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Merger Analysis Click to edit Master title style
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What is a merger? CONCEPTS
A merger is a generic word for all types of combinations of trade companies 1.
Various investors
2.
Various structures
3.
Various targets
A merger model is a simple sum of the bidder’s and target’s financial aggregates coupled with transaction financial impacts KEYS TO A SUCCESSFUL MERGER
1 Find the right target…
Industrial rational
Financial rational
2 …that creates value for shareholders…
Synergies
Re-rating
EPS accretion
3 …while remaining financially balanced
Rating considerations
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What is a merger? cont’d KEY LEVERS
1 Price paid ― A premium over reference share price… ― … justified by a significant amount of synergies… ― … and aligning bidders’ and sellers’ shareholders’ interests
2 Transaction structure: Cash & shares mix ― Driven by shareholders requirements and … ― … rating considerations
3 P&L impacts ― Level of synergies ― Cost of acquisition debt ― Proforma assumptions (i.e. tax rate, payout ratio…)
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Acquisition structure / method Existing cash Existing shareholders
Cash Selling investors
New shares
Trade buyer
Financing
Target shares
Target
New shareholders
Banks Target
New bond holders
Merger model
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Impacts P&L
CASH FLOW
BALANCE SHEET
•
Synergies
•
Same as P&L
•
Goodwill
•
Financing costs
•
New dividend policy
•
Net debt
•
Transactions costs
•
Other synergies (capex, working capital,…)
•
Equity
PRUDENTIAL RATIOS
SHAREHOLDING
RETURN OF TRANSACTION
•
Impacts on prudential ratios
•
NOSH
•
ROCE of transaction
•
Net debt/EBITDA
•
Shareholding structure
•
EPS relution
•
EBITDA interest coverage
•
Sharing of the synergies
•
Gearing
•
Capital gain /IRR for sellers
•
FFO/Adjusted Net Debt
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Merger model guided tour COMPANY INPUT
MERGER MODEL
OUTPUTS
Pro forma financials Buyer
Combination
Accretion/ dillution
Buyer + Target
Leverage
Target Shareholding
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Contribution analysis: how does it look like? CONTRIBUTION (%) ACQUIRER
TARGET
COMBINED
ACQUIRER
TARGET
ENTERPRISE VALUE METRICS Revenues 2014E
800
300
2015E
850
330
2014E
85
30
2015E
90
32
Current Market
20
80
@ 25% Premium
25
85
EBITDA
Enterprise Value
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