Mergers and Acquisitions 101 by Amy Wu

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Amy Wu, former reporter for Time magazine and The Deal LLC, presents "Mergers and Acquisitions 101," a free webinar hosted by the Donald W. Reynolds National Center for Business Journalism. During the one-hour session, Wu covers the DNA of an M&A story, essential ingredients of the M&A story, and the ABCs of writing the basic M&A story.

For more information about business journalism training and resources, please visit http://businessjournalism.org.

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Mergers and Acquisitions 101 by Amy Wu

  1. 1. M&A 101 Presented by Amy Wu June 3, 2014
  2. 2. Get ready to Test your M&A savvy Ready? Set, Go! YES or NO? A merger is the same thing as an acquisition QUESTION #1
  3. 3. Ready? Set, Go! YES or NO? QUESTION #2 Mergers and acquisitions only involve publically traded companies
  4. 4. It’s big news
  5. 5. • Pfizer lures AstraZeneca • Facebook Buys WhatApp $19 billion • Google snags Best Labs $3.2 billion • Global M&A transactions in 2013 was valued at $2.91 trillion • 2014 number of deals up from 2013 •  Source: Dealogic
  6. 6. BIG DEAL AND LITTLE DEALS • Major deals - $1 billion and upwards • Middle market - $100 million -$500 million • Small-cap deals – up to $50 million
  7. 7. What’s the difference between a merger and acquisition?
  8. 8. QUICK CHAT: IS IT A MERGER OR ACQUISITION? •  Apple wants to buy Skullcandy and is using a portion of their stock in the purchase •  Merger or acquisition? •  Acquisition. When stock is used as part of the currency, that's usually a good sign that company is the acquirer and it is not a merger.
  9. 9. DNA OF AN M&A STORY
  10. 10. THE BASICS • Is it a merger or acquisition? • How much is the merger or acquisition • Names of both companies and CEOs • Head quarters of both companies • How is the deal valued; stock vs. cash transactions • 
  11. 11. ACQUIRING THE INGREDIENTS • Press conference • Conference call • Company websites: official press releases • Investor relations: provides investors with an accurate account of the company's affairs • SEC’s (U.S. Securities and Exchange Commission) Edgar database
  12. 12. BEYOND THE BASICS • Why is this deal significant? (the company, the price) • Why is the timing important? Why now? • How long have talks been going on for? • What is the company’s strategy?
  13. 13. BEYOND THE BASICS II • Research analysts at investment banks • Research firms e.g. Forrester Research, Nielsen Group, Dealogic LLC • The company (CEO, CFO, in-house lawyers) • Universities and business schools • 
  14. 14. GO DEEPER •  How is the deal valued; stock vs. cash transactions •  Who (founder and/or employees) is receiving the stock units, and how much? •  Stock vs. cash transactions and what that suggests •  Price of shares before, during and after the deal, what this means
  15. 15. AND EVEN DEEPER: HOW MERGERS AND ACQUISITIONS AFFECT STOCK PRICES • Stock prices Can Change Even After A Merger Is Announced • Acquiring company's stock will fall • Target company’s stock will rise • Uncertainty can lower prices
  16. 16. WHY ARE PRICES AFFECTED? • Target company's stock usually goes up • Acquiring company (typically) needs to pay a premium for the acquisition • Acquiring company's stock usually goes down • Acquiring company must pay more than the target company currently is worth to help the deal go through • Uncertainty and additional challenges
  17. 17. HOW TO GO DEEPER • Investment banks who led the deal • Law firms who led the deal • What banks and law firms advised both companies? What were the previous relationships with the companies?
  18. 18. AND EVEN DEEPER •  Who is the winner and who is the loser, and why? •  Which executives will remain in charge and who's packing? Same with directors •  Where will company be based? •  How is the consumer impacted? •  How does this deal compare with the companies’ previous deals? •  How does it compare with deals in the same sector?
  19. 19. THE M&A PUZZLE GAME •  A) Facebook, based in Menlo Park, Calif., will pay $4 billion in cash and $12 billion worth of shares for WhatsApp. •  C) On Wednesday Facebook announced it would pay at least $16 billion for WhatsApp, a text messaging application. •  B) The price shows that Facebook’s co-founder and chief executive, Mark Zuckerberg, will go to protect his company’s turf as the dominant social network on the web. • Put them in order of priority based on the letters of the puzzle
  20. 20. THE ANSWERS • C • A • B
  21. 21. Ready? Set, Go! YES or NO? QUESTION #3 • Apple buys Skullcandy and Skullcandy’s stock rises after the announcement and the stocks of Apple’s fall. • Who is the acquirer? • Apple
  22. 22. Ready? Set, Go! YES or NO? QUESTION #4 Mergers and acquisitions occur on the national, regional and local level
  23. 23. It is not just global, it’s local
  24. 24. ANATOMY OF AN M&A STORY
  25. 25. KEY TERMS • Hostile takeover
  26. 26. • Bear hug
  27. 27. • Tender offer
  28. 28. • Private equity firm
  29. 29. • Poison pill
  30. 30. QUICK CHAT: THE SIX TERMS GAME READY, SET GO! WHAT KIND OF DEAL IS IT? •  In 2009, U.S. food company Kraft Foods bids £10.5bn for Cadbury •  Cadbury's chairman Roger Carr said the offer was an attempt to "buy Cadbury on the cheap" •  Kraft ups the bid to £11.5bn, and says there will be no compulsory redundancies in manufacturing for two years •  In 2010 the bid is accepted •  After the deal is sealed in 2010 Kraft closes one of Cadbury’s factories and cuts 400 jobs
  31. 31. HOSTILE TAKEOVER
  32. 32. IN SUMMARY • No deal is equal • Mergers and acquisitions are not the same • The five essentials of a deal story • The various levels of a deal story • Critical sources and where to find them • Deal lingo
  33. 33. M&A IS A TREASURE CHEST OF STORIES
  34. 34. Thank you awu1@umd.edu LinkedIn: hk.linkedin.com/pub/amy-wu/3/746/962/ Facebook: https://www.facebook.com/amyhwu

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