• 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
  • What Is A Cash Merger?

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

    published: 10 Oct 2017
  • 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
  • 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
  • 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
  • Price behavior after announced acquisition | Finance & Capital Markets | Khan Academy

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

    published: 12 May 2011
  • What Is The Meaning Of Merger?

    https://goo.gl/6U6t22 - Subscribe For more Videos ! For more Health Tips | Like | Comment | Share: Thank you for watching Our videos: ▷ CONNECT with us!! #HealthDiaries ► YOUTUBE - https://goo.gl/6U6t22 ► Facebook - https://goo.gl/uTP7zG ► Twitter - https://twitter.com/JuliyaLucy ► G+ Community - https://goo.gl/AfUDpR ► Google + - https://goo.gl/3rcniv ► Blogger - https://juliyalucy.blogspot.in/ Watch for more Health Videos: ► How To Avoid Unwanted Pregnancy Naturally: https://goo.gl/hRy93e ► Period Hacks || How To Stop Your Periods Early: https://goo.gl/dSmFgi ► Cold and Flu Home Remedies: https://goo.gl/biPp8b ► Homemade Facial Packs: https://goo.gl/NwV5zj ► How To Lose Belly Fat In 7 Days: https://goo.gl/EHN879 ► Powerfull Foods for Control #Diabetes: https://goo.gl/9SdaLY ► Natural...

    published: 19 Jun 2017
  • LBO Model: Sources & Uses

    Why Does the Sources & Uses Schedule Matter? Key part of an LBO (leveraged buyout) model -- what you're paying for (the Uses) must equal how much you're putting in (the Sources). By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Similar to the conservation of energy or momentum in physics, *money* must be conserved in a transaction like this -- cannot be created or destroyed. But the real point is that this schedule determines the amount of CASH (equity) the private equity firm must contribute to a leveraged buyout transaction. Higher cash contribution = lower IRR, all else being equal, and lower cash contribution = higher IRR, all else being equal. This schedule also tells you the OWNERSHIP in a company post-LBO --...

    published: 28 Jan 2014
  • IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments

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

    published: 05 Aug 2014
  • Example of merger - Q1 to Q7 (Covered -practice manual)

    Points covered in this video - 1. How to calculate exchange ratio 2. PRE (before) and post (after) merger Earnings Per Share calculation. 3. What it means - shareholders of company (acquired) are not at loss. 4. Market price post merger. 5. Value of Company after merger 6. Whether shareholders of both the Companies are better off? 7. Equivalent Earnings of Shares of B Ltd.

    published: 09 Apr 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
  • Cost of merger

    Did you liked this video lecture? Then please check out the complete course related to this lecture, Advanced Financial Management - Mergers and Acquisitions with 20+ Lectures, 2+ hours content available at discounted price(only Rs.640) with life time validity and certificate of completion. https://www.udemy.com/draft/373106/?couponCode=YTB10A This course is about Advanced Financial Management - Mergers and Acquisitions. Often we come across, many big companies announcing Mergers and Acquisitions. We also see many times two or more companies in same line of activity getting merged, as well as companies in different line of activities. But why do they Merge? What is the benefit of merging the entities? How the companies are valued for the purpose of merger? How the purchase value is de...

    published: 14 Nov 2015
  • Car merger

    Subscribe

    published: 11 Apr 2018
  • Corporate Valuation in Merger Analysis

    A simple working example

    published: 02 Nov 2015
  • APG Cash Drawer and Cash Bases' customers profit from merger

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

    published: 24 Feb 2016
  • VW/Porsche Merger, Cash for Clunkers - Autoline Daily 207

    The U.S. Department of Transportation expanded the cash-for-clunkers program yesterday. General Motors may sell the Chevy Volts lithium-ion battery pack to rival automakers. A new Top Gear controversy involving the Porsche Shooting Brake. All that and more, plus Jim Hall predicts what cars from today will be considered classics in the future.

    published: 14 Aug 2009
  • Why Do Stock Prices Often Drop After Mergers and Acquisition

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

    published: 11 Sep 2008
  • 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
  • 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
  • ATM Maker Dispenses Cash for Rival. Kung Fu Kicks Up Stock. Merger Monday Triggers Short Squeeze.

    ATM maker Diebold (@NYSE: $DBD) dispenses cash for German rival Wingcor-Nixdorf @Munich: WIN.MU). Kung Fu thriller "Into the Badlands" looks to kick up revenue and share price for AMC Theatres (@NYSE: $AMC) whose "Walking Dead" franchise, and Merger Monday in the healthcare sector continues as KaloBios (NASDAQ: $KBIO) continues to soar, triggering a further short squeeze at the leukemia drug biotech.

    published: 23 Nov 2015
  • Merger Model: Assessment Centre Case Study

    In this Merger Model tutorial, you'll learn how to complete a merger model case study exercise given at an assessment center. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn how to set up a simplified model, how to calculate accretion / (dilution) under different scenarios, and how to calculate the pro-forma credit stats and ratios for the combined company. http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-Assessment-Center-Case-Study.pdf "Before" Excel File: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-AC-Case-Study-Before.xlsx "After" Excel File: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-AC-Case...

    published: 01 Jul 2014
  • APV Method in Merger Valuation

    Corporate finance lecture

    published: 15 Nov 2015
  • 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
  • TATA-Bharti Airtel Merger is Now Going to be a Reality | CNBC TV18

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

    published: 12 Oct 2017
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Merger Model: Cash, Debt, and Stock Mix
19:59

