash in merger The majority of Sprint Nextel Corp shares elected to receive cash when Japan's SoftBank Corp's takes control of the company. About 53 percent of Sprint's outstanding shares voted to take money in preliminary election over the merger. http://news.yahoo.com/majority-sprint-shares-vote-receive-cash-merger-120455634.html http://www.wochit.com

    published: 08 Jul 2013
  • Bank Cashier Job

    Honor 8 Amazon Sale http://amzn.to/2wXD5eO Head cashier job profile in PSU bank in India, Cash cabin Cash Vault Note counting machine Cashier cabin Chief cashier teller job How to resign from Bank Bank notice period for clerks IBPS 2017, SSC cgl tier 1 2017 2000 rupee note 500 rupee note cashier cabin inside bank branch public sector banks Clerical Staff, MTS, substaff bank officer cheque payment, receipts, overdraft, bank union, bank of India, SBI, PNB, bank merger, cash withdrawal limit, ATM withdrawal limit, Bank strike, Debit card, credit Card, bank loan, cash handling charges, current account, RRB NTPC post preference, RRB NTPC result 出納係 encarregado do caixa касса la caissière Kassierer खजांची केशियर, แคชเชียร์ , ταμίας , pokladní Cassiere capo Cashiar , female cas...

    published: 06 May 2017
  • Shannon and the Merger - Folsom Prison Blues (Johnny Cash cover)

    Shannon and the Merger - Jergel's Rhythm Grille - Folsom Prison Blues (4/23/17)

    published: 11 May 2017
  • BEER CULTURE IS F*CKED?!

    With the recent sale merger of SABMiller and InBev, it's looking like your hard earned cash is going to one giant company no matter which beer you decide to drink. -- LINKS: http://www.nytimes.com/2016/06/02/opinion/a-big-merger-may-flatten-americas-beer-market.html http://www.chicagotribune.com/business/ct-megabrew-ab-inbev-sabmiller-merger-20161010-story.html http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668 -- Follow us: http://twitter.com/ETCShow http://twitter.com/EliotETC http://twitter.com/RickyFTW

    published: 12 Oct 2016
  • Bayer's $66B deal for Monsanto is biggest takeover of 2016

    How will Bayer and Monsanto's all-cash $66 billion merger agreement impact shares? Varney & Co. with more.

    published: 14 Sep 2016
  • Majority of Sprint shares vote to receive cash in merger

    Majority of Sprint shares vote to receive cash in merger The majority of Sprint Nextel Corp shares elected to receive cash when Japan's SoftBank Corp's takes control of the company. About 53 percent of Sprint's outstanding shares voted to take money in preliminary election over the merger. http://news.yahoo.com/majority-sprint-shares-vote-receive-cash-merger-120455634.html http://www.wochit.com

    published: 08 Jul 2013
  • The Inner Circle - Hard Knock Gamers Merger! Cash Prize Gaming Tournament!

    TicGn.com -~-~~-~~~-~~-~- Please watch: "Nintendo Switch Giveaway | Nintendo Switch Impressions" https://www.youtube.com/watch?v=GYIQhYRKldM -~-~~-~~~-~~-~-

    published: 19 Apr 2016
Merger Model: Cash, Debt, and Stock Mix

Merger Model: Cash, Debt, and Stock Mix

  • Order:
  • Duration: 19:59
  • Updated: 21 Oct 2014
  • views: 18222
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
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
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
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: 19844
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
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: 54
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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
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: 77101
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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
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: 1286
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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
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: 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
Minority Stake Acquisition (Equity Investments, Part 1)

Minority Stake Acquisition (Equity Investments, Part 1)

