Mand a toolkit value creation principles

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Mand a toolkit value creation principles

  1. 1. M&A TOOLKIT Valuation: Value Creation principles© 2007-2013 IESIES Development Ltd. All Ltd. Reserved © 2007-2013 Development Rights All Rights Reserved
  2. 2. The value creation of the deal is the difference between the price paid and the value of the business bought by the acquirerDEAL VALUE CREATION$m 50 800 250 150 750 600 550Current Market Acquisition Price Paid Value creation Value to Value of Base businessCapitalisation Premium acquirer synergies value © 2007-2013 IES Development Ltd. All Rights Reserved
  3. 3. The synergies must exceed the acquisition premium if the target is accurately priced “as is”DEAL VALUE CREATION$m 100 850 250 150 750 600 600Current Market Acquisition Price Paid Value creation Value to Value of Base businessCapitalisation Premium acquirer synergies value © 2007-2013 IES Development Ltd. All Rights Reserved
  4. 4. There is no way to calculate the acquisition premium in a private dealDEAL VALUE CREATION$m 50 800 250 150 750 600 550Current Market Acquisition Price Paid Value creation Value to Value of Base businessCapitalisation Premium acquirer synergies value © 2007-2013 IES Development Ltd. All Rights Reserved
  5. 5. You can analyse the market estimate of value creation by watching the share price of acquirer and target during a dealFirst rumour On first rumour on 23rd May, Anheuser-Busch share price jumps $5 (+$4,000m market capitalisation) On the same day, Inbev share price drops by €3 (-$2,500m market capitalisation) © 2007-2013 IES Development Ltd. All Rights Reserved
  6. 6. When a deal is underway, share prices respond to events in the deal processFirst rumour PV($70) Credit crisis; Agreed Closure speculation that @$70 high % Inbev might walk Offer away @$65 Inbev cancels rights issue © 2007-2013 IES Development Ltd. All Rights Reserved
  7. 7. An annotated share price graph helps you understand the deal What conclusion would you reach if the stock traded above $12.2? Why doesn’t the stock Coke offer at trade at $12.2? HK$12.2/share Post- announcement, what drives stock price volatility? © 2007-2013 IES Development Ltd. All Rights Reserved

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