Merger Model: Cash, Debt, and Stock Mix

  • Order:
  • Duration: 19:59
  • Updated: 21 Oct 2014
  • views: 24137
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In this merger model lesson, you'll learn how a company might decide what mix of cash, debt, and stock it might use to fund... By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" ... might use to fund a merger or an acquisition - and you'll understand how to determine the appropriate amount of each one in a deal. 2:24 General Order of Funding for M&A Deals 4:49 Cash - How Much Can You Use? 9:56 Debt - How Much Can You Use? 14:08 Stock - How Much Can You Use? 16:32 Exceptions 18:03 Recap and Summary How Do You Determine the Cash / Stock / Debt Mix in an M&A Deal? Very common interview question, and you also need to know it for what you do on the job. 3 ways to fund a company, and to fund acquisitions of other companies: use cash on-hand, borrow the money from other entities (debt), or issue equity (stock) to new investors. But how does a buyer in an M&A deal decide whether it should use… 50% debt and 50% stock vs. 33% debt, 33% stock, and 33% cash vs. 50% cash and 50% debt vs…. And the list goes on. Easiest: Think about the "cost" of each method, start with the cheapest method, use the most of THAT method that you can, and then move to the next cheapest method, and continue like that. GENERALLY: Cheapest: Cash, since interest rates on cash are lower than interest rates on debt, and tend to be low in general. Next Cheapest: Debt, since it is still cheaper than equity and since interest paid on debt is tax-deductible. Most Expensive: Stock, since the Cost of Equity tends to exceed the Cost of Debt… in theory and in practice. To Compare Them: Look at the "After-Tax Yields"… for debt and cash, just take the Interest Rate and multiply by (1 - Buyer's Tax Rate). Stock: Take the buyer's Net Income and divide by its Equity Value (or "flip" its P / E multiple). SO: Always start with cash, use the most you can, then move to debt, use the most you can, and finish up with stock. Cash - How Much is "The Most You Can?" Easy: Company has minimal cash and can't use anything, or it has a huge cash balance and can use all of it. More Common Case: Look at the company's "minimum" cash balance and use the excess cash above that to fund the deal. EX: Company has $500 million in cash right now, but its minimum cash balance to keep operating is $200 million… So it can use $300 million of its cash to fund the deal. How to Determine: Can be tough, but sometimes companies disclose it… ...or you can look back at historical cash balances and make a guesstimate based on that (what was its lowest cash balance in past years?). Debt - How Much Can You Use? So let's say you've now used $300 million of cash to fund the deal… but it's a deal for $1 billion total. How much debt can you use to fund the remainder? $700 million? $300 million? $500 million? Easiest Method: Calculate the key credit stats and ratios for the combined company - for example: Total Debt / EBITDA Net Debt / EBITDA EBITDA / Interest Expense And see what amount of debt makes these look "reasonable", in line with historical figures and also figures for comparable companies. EX: Let's say that if the company uses $500 million of debt, its Debt / EBITDA is 4x. Historically, it has been around 2-3x, and no peer company is levered at more than 3.5x. If that's the case, we'd say that 3.5x - 4.0x is probably the "maximum" (whatever amount of debt that means). Here: We have the Debt / EBITDA and other ratios for the Men's Wearhouse / Jos. A. Bank peer companies. Stock - Now What? Often used as the "method of last resort" because: A) It tends to be the most expensive method for most companies. B) Most acquirers don't like giving up ownership and diluting existing shareholders unless absolutely necessary. So in this example, if we've used $300 million of cash and $500 million of debt, we're still not quite at $1 billion... need an extra $200 million, which we can get by issuing stock. # of Shares = $200 million / Buyer's Share Price. Technically, there's no real "limit," but it would be very odd for a company to give up more than, say, 50% ownership to another company… unless they're very close in size. Exceptions: Buyer has an exceptionally high P / E multiple (Amazon) - stock might be the cheapest! Buyer wants to do a tax-free deal (Google / YouTube) and it's much bigger anyway, so won't make a difference. Companies are similarly sized - stock might always be necessary because cash/debt are implausible (mergers of equals). Summary Which purchase method do you use? MOST relevant when companies are closer in size… doesn't make much difference when the buyer is 100x or 1000x bigger than the seller. Order: 1. Cash - Any excess cash above the company's minimum cash balance. 2. Debt - To the upper range of the Debt / EBITDA of comparables (and other metrics). 3. Stock - For any remaining funding that's required; ideally give up well under 50% ownership.
https://wn.com/Merger_Model_Cash,_Debt,_And_Stock_Mix
What Is A Cash Merger?
0:47

What Is A Cash Merger?