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  • Duration: 16:20
  • Updated: 10 Dec 2013
  • views: 6147
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Here's an outline of what we'll cover in this free Minority Stake Acquisition tutorial: Why Does This Matter? By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" The way you reflect minority stake purchases on the financial statements differs from what you do for acquisitions of entire companies, and from greater than 50% ownership acquisitions. We create an item called "Equity Investments" AKA "Investments in Equity Interests" AKA "Associate Companies" on the Balance Sheet to reflect cases where we own less than 50% of other companies. It's also very, very common to see these deals in the news... we're looking at a ~$2.6 billion deal here between Liberty Media and Charter Communications Liberty Media is a large holding company and media conglomerate that buys stakes in lots of media companies... such as Sirius XM Radio, Time Warner, Viacom, Live Nation, Crown Media, and Barnes & Noble. Charter Communications is the 4th largest cable operator in the US, as of the time of this deal. Liberty purchased a 27% stake in Charter, worth $2.6 billion, which was announced in Q1 2013 and closed in Q2 2013. We're going to look at this acquisition via a 4-step process in this set of tutorial videos: 1. What happens on the financial statements when you purchase that initial minority stake in a company? We'll cover this first step in this tutorial. 2. What happens on the statements after running the business for several years, with that minority stake included? 3. What happens when you increase your ownership in that company? 4. How do you reflect a sale of a minority stake on the financial statements? What Do You Do to Reflect This? It's DIFFERENT from greater than 50% ownership acquisition because you do NOT go through the purchase price allocation process at all - no Goodwill, no write-ups, no consolidation of the financial statements, etc. Instead, you simply reflect the cash/debt/stock used to fund the deal on the Balance Sheet, create the new line item for your ownership in the other company, and also reflect any transaction fees paid for this minority stake. So this initial step is pretty simple - but it gets more complicated when you have to reflect earnings and dividends from the Equity Investments *after* the transaction closes. How Do You Reflect This Type of Acquisition on the Statements? 1. First, you need 3-statement projections for the Parent Company and target company. We've already filled these in here, based on equity research and our own estimates - this is NOT the focus of this lesson, so we're not going over how to create these projections. If the deal closes in the middle of the year, quarterly projections are best so you can be more precise - here, we're dividing 2013 into quarters but leaving the other years in annual figures. 2. Then, you need to look up information on the deal - the close date, purchase price, % cash/debt/stock used, and anything else relevant such as the maximum ownership percentage. 3. Then, go to Balance Sheet and reflect cash/debt/stock used and creation of new Equity Investments line item. Careful with debits and credits... CR Asset = Reduce it, CR Liability = Increase it. DR Asset = Increase it, DR Liability = Reduce It. Aside from cash, debt, and the Equity Investments line item, most other line items will not be adjusted at all in this initial transaction. So the set of steps here is just: CR Cash DR Equity Investments CR Long-Term Debt And if you've set up the model correctly, the Balance Sheet should remain in balance. Most other line items will be $0 - we're ignoring transaction and financing fees here. What Next? In parts 2-4, we'll walk through what happens on all 3 statements when a minority stake is purchased, what happens when the parent company increases its ownership, and what happens when it finally sells that minority stake to someone else. Again, we'll be using this Liberty Media / Charter Communications deal as the example for all the steps here.
https://wn.com/Minority_Stake_Acquisition_(Equity_Investments,_Part_1)
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
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
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
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: 6959
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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
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: 63500
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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
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
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: 4862
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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
Mergers and Acquisitions

Mergers and Acquisitions

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  • Duration: 56:28
  • Updated: 06 Jul 2015
  • views: 4482
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Describes the different types of corporate takeovers and the sources of gains (if any) from these takeovers. Explains the differences between stock and cash transactions.
https://wn.com/Mergers_And_Acquisitions
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.
https://wn.com/What_Is_A_Reverse_Merger
How Equity Value & Enterprise Value Change in M&A Deals

