Fundamentals of   Business & Financial Journalism   Week 9: Mergers & Acquisitions (& IPOs)    Jeffrey TimmermansMonday, 2...
News Quiz   ✤    What are some of the reasons HSBC has been in the news recently?   ✤    Which area of which city has the ...
Types of M&A   ✤    Merger: companies join as “equals”   ✤    Acquisition: one company buys another   ✤    Take private: a...
Global M&A activity 2004-2012                Source: MergermarketMonday, 26 November, 12
Global Private Equity Activity               Source: MergermarketMonday, 26 November, 12
The M&A process   ✤    Initiated by acquirer, target, private equity firm, or investment bank   ✤    Mandate of investment ...
Questions to ask   ✤    What’s the value of the deal?    ✤   What seller will do with                                     ...
More questions   ✤    Are there regulatory or other       ✤   What are the fees the banks/        legal concerns?         ...
Sourcing in M&A   ✤    Investment banks (advisors and rivals)   ✤    Management consultants   ✤    Institutional sharehold...
Valuations    ✤   Cash Deals: Exclude all assumed debt, multiply price-per-share offered        by buyer by number of outs...
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Class9

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Class9

  1. 1. Fundamentals of Business & Financial Journalism Week 9: Mergers & Acquisitions (& IPOs) Jeffrey TimmermansMonday, 26 November, 12
  2. 2. News Quiz ✤ What are some of the reasons HSBC has been in the news recently? ✤ Which area of which city has the highest retail store rents in the world, and why might that be? ✤ How much of a pay rise is Cathay Pacific’s flight-attendants’ union seeking for next year, and what’s the significance of that number? ✤ EXTRA CREDIT: What are some of the ways Autonomy allegedly inflated its profits?Monday, 26 November, 12
  3. 3. Types of M&A ✤ Merger: companies join as “equals” ✤ Acquisition: one company buys another ✤ Take private: all shares in a listed company are purchased from shareholders (typically by a private equity firm) and the company is restructured as a private entity before re-listing ✤ Joint venture: two companies form another venture ✤ Reverse takeover: purchase of a listed company by a private companyMonday, 26 November, 12
  4. 4. Global M&A activity 2004-2012 Source: MergermarketMonday, 26 November, 12
  5. 5. Global Private Equity Activity Source: MergermarketMonday, 26 November, 12
  6. 6. The M&A process ✤ Initiated by acquirer, target, private equity firm, or investment bank ✤ Mandate of investment banks as advisors ✤ Due diligence/valuation process ✤ Possible emergence of rival bid ✤ Shareholders of target vote on deal / regulatory approval ✤ Unification of operations/possible mass firingsMonday, 26 November, 12
  7. 7. Questions to ask ✤ What’s the value of the deal? ✤ What seller will do with money? ✤ Who’s buying what for what amount from whom? ✤ Effect on companies’ revenue, earnings? ✤ Is it a hostile bid? ✤ Is there a large amount of debt ✤ The reasons for the deal – how at the target that will be it “fits.” assumed by the acquirer? ✤ How buyer is paying: cash, stock, debt, or a combination?Monday, 26 November, 12
  8. 8. More questions ✤ Are there regulatory or other ✤ What are the fees the banks/ legal concerns? advisors are getting? ✤ Antitrust issues? Political ✤ When is the deal expected to issues? close? ✤ Who will run the new entity? ✤ How did the market react to the Changes? announcement of the deal? ✤ What happens to employees? Transfers? Layoffs?Monday, 26 November, 12
  9. 9. Sourcing in M&A ✤ Investment banks (advisors and rivals) ✤ Management consultants ✤ Institutional shareholders in target (& acquirer) ✤ Shareholder activists ✤ David Webb (HK) ✤ Institutional Shareholder Services (US)Monday, 26 November, 12
  10. 10. Valuations ✤ Cash Deals: Exclude all assumed debt, multiply price-per-share offered by buyer by number of outstanding shares of target. ✤ ABC offers $1 per XYZ share x 100m XYZ shares = $100M ✤ Stock Deals: Multiply exchange ratio offered by Buyer’s trading price. ABC offers 0.64 of its shares for each XYZ share: ✤ 0.64 x ABC trading price $2.00 = $1.28/Share for XYZ shareholders ✤ Total Value: $1.28 x XYZ outstanding shares 1.0B = $1.28BMonday, 26 November, 12

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