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  • Duration: 0:47
  • Updated: 10 Oct 2017
  • views: 63
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Definition of cash merger where an acquiring firm buys the target firm's stock with cash, instead more common practice exchanging it own definition out buying its a happens when company's. The acquirer can pay cash outright for all the equity shares of target company, paying what is an 'all deal'all mergers and acquisitions occur with no exchange stock; parent company purchases a majority common 7 aug 2017 merger mode payment business acquisition in which used to buy stock acquired firm instead striking about 1990s, however, way they're being deal, roles two parties are clear cut, but deals also be funded combination. In the event of a cash only merger transaction, exchange ratio is not excluding any effects, what actual based on stock mergers and acquisitions (m&a) are complex, involving many partiesairways begin discussions. What is cash merger? Definition and meaning businessdictionary. Cash merger meaning in the cambridge english dictionary. Cash received in mergers fairmark exchange ratio definition, formula and explanation. Capital gains tax share reorganisation, takeover or merger gov. Nov 2014 you must pay capital gains tax on any cash get as part of the takeover work out what proportion total shares (of that class) you're 1 2006 is a merger? The case for taxing mergers like stock salesin merger, neither assets nor in lieu fractional merger or spinoff, and reporting your broker reports could trigger warning flags irs can pick up does reverse mean my stocks? In takeovers, acquiring company agrees to certain dollar amount each share. What is a stock for merger and how does this corporate action all cash deal investopedia. Stock or cash? The trade offs for buyers and sellers in mergers the difference between cash & stock what is a forward merger? What cashout Definition of merger calculating gains. Occurs when the targeted firm's stockholders or shareholders do 8 sep 2015 corporations sometimes create merger transactions that exchange both cash and shares of one stock for a currently held tax rules depend on reason you received. What happens when you hold stock in a company that merges into another one? There are different tax corporate finance, tender offer is type of public takeover bid. In a cash merger, the acquirer uses to buy target company. What is cash merger? Definition and meaning businessdictionary what out the difference between & stock mergers budgeting money. First, let's be clear about what we mean by a stock for merger. How to report cash in lieu on schedule d the motley fool. What is a merger? The case for taxing cash law ecommons. What happens to stocks when companies merge? . The tender offer is a public, cash or securities may be offered to the target company's shareholders, although in which offers david offenberg, christo. What is the difference between all different types of stocks & symbols for same company? a merger formal type acquisition that combines two or more business enterprises were independent into single en
https://wn.com/What_Is_A_Cash_Merger
Accretion Dilution - Rules of Thumb for Merger Models
13:25

Accretion Dilution - Rules of Thumb for Merger Models

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  • Duration: 13:25
  • Updated: 17 Nov 2013
  • views: 49120
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Learn about rules of thumb you can use to determine whether an acquisition will be accretive or dilutive in advance, based on the P/E multiples of the buyer and seller, the % cash, stock, and debt used, and the prevailing interest rates on cash and debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Here's an outline of what we cover in the lesson, and the step-by-step process you can follow to figure this out for yourself: Why Do We Care About Rules of Thumb for M&A Deals / Merger Models? It's a VERY common interview question - "How can you tell whether an M&A deal is accretive or dilutive?" People often believe, incorrectly, that there's no way to tell without building the entire model. But shortcuts always exist! Plus, this shortcut is very useful in real life. You can use it to "sanity check" your model, approximate the impact of a deal in advance, and so on. So it's a time-saver *and* a good way to check your work. Rules of Thumb for Merger Models AKA Accretion / Dilution Models: CONCEPT: An M&A deal is accretive if the combined company's EPS (Earnings Per Share) is higher than the buyer's standalone EPS prior to the transaction. It's dilutive if the combined EPS is lower, and it's neutral if the EPS is the same afterward. The outcome depends on price paid for the seller, the method of payment (cash, stock, or debt), the interest rate on debt and cash, and the buyer's P/E multiple, among other factors. In real life, it's very difficult to tell with high precision whether the deal will be accretive or dilutive without running the whole model - due to added costs, synergies, write-ups, timing differences, the cumulative impact of additional interest on debt and foregone interest on cash, etc... BUT you can approximate the impact with a simple rule of thumb: 1. Calculate the Weighted "Cost" of Acquisition for the Buyer... 2. And compare it to the Seller's "Yield" AT its purchase price. (i.e. Seller's Net Income / Equity Purchase Price) This step is essential - if the seller is currently valued at $900 million and the buyer pays $1 billion for the seller, you NEED to use the $1 billion actually paid for the seller or these yields won't be correct. 3. If the Seller's "Yield" is higher, it's accretive - otherwise, if it's lower, it's dilutive... Think of it as the buyer getting MORE *from* the seller than what it's paying for the seller, vs. getting LESS than what it's paying. 4. How do you calculate the Weighted "Cost" of Acquisition? You need to calculate the after-tax "cost" of each component, since Net Income is also after-tax. After-Tax Cost of Cash = Foregone Cash Interest Rate * (1 - Buyer's Tax Rate) After-Tax Cost of Debt = Interest Rate on Debt * (1 - Buyer's Tax Rate) After-Tax Cost of Issuing Stock = 1 / Buyer's P/E Multiple (i.e. take the reciprocal of the buyer's P/E multiple) That last one is effectively the buyer's "after-tax yield"... For example, if you buy 1 share of the buyer's stock, it's the Net Income you'd be entitled to with that 1 share... So in this example, 1 / Buyer's P/E Multiple = 1 / 11.3 x = 8.9%. That means that for each $1.00 of United stock you buy, you get $0.089 in Net Income. Finally, you calculate the Weighted Average Itself with this formula: Weighted Average Cost of Acquisition = Cost of Cash * % Cash Used + Cost of Stock * % Stock Used + Cost of Debt * % Debt Used And if this weighted average cost of acquisition is greater than the seller's yield, it's dilutive - otherwise, if the weighted average cost of acquisition is lower than the seller's yield, it's accretive. LIMITATIONS: This trick doesn't hold up if the tax rates for the buyer and seller are different, especially if they're VERY different. This also doesn't work if you also factor in write-ups / write-downs, synergies, the cumulative impact of interest paid on debt and foregone interest on cash, merger closing costs, integration costs, etc... And it also doesn't work if the acquisition closes mid-year or in between fiscal years - you need to adjust for that with stub periods and the calendarization of financials... But this is a common interview question, so who cares! It's still very useful to know, and will save you a lot of time in interviews and on the job.
https://wn.com/Accretion_Dilution_Rules_Of_Thumb_For_Merger_Models
Merger Model Interview Questions: What to Expect
18:39