How Equity Value & Enterprise Value Change in M&A Deals

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  • Duration: 11:38
  • Updated: 14 Apr 2015
  • views: 11289
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In this tutorial, you will learn how Equity Value and Enterprise Value change after an M&A deal takes place. You will also learn how the combined company’s Equity Value and Enterprise Value relate to the Equity Value and Enterprise Value of the buyer and seller in the deal. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Table of Contents: 1:01 Why Equity Value and Enterprise Value Matter, and the Rules 4:11 Excel Demonstration of Changes in an M&A Deal 9:49 Why the Rules Don’t Work in Real Life How Equity Value and Enterprise Value Change in M&A Deals A common interview question goes something like: “Company A acquires Company B using 100% debt – what is the combined company’s Enterprise Value?” Another common variant is “Company A acquires Company B using 100% stock – what is the combined EV / EBITDA multiple?” Fortunately, there are a few simple rules you can use to determine these answer. First, recall what Enterprise Value MEANS: it’s the value of a company’s core business operations to all investors in the company. So when moving from Equity Value to Enterprise Value, you add Debt and Preferred Stock (and anything else representing other investors) and subtract non-core assets, such as Cash and Investments. The end result is that regardless of how a company finances itself, Enterprise Value does not change and neither do Enterprise Value-based multiples. In the same way, in M&A deals the combined Enterprise Value and combined Enterprise Value-based multiples do not change regardless of how the acquirer buys the seller. Rules for Equity Value and Enterprise Value in M&A Deals Combined Equity Value: Acquirer’s Equity Value, plus the value of stock it issues to buy the Seller. Combined Enterprise Value: Acquirer’s Enterprise Value + the Seller’s Enterprise Value Combined EV / EBITDA: Add both companies’ Enterprise Values and EBITDAs; not impacted by cash/stock/debt mix. Combined P / E: No “shortcut”; impacted by funding mix. Calculate it by determining the Combined Equity Value first, and then the combined Net Income after factoring in foregone interest on cash and interest paid on new debt, and any tax rate differences. Example Calculations: Say that Company A has an Enterprise Value of $100, Equity Value of $80, EBITDA of $10, and Net Income of $4. Its tax rate is 25%. Company B has an Enterprise Value of $40, Equity Value of $40, EBITDA of $8, and Net Income of $2. The foregone interest rate on cash is 2%, and the interest rate on debt is 10%. So if Company A acquires Company B for $40 with 100% debt: Combined Enterprise Value = $100 + $40 = $140 Combined Equity Value = $80 + $40 * 0% Stock Used = $80 Combined EBITDA = $10 + $8 = $18 Combined Net Income = Company A Net Income + Company B Net Income + Acquisition Effects = $4 + $2 – $40 * 100% Debt * 10% Interest Rate * (1 – 25% Tax Rate) – $40 * 100% Cash * 2% Foregone Interest Rate * (1 – 25% Tax Rate) = $3 Combined EV / EBITDA = $140 / $18 = 7.8x Combined P / E = $80 / $3 = 26.7x If you then change around the mix of cash, stock, and debt, the Combined EV / EBITDA, Combined EBITDA, and Combined Enterprise Value will not change at all. However, the Combined Equity Value, Combined Net Income, and Combined P / E will all change depending on the financing mix. In Real Life These rules don’t quite hold up… because: Premium Paid for Seller: Will have to use seller’s Enterprise Value at the share price premium instead. Most sellers are acquired for more than their current market caps! Share Price After-Effects: Does the market like / not like the deal? If so, the buyer’s share price and therefore its Equity Value and Enterprise Value will change after the deal is announced. Synergies, Other Acquisition Effects: Could affect share prices, EBITDA, Net Income, and everything else! RESOURCES: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-10-Equity-Value-Enterprise-Value-in-MA-Deals.xlsx http://youtube-breakingintowallstreet-com.s3.amazonaws.com/106-10-Equity-Value-Enterprise-Value-in-MA-Deals.pdf
https://wn.com/How_Equity_Value_Enterprise_Value_Change_In_M_A_Deals
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: 82812
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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
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: 17412
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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

Mergers and Acquisitions

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  • Duration: 8:24
  • Updated: 06 Nov 2011
  • views: 103678
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https://wn.com/Mergers_And_Acquisitions
Private Company Valuation

