Corporations acquire or merge with other companies to gain access to new technologies, new talent or to open and expand new markets. Alas, 70 percent of all deals fail. HP and Compaq worked out real well. Right? How about Daimler-Benz and Chrysler? Not exactly a marriage made in heaven. What are the opportunities with deals? How do you disclose them? And what are the perils?

1. Kevin M Brett
April 30, 2013

2.  1,896 mergers or acquisitions
 $471.5 billion
 Hewlett Packard/Compaq
 Disney/ABC
 ABC/ESPN
 AOL/ Time Warner
 Time/Warner Brothers
 Daimler Benz/Chrysler
 Budweiser/Corona

3.  Gain new technology and talent
 Grow Revenue
 Strategic Assets
 Market Share
 Synergies

4.  “I'm all for progress. It's change I
object to.” – Mark Twain

5.  Approximately 70 percent of deals fail
 Inadequate “Due Diligence”
 Acquiring companies blow integration
 Acquired employees head for the exits
 Need to welcome acquired employees

6.  Size of Deal?
 Financing?
 How many are going to be laid off?
 Is the deal accretive or dilutive to EPS?
 Is there any product or customer overlap?
 How will you integrate the two companies?
 Anti-Trust Issues?
 Will you report the deal on a Pro Forma basis?

7.  Cash from Balance Sheet
 Stock (1 for 1 or Ratio)
 S4 (Issue More Stock)
 LBO (Leveraged Buyout): Combo of Cash/Stock
and Debt

8.  GAAP Greater or Equal Prominence to Pro Forma –
SEC Reg. G
 GAAP: Generally Accepted Accounting Principles
 Pro Forma, Non-GAAP or Earnings Before Special Items
 Pro Forma: “For The Sake of Form”
 Pro Forma: Results from Continuing Operations

9.  Revenues: $2 million
 COGS: $1 million
 Gross Margin: $1 million
 SG&A: $250,000
 R&D: $250,000
 Amortization: $1 million
 Operating Margin: ($500,000)
 Taxes: $200,000
 Net Loss: ($700,000)

10.  Revenues: $2 million
 COGS: $1 million
 Gross Margin: $1 million
 SG&A: $250,000
 R&D: $250,000
 Operating Margin: $500,000
 Taxes: $200,000
 Net Income (Loss): $300,000

12.  Anheuser Busch, 39%
 Miller Coors, 26%
 Grupo Modelo, 7%
 Heineken USA, 6%
 Others, 22%

17.  “Class Assignment: Do Not Trade”
 Both companies announce definitive merger
agreement
 Establish the price of the deal
 Announce cash and/or stock financing (1 for 1)
 Accretive to acquiring company’s EPS in one year
 Subject to successful completion of Hart-Scott-
Rodino and other closing conditions
 Quotes from both CEOs
 Both Boilerplates/One Safe Harbor