Merger Model Interview Questions: What to Expect

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  • Duration: 18:39
  • Updated: 11 Oct 2016
  • views: 13430
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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
Purchase Price in M&A Deals: Equity Value or Enterprise Value?
15:29

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

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  • Duration: 15:29
  • Updated: 10 Mar 2016
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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
Price behavior after announced acquisition | Finance & Capital Markets | Khan Academy
4:04

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

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  • Duration: 4:04
  • Updated: 12 May 2011
  • views: 51168
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Stock Price Behavior After Announced Acquisition with Shares. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/simple-merger-arb-with-share-acquisition?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/mergers-acquisitions/v/acquisitions-with-shares?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks through the mechanics of how this happens and details what is likely to happen in the public markets because of the transaction (including opportunities for arbitrage). About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
https://wn.com/Price_Behavior_After_Announced_Acquisition_|_Finance_Capital_Markets_|_Khan_Academy
What Is The Meaning Of Merger?
0:42

What Is The Meaning Of Merger?

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  • Duration: 0:42
  • Updated: 19 Jun 2017
  • views: 1175
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https://goo.gl/6U6t22 - Subscribe For more Videos ! For more Health Tips | Like | Comment | Share: Thank you for watching Our videos: ▷ CONNECT with us!! #HealthDiaries ► YOUTUBE - https://goo.gl/6U6t22 ► Facebook - https://goo.gl/uTP7zG ► Twitter - https://twitter.com/JuliyaLucy ► G+ Community - https://goo.gl/AfUDpR ► Google + - https://goo.gl/3rcniv ► Blogger - https://juliyalucy.blogspot.in/ Watch for more Health Videos: ► How To Avoid Unwanted Pregnancy Naturally: https://goo.gl/hRy93e ► Period Hacks || How To Stop Your Periods Early: https://goo.gl/dSmFgi ► Cold and Flu Home Remedies: https://goo.gl/biPp8b ► Homemade Facial Packs: https://goo.gl/NwV5zj ► How To Lose Belly Fat In 7 Days: https://goo.gl/EHN879 ► Powerfull Foods for Control #Diabetes: https://goo.gl/9SdaLY ► Natural Hand Care Tips At Home That Work: https://goo.gl/YF3Exa ► How to Tighten #SaggingBreast: https://goo.gl/ENnb6b ► Natural Face Pack For Instant Glowing Skin: https://goo.gl/gvd5mM ► Get Rid of Stretch Marks Fast & Permanently: https://goo.gl/ZVYvQZ ► Eating Bananas with Black Spots: https://goo.gl/gXuri6 ► Drink this Juice every day to Cure #Thyroid in 3 Days: https://goo.gl/L3537H ► How Garlic Improves Sexual Stamina? https://goo.gl/GNcbYU ► Benefits of using Egg Shells: https://goo.gl/hAUyUS ► Home Remedies to Gain Weight Fast: https://goo.gl/jBVVQh ► Amazing Benefits of Olive Oil for Health: https://goo.gl/R3583v ► Rapid Relief of Chest Pain (Angina): https://goo.gl/idAFZR ► Home Remedies for Joint & Arthritis Pains Relief: https://goo.gl/jRbNkh ► SHOCKING TRICKs For #Diabetes Control: https://goo.gl/ATDDsV ► Doctors Are Shocked! #Diabetics: https://goo.gl/ZeQddJ ► Home Remedies for Gastric Troubles: https://goo.gl/72VR1b ► Juice for #Diabetics Type 2: https://goo.gl/3vDMqR --------- The combination of the two companies involves a transfer ownership, either through stock swap or cash payment between. See more merge definition if one thing merges with another, or is merged they combine come. Mergers & acquisitions meaning, importance, examples, case merger merge definition and meaning of by merriam webster. Merger definition & example merge meaning in the cambridge english dictionary. Mergers and acquisitions are commonly done to expand a company's reach, into new segments, or gain market share voluntary amalgamation of two firms on roughly equal terms one legal entity. What is mergers and acquisitions (m&a)? Definition from whatis. What is merger? Definition and meaning businessdictionary. To become combined or united 'all the shadows on wall mergersdefinition combination of one more corporations, llcs, other business entities into a single entity; The mail merge )(1) to combine two files in such way that resulting file has same organization as individual definition is so there are no longer distinct elements. Definition of merge in english merging definition by the free dictionary. What is merger? Definition, meaning and example of merger. Meaning, pronunciation, translations and examples define merger the act or process of combining two more businesses into one business in a sentence mergers acquisitions (m&a) is area corporate finances, management strategy dealing with purchasing joining other companies combine cause to form single entity meaning, example sentences, no object 'the merchant bank merged another broker' unite merging sets datav tr. An example of a merger is two law firms joining into one merge meaning in hindi, what hindi dictionary, audio pronunciation, synonyms and definitions english mergers acquisitions (m&a) are transactions which the ownership companies, other business organizations or their operating units transferred 4 aug 2015 do you understand difference between an acquisition? Can explain why company might acquire, What merger? Definition businessdictionary. Merger investopedia. Learn more 23 apr 2012 the definition of merger in general and finance can be stated as follows 'merger is an absorption one or companies by a single 16 jun 2015 everything about mergers acquisitions meaning, reasons that it takes place, types, procedure involved, examples recent case definition, statutory combination two corporations transfer properties to surviving corporation. In practice, both companies surrender their stock and issue new as a company merge meaning, definition, what is to combine or join together, cause things do this. Mergers and acquisitions wikipedia. Owners of each pre merger firm continue as owners, and the resources merging entities are a usually involves combining two companies into single larger company. Mergers are effected by exchange of the pre merger stock (shares) for new firm. In hindi merge in shabdkosh. When two different companies join together to become one the definition of a merger i
https://wn.com/What_Is_The_Meaning_Of_Merger
LBO Model: Sources & Uses
17:21