Private Company Valuation

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  • Duration: 23:32
  • Updated: 11 May 2016
  • views: 33447
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In this tutorial, you’ll learn how private companies are valued differently from public companies, including differences in the financial statements, the public comps, the precedent transactions, and the DCF analysis and WACC. Get all the files and the textual description and explanation here: http://www.mergersandinquisitions.com/private-company-valuation/ Table of Contents: 1:29 The Three Types of Private Companies and the Main Differences 6:22 Accounting and 3-Statement Differences 12:04 Valuation Differences 16:14 DCF and WACC Differences 21:09 Recap and Summary The Three Type of Private Companies To master this topic, you need to understand that “private companies” are very different, even though they’re in the same basic category. There are three main types worth analyzing: Money Businesses: These are true small businesses, owned by families or individuals, with no aspirations of becoming huge. They are often heavily dependent on one person or several individuals. Examples include restaurants, law firms, and even this BIWS/M&I business. Meth Businesses: These are venture-backed startups aiming to disrupt big markets and eventually become huge companies. Examples include Kakao, WhatsApp, Instagram, and Tumblr – all before they were acquired. Empire Businesses: These are large companies with management teams and Boards of Directors; they could be public but have chosen not to be. Examples include Ikea, Cargill, SAS, and Koch Industries. You see the most differences with Money Businesses and much smaller differences with the other two categories. The main differences have to do with accounting and the three financial statements, valuation, and the DCF analysis. Accounting and 3-Statement Differences Key adjustments might include “normalizing” the company’s financial statements to make them compliant with US GAAP or IFRS, classifying the owner’s dividends as a compensation expense on the Income Statement, removing intermingled personal expenses, and adjusting the tax rate in future periods. These points should NOT be issues with Meth Businesses (startups) or Empire Businesses (large private companies) unless the company is another Enron. Valuation Differences The valuation of a private company depends heavily on its purpose: are you valuing the company right before an IPO? Or evaluating it for an acquisition by an individual or private/public buyer? These companies might be worth very different amounts to different parties – they *should* be worth the most in IPO scenarios because private companies gain a larger, diverse shareholder base like that. You’ll almost always apply an “illiquidity discount” or “private company discount” to the multiples from the public comps; a 10x EBITDA multiple is great, but it doesn’t hold up so well if the comps have $500 million in revenue and your company has $500,000 in revenue. This discount might range from 10% to 30% or more, depending on the size and scale of the company you’re valuing. Precedent Transactions tend to be more similar, and you don’t apply the same type of huge discount there for larger private companies. You may see more “creative” metrics used, such as Enterprise Value / Monthly Active Users, especially for private mobile/gaming/social companies. DCF and WACC Differences The biggest problems here are the Discount Rate and the Terminal Value. The Discount Rate has to be higher for private companies, but you can’t calculate it in the traditional way because private companies don’t have Betas or Market Caps. Instead, you often use the industry-average capital structure or average from the comparables to determine the appropriate percentages, and then calculate Beta, Cost of Equity, and WACC based on that. There are other approaches as well – use the firm’s optimal capital structure, create a giant circular reference, or use earnings volatility or dividend growth rates – but this is the most realistic one. You use this approach for all private companies because they all have the same problem (no Market Cap or Beta). You’ll also have to discount the Terminal Value, but this is mostly an issue for Money Businesses because of their dependency on the owner and key individuals. You could heavily discount the Terminal Value, use the company’s future Liquidation Value AS the Terminal Value, or assume the company stops operating in the future and skip Terminal Value entirely. Regardless of which one you use, Terminal Value will be substantially lower for this type of company. The result is that the valuation will be MOST different for a Money Business, with smaller, but still possibly substantial, differences for Meth Businesses and Empire Businesses. http://www.mergersandinquisitions.com/private-company-valuation/
https://wn.com/Private_Company_Valuation
Majority of Sprint shares vote to receive cash in merger

Majority of Sprint shares vote to receive cash in merger

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  • Duration: 0:25
  • Updated: 08 Jul 2013
  • views: 24
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Majority of Sprint shares vote to receive cash in merger The majority of Sprint Nextel Corp shares elected to receive cash when Japan's SoftBank Corp's takes control of the company. About 53 percent of Sprint's outstanding shares voted to take money in preliminary election over the merger. http://news.yahoo.com/majority-sprint-shares-vote-receive-cash-merger-120455634.html http://www.wochit.com
https://wn.com/Majority_Of_Sprint_Shares_Vote_To_Receive_Cash_In_Merger
Bank Cashier Job

