Abbreviations
1.3. Mechanisms of Insulator Function
1.3.1. The Omnipresent CTCF
1.3.1.2. CTCF, “The Master Weaver of the Genome”
Case Studies
Table of Content
Introduction 177
Types of Acquisition 178
Transaction Types 179
Overview 181
Target Business Description 182
Transaction Overview 183
Transaction Highlights 184
Transaction Rationale 185
Market /Broker’s perception 186
Mergers and Acquisitions (M&A) are a big part of the corporate finance world. Every day, Wall Street investment bankers arrange M&A transactions, which bring separate companies together to form larger ones.
M&A are a combination of two or more companies, or the acquisition of a part of a corporation for which some payment is given in compensation. This payment can be in stock, cash or a combination of the two.
Investors in a company, that are aiming to take over another one, must determine whether the purchase will be beneficial to them. In order to do so, they must determine how much the company being acquired is really worth.
The success of a merger is measured by whether the value of the buyer is enhanced in medium to long term, by
The success of a merger is measured by whether the value of the buyer is enhanced in medium to long term, by the action.
A transaction case study aim at analyzing the merger and acquisition deal that has taken place.
An Acquisition can take the form of a purchase of stock and other equity in the target entity or the purchase of all or a substantial portion of its assets
Share Purchase – In a share/stock purchase, the seller transfers shares in the target entity to the acquirer in exchange for an agreed-upon consideration. The acquirer takes on the target company with all its assets and liabilities
Asset Purchase – In an asset purchase, the acquirer buys all or a substantial portion of the assets of the target company. An advantage for the acquirer in an asset purchase is that it can cherry-pick the assets it wants and leave assets and liabilities that it does not want to purchase
leave assets and liabilities that it does not want to purchase
Some common types of deals
Leveraged Buyout – An LBO is essentially a strategy whereby the acquirer gains control over the target’s stock or assets through significant amount of borrowed money, making the acquired company’s new capital structure highly levered; for e.g. - Kohlberg Kravis Roberts & Co. and Texas Pacific Group’s acquisition of TXU Corp
Secondary Buyout – The management team, in conjunction with a private equity fund, acquires the business, allowing the existing private equity supplier to exit from its investment. Thus, it is an exit mechanism whereby one investment firm sells its position in a venture on to another; for e.g. - The sale of textile and cleaning group Elis by French buyout firm PAI Partners to rival Eurazeo
Public to Private Buyout – This involves the management or a private equity provider making an offer for the
Public to Private Buyout – This involves the management or a private equity provider making an offer for the listed shares of a public quoted company, then taking the company private; for e.g. - Blackstone Group’s acquisition of German chemical maker Celanese
Management Buyout – Existing management of a company buys the Company from its owners; foe e.g. -A.T.Kearney’s management buy-out
Tender Offers – A formal offer of determined duration to acquire a public company’s shares made to equity holders. The offer is often conditioned upon certain requirements such as a minimum number of shares being tendered; for e.g. - Sanofi-Aventis’ tender offer to acquire all outstanding shares of Genzyme for $69 per share in cash
Divestiture – A deal which results in the loss of majority control, such as sale of subsidiary; for e.g. - Kodak’s sale of Health Group to Onex
Privatization – Sale of a government-controlled entity to a single or consortium of bidders or by floatation of stock
Deal Attitude
Represents the recommendation of the target company’s Management or Board of Directors on the transaction – Friendly – The Board recommends the offer
– Hostile – The Board officially rejects the offer (but the acquirer persists with the takeover) – Neutral – The Management has nothing to do with the transaction
– Not applicable – The attitude of the Board is not applicable, i.e. open market repurchases, spin-offs – Unsolicited – The offer is a surprise to the target’s board, and it has yet not given a recommendation.
– Unsolicited – The offer is a surprise to the target’s board, and it has yet not given a recommendation.
Deal Consideration
There are three common ways to pay for a M&A Transaction – All Cash
The acquirer pays a lump sum cash consideration to purchase shares/assets in the target
The acquirer offers per share cash consideration for every target share
– All Stock – The acquirer offers its own shares in consideration for each share of the target
– Stock & Cash – The acquirer makes payment for the target partly by issuing its own stock and partly in cash
Additionally, the deal consideration may also include provision for Earnouts. Earnout is a method of
compensating a seller based on the future earnings of the acquired entity. It is the contingent portion of the purchase price
Case studies focus on different M&A transactions and include the following information regarding the deal:
– Target/Acquiror Business Description – Transaction Highlights
– Transaction Overview – Transaction Rationale
– Implied Multiples (Refer to Trading/Transaction Comp Modules) – Market/broker’s Perception
Give a brief description of the target company
– Include main business of the company, major product categories, geographic presence and other details like brands, headquarter, listing, employees
In case only one division or segment of the company is being acquired then focus on that particular segment or division
Also, include data related to the market position of the Target (for example: largest produce of chemicals in China;
one of the leading provider of software solutions etc)
Company Website or Filings
Other databases such as Capital IQ, Thomson, Factiva etc
Sources
This section captures the various news items that have been released regarding the transaction
Start from the first mention of the deal (rumors date) or management’s wish to get acquired
It might be the first bid by the acquirer or a competitive bid
Move in ascending order to the latest available news on the deal
Try to capture all news regarding the deal including – Market rumors
– Other bidders – Revised bids
– Change in value of the deal – Search for partners
Company Website or Filings
Other databases such as Bloomberg, Capital IQ, Thomson, Factiva etc
Sources
Covers a summary of all events that took place in the course of the deal, starting from the announcement of the deal includes:
– Items such as the %age held, final price, dividends declared, financing details, advisors, etc. and Information regarding the terms and conditions of the deal
– Management and shareholding changes, post transaction, if any – Status of the deal, pending or completed
– Any other post transactions plans
– Compliance requirements with governing agencies – Compliance requirements with governing agencies
Company Website: Fillings, presentations and press releases
Other databases such as Bloomberg, Capital IQ, Thomson, Factiva etc
Sources
Rationale for Seller/Target: Mention benefits which the seller/target is expecting from the deal or why they want to sell off the Company
Synergy: Overall synergy benefits expected out of the joint entity post merger. The functions of synergy allow for the enhanced cost efficiency of a new entity made from two smaller ones - synergy is the logic behind mergers and acquisitions
Focus on various strategic benefits of the deal such as combining the product portfolio of current target with its existing portfolio companies and entering a new geography with the current acquisition
Include potential synergies, increase in market share, enhancement in product portfolio, geographic expansion, financing further growth and divesting non-core activities
financing further growth and divesting non-core activities
Company Website: Fillings, presentations and press releases
Other databases such as Bloomberg, Capital IQ, Thomson, Factiva etc
Sources
The section provides commentary on the company from the analyst’s research reports; try to include comments from the brokers who have made commentary on the deal
– Also, in some cases, the commentary includes quotes by Key management of the target and acquirer on the deal
The commentary highlights the attractiveness of the target, deal rationale, comments on valuation or future predictions of the deal
In case of private companies, try to find out analyst’s comments on the deal through web search
Try to incorporate broker comments on target/acquirer and seller for the deal
Try to incorporate broker comments on target/acquirer and seller for the deal
Research reports pertaining to the transaction
Other databases such as Bloomberg, Press etc