LBO Model: Sources & Uses

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  • Duration: 17:21
  • Updated: 28 Jan 2014
  • views: 29496
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Why Does the Sources & Uses Schedule Matter? Key part of an LBO (leveraged buyout) model -- what you're paying for (the Uses) must equal how much you're putting in (the Sources). By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Similar to the conservation of energy or momentum in physics, *money* must be conserved in a transaction like this -- cannot be created or destroyed. But the real point is that this schedule determines the amount of CASH (equity) the private equity firm must contribute to a leveraged buyout transaction. Higher cash contribution = lower IRR, all else being equal, and lower cash contribution = higher IRR, all else being equal. This schedule also tells you the OWNERSHIP in a company post-LBO -- can add up the cash contribution from all parties (e.g. PE firm, Founder, management team) and divide each contribution by the total to get the ownership percentages. And it explains why activist shareholders like Carl Icahn often hate these types of deals -- can hugely increase the Founder's stake or management's stake, and remove all upside from the existing shareholders! What Goes Into a Sources & Uses Schedule, and How Do You Build One? Uses Side -- Most common items are the Equity Purchase Price of the company (how much it costs to acquire all their shares), plus transaction fees, and any debt that is repaid in the course of the deal. Sources Side -- The most common items are all the different types of debt you use to buy the company, and then the cash (equity) the PE firm contributes to close the gap. How to Calculate It: 1. Always START with the Uses side and calculate everything there, adding up the total at the bottom. 2. Then go to the Sources side and link in all the debt (and other funding sources) you're using. 3. Then, calculate Investor Equity by setting it equal to Total Uses -- "Sources So Far" -- all the sources of funding ABOVE the Investor Equity line item. 4. Finally, add up Total Sources at the bottom and ensure that it equals Total Uses. More Complex Items for the Sources & Uses Schedule: Debt Assumed -- This appears under BOTH the Sources AND the Uses sides and has no impact on the cash required to do the deal. It simply stays on the Balance Sheet, so it's both a Source and a Use of funds and doesn't impact us at all. Excess Cash Used -- The company uses its own cash to purchase some of its shares required to complete the deal. This REDUCES the number of shares the PE firm must buy, and therefore reduces the amount the PE firm must pay, so it's a Source of funds. Founder or Management Rollover -- If the Founder or management team owns a % of the company now and wants to keep it, this also reduces the amount the PE firm pays -- and therefore it's another Source of funding and only appears under Sources. Additional Cash Contributions -- The Founder or management team or other parties can also "up" their stake in the company by putting in additional cash into the deal. This reduces how much the PE firm must contribute, and increases the ownership of these other parties. Rules of Thumb for All of These: If an item DECREASES the cash a PE firm must contribute, it goes on the Sources side. If an item INCREASES the cash a PE firm must contribute, it goes on the Uses side. If an item makes NO IMPACT on the cash a PE firm must contribute, it goes on both sides of the schedule and is both a Source and a Use. So Why Did the Dell LBO Piss Off Shareholders So Much? Because Michael Dell went from owning ~15% of the company to ~78% and only put in a bit of extra cash to do so. And the company used its own cash to fund much of the deal. They said to shareholders, "Hey, we're going to buy your shares at a low-ball price and use our excess cash to buy many of them -- we could have issued that cash to you as a big dividend and let you keep their shares, but we're going to instead buy them from you at a fairly low price and remove any potential upside you have in this deal." What Next? Find a deal you're interested in and try to create your own Sources & Uses schedule for it, based on press releases and company filings. And be prepared for these questions in interviews, case studies, modeling tests, and more -- this schedule is critical to all types of transaction modeling.
https://wn.com/Lbo_Model_Sources_Uses
IRR vs. Cash on Cash Multiples in Leveraged Buyouts and Investments
14:01