Bank Cashier Job

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  • Duration: 3:17
  • Updated: 06 May 2017
  • views: 6536
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Honor 8 Amazon Sale http://amzn.to/2wXD5eO Head cashier job profile in PSU bank in India, Cash cabin Cash Vault Note counting machine Cashier cabin Chief cashier teller job How to resign from Bank Bank notice period for clerks IBPS 2017, SSC cgl tier 1 2017 2000 rupee note 500 rupee note cashier cabin inside bank branch public sector banks Clerical Staff, MTS, substaff bank officer cheque payment, receipts, overdraft, bank union, bank of India, SBI, PNB, bank merger, cash withdrawal limit, ATM withdrawal limit, Bank strike, Debit card, credit Card, bank loan, cash handling charges, current account, RRB NTPC post preference, RRB NTPC result 出納係 encarregado do caixa касса la caissière Kassierer खजांची केशियर, แคชเชียร์ , ταμίας , pokladní Cassiere capo Cashiar , female cashier, head cashier allowance, fastest cashier, cashier Job profile Citi Bank Credit Card india 5 Day Banking Cash Vault Currency Chest Cash lodgement SBI associate Banks Bank Branch Rural bank branch bank lease accommodation Cash Van
https://wn.com/Bank_Cashier_Job
Shannon and the Merger - Folsom Prison Blues (Johnny Cash cover)

Shannon and the Merger - Folsom Prison Blues (Johnny Cash cover)

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  • Duration: 3:34
  • Updated: 11 May 2017
  • views: 7
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Shannon and the Merger - Jergel's Rhythm Grille - Folsom Prison Blues (4/23/17)
https://wn.com/Shannon_And_The_Merger_Folsom_Prison_Blues_(Johnny_Cash_Cover)
BEER CULTURE IS F*CKED?!

BEER CULTURE IS F*CKED?!

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  • Duration: 9:00
  • Updated: 12 Oct 2016
  • views: 129703
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With the recent sale merger of SABMiller and InBev, it's looking like your hard earned cash is going to one giant company no matter which beer you decide to drink. -- LINKS: http://www.nytimes.com/2016/06/02/opinion/a-big-merger-may-flatten-americas-beer-market.html http://www.chicagotribune.com/business/ct-megabrew-ab-inbev-sabmiller-merger-20161010-story.html http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668 -- Follow us: http://twitter.com/ETCShow http://twitter.com/EliotETC http://twitter.com/RickyFTW
https://wn.com/Beer_Culture_Is_F_Cked
Bayer's $66B deal for Monsanto is biggest takeover of 2016

Bayer's $66B deal for Monsanto is biggest takeover of 2016

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  • Duration: 1:53
  • Updated: 14 Sep 2016
  • views: 2201
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How will Bayer and Monsanto's all-cash $66 billion merger agreement impact shares? Varney & Co. with more.
https://wn.com/Bayer's_66B_Deal_For_Monsanto_Is_Biggest_Takeover_Of_2016
Majority of Sprint shares vote to receive cash in merger

Majority of Sprint shares vote to receive cash in merger

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  • Duration: 0:25
  • Updated: 08 Jul 2013
  • views: 24
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Majority of Sprint shares vote to receive cash in merger The majority of Sprint Nextel Corp shares elected to receive cash when Japan's SoftBank Corp's takes control of the company. About 53 percent of Sprint's outstanding shares voted to take money in preliminary election over the merger. http://news.yahoo.com/majority-sprint-shares-vote-receive-cash-merger-120455634.html http://www.wochit.com
https://wn.com/Majority_Of_Sprint_Shares_Vote_To_Receive_Cash_In_Merger
The Inner Circle - Hard Knock Gamers Merger! Cash Prize Gaming Tournament!

The Inner Circle - Hard Knock Gamers Merger! Cash Prize Gaming Tournament!

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  • Duration: 5:02
  • Updated: 19 Apr 2016
  • views: 95
videos
TicGn.com -~-~~-~~~-~~-~- Please watch: "Nintendo Switch Giveaway | Nintendo Switch Impressions" https://www.youtube.com/watch?v=GYIQhYRKldM -~-~~-~~~-~~-~-
https://wn.com/The_Inner_Circle_Hard_Knock_Gamers_Merger_Cash_Prize_Gaming_Tournament