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

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  • Duration: 14:01
  • Updated: 05 Aug 2014
  • views: 24558
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In this IRR vs Cash tutorial, you’ll learn the key distinctions between the internal rate of return (IRR). By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn further distinctions on the cash-on-cash multiple or money-on multiple when evaluating deals and investments – and you’ll understand why venture capital (VC) firms target one set of numbers, whereas private equity (PE) firms target a different set of numbers. http://youtube-breakingintowallstreet-com.s3.amazonaws.com/109-05-IRR-vs-Cash-on-Cash-Multiples.xlsx Table of Contents: 1:35 Why Do IRR and Cash-on-Cash Multiples Both Matter? 3:05 What Do Private Equity vs. Venture Capital vs. Other Firms Care About? 8:30 How to Use These Metrics in Real Life 11:08 Key Takeaways Lesson Outline: 1. Why Does This Matter? Because there are DIFFERENT ways to judge the success of a deal - 2 of the main ones for leveraged buyouts (LBOs), growth equity investments, and venture capital investments are the internal rate of return (IRR) and the cash-on-cash (CoC) or money-on-money (MoM) multiple. Many investment firms will care a lot about one of these, but not the other, and will try to find investments that yield a high IRR or a high multiple… but not both. The Difference: IRR factors in the time value of money - it's the effective, compounded interest rate on an investment. Whereas the multiple is simpler and ignores timing (e.g., $1000 / $100 = 10x multiple). 2. What Do Different Firms Care About? Most venture capital (VC) firms and early-stage investors want to earn a multiple of their money back - they don't care that much about IRR, because they're going to be invested for a VERY LONG time and it's not exactly liquid… and they don't care what the stock market does. VC firms must be able to cover their losses with “the winners”! If they get 2x their capital back in 1 year (100% IRR) and then lose everything on another investment in 5 years’ time (0% IRR), the first result is completely irrelevant because they've only earned back 1x their capital. Perfect Example: Harmonix, maker of Guitar Hero - got VC investment in the mid-1990's, generated $0 in revenue for 5+ years, and then in 2005 released the hit video game Guitar Hero. Sold for $175 million to Viacom in 2006! Massive multiple, but likely a pathetic IRR since it took 10+ years to get there. Later-stage investors and private equity firms care more about IRR because the multiples will never be that high in late-stage deals, and because they are benchmarked against the public markets (e.g., the S&P 500) more. If the firm's IRR can't beat the stock market, why should you invest? Most PE firms target at least a 20-25% IRR depending on the economy, deal environment, valuations, etc… less when things are bad, more in frothy times. This makes it common to do "quick flip" deals where the company is bought and then sold at a MUCH higher multiple right after - simply to get a high IRR. Real-Life Example: Thoma Bravo (mid-market tech PE firm) bought Digital Insight from Intuit for $1.025 billion, and then sold it 4 months later for $1.65 billion to NCR. VERY high IRR - 316%! But only a ~1.6x money multiple, assuming no debt / no debt repayment. http://dealbook.nytimes.com/2013/12/02/sale-to-ncr-is-a-quick-profitable-flip-for-a-private-equity-firm/ 3. How Do You Use These Metrics In Real Life? How to calculate them: see the Atlassian or J.Crew models. IRR is straightforward and uses built-in Excel functions, but for the CoC or MoM multiple, you need to sum up all positive cash flows in the period and divide by the sum of all negative cash flows in that period, and flip the sign. In the case of Atlassian, the deal is great for Accel because they earn a 15x multiple, even though the IRR is "only" 35%... they do not care AT ALL because they are targeting the multiple, not the IRR. For T. Rowe Price, the multiple of 1.9x isn't great, but they do at least get a 14% IRR which is probably what they care about more since they are late-stage investors. For the J. Crew deal, both the IRR and the multiple are very low and below what PE firms typically target, so this deal would be problematic to pursue, at least with these assumptions. 4. Key Takeaways IRR and Cash-on-Cash or Money-on-Money multiples are related, but often move in opposite directions when the time period changes. Different firms target different rates and metrics (VC/early stage - multiples, ideally over 10x or 3-5x later on; PE/late stage - IRR, ideally 20%+). Calculation: IRR is simple, use the built-in IRR or XIRR in Excel; for the multiple, sum the positive returns/cash flows, divide by the negative returns/cash flows and flip the sign. Judging deals: Focus on multiples for earlier stage deals (and if you're pitching VCs to fund your company), and focus on IRR for later stage / growth equity / PE deals.
https://wn.com/Irr_Vs._Cash_On_Cash_Multiples_In_Leveraged_Buyouts_And_Investments
Example of merger - Q1 to Q7  (Covered -practice manual)
9:11

Example of merger - Q1 to Q7 (Covered -practice manual)

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  • Duration: 9:11
  • Updated: 09 Apr 2015
  • views: 8170
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Points covered in this video - 1. How to calculate exchange ratio 2. PRE (before) and post (after) merger Earnings Per Share calculation. 3. What it means - shareholders of company (acquired) are not at loss. 4. Market price post merger. 5. Value of Company after merger 6. Whether shareholders of both the Companies are better off? 7. Equivalent Earnings of Shares of B Ltd.
https://wn.com/Example_Of_Merger_Q1_To_Q7_(Covered_Practice_Manual)
Simple merger arbitrage with share acquisition | Finance & Capital Markets | Khan Academy
4:22

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

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  • Duration: 4:22
  • Updated: 12 May 2011
  • views: 46252
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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
Cost of merger
9:06

Cost of merger

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  • Duration: 9:06
  • Updated: 14 Nov 2015
  • views: 1132
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Did you liked this video lecture? Then please check out the complete course related to this lecture, Advanced Financial Management - Mergers and Acquisitions with 20+ Lectures, 2+ hours content available at discounted price(only Rs.640) with life time validity and certificate of completion. https://www.udemy.com/draft/373106/?couponCode=YTB10A This course is about Advanced Financial Management - Mergers and Acquisitions. Often we come across, many big companies announcing Mergers and Acquisitions. We also see many times two or more companies in same line of activity getting merged, as well as companies in different line of activities. But why do they Merge? What is the benefit of merging the entities? How the companies are valued for the purpose of merger? How the purchase value is determined? You will have answers to all these questions in this course. Merger & Acquisitions are basically Investment decisions but made under uncertainty. Mergers are resorted to enhance the wealth for the owners / share holders. When two entities gets merged / acquired, wealth for the merged entity is expected to be higher than the wealth when they are individual entities. But, arriving at the value of the business to be merged is not an easy task because it would involve many complications like Legal issues, Tax Complications, Accounting effects on Financial Reports, etc. Hence, Mergers & Acquisitions are strategic decisions focusing on maximization of growth and value of the firm. In this course you will learn how to value the business as well as the strategic benefits to look for while considering merger. You will understand the two forms or structures in Merger and the valuation models covering 1. Asset Based Valuation. 2. Earnings or Dividend based Valuation. 3. Capital Asset Pricing Model based valuation. 4. Free cash flow model. The real benefit of merger can be measured only on the basis of price paid for the merger. Hence, valuation of business is the core element in the Merger. This course is presented in simple lecture style, to the point, focussing straight on the subject matter. This course has video lectures (black board writing model) explaning the concepts of Merger, Acquisitions, Synergy, Valuation Models, etc. This course is structured in self paced learning style. Take this course to understand the nuances in Valuation aspects of Merger and Acquisitions. • Category: Business What's in the Course? 1. Over 23 lectures and 3.5 hours of content! 2. Understand Why Business Entities opt for Merger 3. Understand different structures of Merger 4. Understand Strategic benefits of Merger 5. Understand Valuation Models related with Merger Course Requirements: 1. This is a basic level course. Students can take fresh approach to this course. 2. No prior knowledge in Financial Management is required. Who Should Attend? 1. Any one who is interested in Knowing about Valuation Aspects of Merger Deals 2. CA / CMA / CS / CPA / CFA / CIMA Students 3. Entrepreneurs 4. Finance Mangers
https://wn.com/Cost_Of_Merger
Car merger
6:48

Car merger

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  • Duration: 6:48
  • Updated: 11 Apr 2018
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Subscribe
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Corporate Valuation in Merger Analysis
12:01

Corporate Valuation in Merger Analysis

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  • Duration: 12:01
  • Updated: 02 Nov 2015
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A simple working example
https://wn.com/Corporate_Valuation_In_Merger_Analysis
APG Cash Drawer and Cash Bases' customers profit from merger
3:34

APG Cash Drawer and Cash Bases' customers profit from merger

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  • Duration: 3:34
  • Updated: 24 Feb 2016
  • views: 307
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Two companies are now one: The integration of APG Cash Drawer and Cash Bases has been taking place over the last six months. Stephen Bergeron, VP Global Marketing at APG/Cash Bases explains how both companies and their consumers profit from the merger.
https://wn.com/Apg_Cash_Drawer_And_Cash_Bases'_Customers_Profit_From_Merger
VW/Porsche Merger, Cash for Clunkers - Autoline Daily 207
7:49

VW/Porsche Merger, Cash for Clunkers - Autoline Daily 207

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  • Duration: 7:49
  • Updated: 14 Aug 2009
  • views: 713
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The U.S. Department of Transportation expanded the cash-for-clunkers program yesterday. General Motors may sell the Chevy Volts lithium-ion battery pack to rival automakers. A new Top Gear controversy involving the Porsche Shooting Brake. All that and more, plus Jim Hall predicts what cars from today will be considered classics in the future.
https://wn.com/Vw_Porsche_Merger,_Cash_For_Clunkers_Autoline_Daily_207
Why Do Stock Prices Often Drop After Mergers and Acquisition
3:39

Why Do Stock Prices Often Drop After Mergers and Acquisition

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  • Duration: 3:39
  • Updated: 11 Sep 2008
  • views: 7940
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Professor Antonio Bernardo and student Feifei Li say acquiring firms are often overvalued. Visit UCLA Anderson School of Management http://www.anderson.ucla.edu/ Click here for more faculty videos from UCLA Anderson School of Management http://www.anderson.ucla.edu/x17273.xml
https://wn.com/Why_Do_Stock_Prices_Often_Drop_After_Mergers_And_Acquisition
Free Cash Flow: How to Interpret It and Use It In a Valuation
21:50

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

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  • Duration: 21:50
  • Updated: 20 May 2014
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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
How Equity Value & Enterprise Value Change in M&A Deals
11:38

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

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  • Duration: 11:38
  • Updated: 14 Apr 2015
  • views: 14473
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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
ATM Maker Dispenses Cash for Rival. Kung Fu Kicks Up Stock.  Merger Monday Triggers Short Squeeze.
25:39

ATM Maker Dispenses Cash for Rival. Kung Fu Kicks Up Stock. Merger Monday Triggers Short Squeeze.

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  • Duration: 25:39
  • Updated: 23 Nov 2015
  • views: 489
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ATM maker Diebold (@NYSE: $DBD) dispenses cash for German rival Wingcor-Nixdorf @Munich: WIN.MU). Kung Fu thriller "Into the Badlands" looks to kick up revenue and share price for AMC Theatres (@NYSE: $AMC) whose "Walking Dead" franchise, and Merger Monday in the healthcare sector continues as KaloBios (NASDAQ: $KBIO) continues to soar, triggering a further short squeeze at the leukemia drug biotech.
https://wn.com/Atm_Maker_Dispenses_Cash_For_Rival._Kung_Fu_Kicks_Up_Stock._Merger_Monday_Triggers_Short_Squeeze.
Merger Model: Assessment Centre Case Study
24:15

Merger Model: Assessment Centre Case Study

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  • Duration: 24:15
  • Updated: 01 Jul 2014
  • views: 27697
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In this Merger Model tutorial, you'll learn how to complete a merger model case study exercise given at an assessment center. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You will also learn how to set up a simplified model, how to calculate accretion / (dilution) under different scenarios, and how to calculate the pro-forma credit stats and ratios for the combined company. http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-Assessment-Center-Case-Study.pdf "Before" Excel File: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-AC-Case-Study-Before.xlsx "After" Excel File: http://youtube-breakingintowallstreet-com.s3.amazonaws.com/108-04-Merger-Model-AC-Case-Study-After.xlsx Table of Contents: 3:01 How to Interpret the Case Study and Model Requirements 5:18 Financial Information for Companies A and B 5:31 How to Calculate the Missing Information 8:02 Entering the Key Deal Assumptions 10:55 How to Combine the Income Statements 14:36 How to Calculate Accretion / (Dilution) and Credit Stats 16:46 Answering the Case Study Questions 21:06 Key Takeaways from the Case Study 22:39 Recap and Summary Step 1: Read and interpret the instructions... and understand where to cut corners! Requirements: Need to be able to change the purchase price and % debt and stock used... but cash and the foregone interest on cash are unnecessary, which simplifies things. Also, they've given us incomplete information in a few spots and we need to go through and calculate some figures for Company A and Company B, such as the shares outstanding. SKIP the formatting! Step 2: Enter the financial information for Company A and Company B. Fairly straightforward, but remember that we need to calculate a few additional numbers for this to work, such as the shares outstanding for each company and the Net Income and EPS, at least for the buyer. Step 3: Calculate the "missing information" - Net Income, EPS, and Share Counts. Start with Pre-Tax Income, then calculate Net Income based on the tax rates for both companies, and then EPS... not completely necessary for Company B, but definitely need it for Company A. Then, calculate the Share Count for both companies and the Enterprise Value (just for reference). Step 4: Go up to the top and enter the key assumptions, starting with Question #1. To save time, skip the (1 + Premium) * Share Price * # Shares calculation and just calculate the purchase price based on the premium to Company B's Market Cap instead -- same result either way. Calculate %s for debt and stock, then the amount of debt raised, debt interest rate, and shares issued. Then, fill in the information about the synergies -- no information on expenses here, so we leave it out. Step 5: Combine the Income Statements for Company A and Company B. Start with the Synergies, and then combine all the other line items, factoring in those synergies on top. Remember to factor in acquisition effects, such as additional interest expense. Calculate down to EPS, making sure you include the NEW shares issued in the transaction and increase Company A's share count as appropriate. Step 6: Calculate Accretion / (Dilution) and the Pro-Forma Credit Stats. Take the combined company's EPS and divide by the buyer's EPS and subtract 1. For the credit stats, the two key ones are the Leverage Ratio (Net Debt / EBITDA here) and the Coverage Ratio (EBITDA / Interest) - so calculate those each year. Step 7: Create sensitivities... if you have time. Here, we would argue it's pointless since it takes more time and effort to set them up, and they don't save much time beyond the model we already have -- so we're skipping this step. Step 8: What is the POINT of this case study exercise? Takeaway #1: Even if we pay a higher premium for a seller, the deal might be MORE accretive depending on the purchase method... debt tends to be less expensive than stock. Takeaway #2: Company B is a very cheap asset -- MUCH lower P / E and EV / EBITDA multiples than Company A. When a more expensive buyer acquires a much less expensive seller, the deal will almost always be accretive. Company B's significantly higher tax rate also makes a difference -- Company A gets "free money" after the acquisition since it's only paying 25% in taxes rather than 40%. Takeaway #3: Using debt tends to produce more accretion than stock, but it also produces higher leverage ratios and lower coverage ratios -- so there is a trade-off between accretion / (dilution) and the credit stats following the deal.
https://wn.com/Merger_Model_Assessment_Centre_Case_Study
APV Method in Merger Valuation
14:22

APV Method in Merger Valuation

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  • Duration: 14:22
  • Updated: 15 Nov 2015
  • views: 4736
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National Finance offers 'cash buyout' to Oman Orix shareholders for merger
1:01

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

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  • Duration: 1:01
  • Updated: 15 May 2017
  • views: 72
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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
TATA-Bharti Airtel Merger is Now Going to be a Reality | CNBC TV18
33:46

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

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  • Duration: 33:46
  • Updated: 12 Oct 2017
  • views: 3271
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TTSL, TTML To merget their consumer mobile businesses with Bharti Airtel Merger on a Debt-free cash-free basis TATA CMB-AIRTEL CNBC-TV18 is India's No.1 Business medium and the undisputed leader in business news. The channel's benchmark coverage extends from corporate news, financial markets coverage, expert perspective on investing and management to industry verticals and beyond. CNBC-TV18 has been constantly innovating with new genres of programming that helps make business more relevant to different constituencies across India. India's most able business audience consumes CNBC-TV18 for their information & investing needs. This audience is highly diversified at one level comprising of key groups such as business leaders, professionals, retail investors, brokers and traders, intermediaries, self-employed professionals, High Net Worth individuals, students and even homemakers but shares a distinct commonality in terms of their spirit of enterprise. Subscribe to our Channel: https://www.youtube.com/user/CNBCTV18 Like us on Facebook: https://www.facebook.com/cnbctv18india/ Follow us on Twitter: https://twitter.com/CNBCTV18News Website: http://www.moneycontrol.com/cnbctv18/
https://wn.com/Tata_Bharti_Airtel_Merger_Is_Now_Going_To_Be_A_Reality_|_Cnbc_Tv18