1. FI6021 International corporate finance
Group members Student ID
Wantong Dong 15072487
Dmytro Dudko 15055221
Bocheng Yang 15060233
Olaseni Odeyemi 15014967
2. In January 2015,
GE Capital
Aviation Services
(GECAS), GE’s
Irish-
headquartered
aircraft finance
subsidiary
bought the
helicopter
leasing specialist
Milestone
Aviation for $1.8
billion.
Introduction
Introduction of GE & Milestone
The choice to acquire milestone aviation
GE’s overall strategic goals
The acquisition deal
Factors that impact value creation
GECAS integration of milestone aviation
Conclusions
3. Background
Imagination at work
GECAS
US & Irish commercial aircraft financing
and leasing business of GE
40+years of Industry experience
A wide business scale
Providing multiple services & financing
solutions
Milestone Aviation Group
Established in August 2010
Leasing aircraft to industries
Providing emergency searching & services
Acquired by GECAS in 2015
4. Open new markets & expend
production scale
Increase the market shares
Obtain sufficient and cheap labour
force; raw material
Enhance the competitiveness of
the enterprises
Carry out the brand operation
Get advanced technology;
management experience; business
network and experts
Motives for international acquisitions
The leader in aircraft market
with $ 3 billion
Global resources and delivery
positions
Financing with lower risk
Strong experienced team
Build long term; stable and
sustainable development co-
partnership
Deal with the payment
carefully
Milestone Aviation Group Strengths
5. The choice to acquire Milestone Aviation
Deep their strength in helicopter area
Increase their main industrial values
Create the synergy effects
Gain more experts and increase reputation
The team with passion and creative knowledge will produce big profits
6. GE strategic areas of
expansion
Aviation
Engines and parts
for aircrafts of all
types
Global service
network
Oil and Gas
Technical solutions
for offshore drilling
Maintenance
services for offshore
platforms
Other
businesses
Healthcare
Energy management
Transportation
Appliances and lightning
Acquisition of Milestone Aviation
Overall strategic goals
7. Decide the ‘right price’ of the target
The valuation of the target
Assets-based
Income-based
Cash flow- based
Book value
Net realisable value
Replacement cost
P/E=PPS/EPS
Dividend growth model
(P/E=MV/PAT)
8. SOFP of Milestone Aviation Group in 31/12/2013
Multiple
P/E ratio
China Aircraft Leasing
Group Holdings LTD
15.23
Capital Lease Aviation PLC 17.66
BBA Aviation PLC 18.26
30/06/2015
average P/E =17.05
I/S in 31/12/2013
Profit (Loss) after Tax 25,017
MV=P/E*PAT
=17.05*25017=£426539.85
Fixed Assets 1,551,557
Current Assets 157,399
Total Assets 1,708,956
Current Liabilities 110,710
Long Term Liabilities 1,206,667
Net assets 391,579
Shareholders Funds 391,579
In is normal to reduce the
value by 1/3 –1/2 when
estimate the value of a non-
listed company.
Dividend Discount Model
market value: PV of future dividends
lower div per share
theoretical value lower growth rate
higher required rate of return
9. Payment method
cash consideration or debt
Roles are clear-cut
MAG’s shareholders---more likely to accept cash Avoid any future upside performance
block from future gains
share-exchange approach
GECAS’s shareholders—less likely to pay by shares pay more than MAG is worth.
tax factors
• paying cash----MAG will request GECAS to pay more
pay capital gains tax overall costs
• Use debt----bring great
benefit to the acquiree-
----no need to pay
income taxes until they
receive the debt
payments
11. Date
Share
price
Total amount of
shares outstanding
Market
capitalization
13th of October 2014 $23.95 10,057,380,000 $241 bn.
18th of November
2014
$27.01 10,057,380,000 $272 bn.
Total gain in overall
market value of GE
31 billion dollars
Value creation
12. Acquisition difficulties
• All the debts and liabilities of milestone will be inherited by
GECAS
• Having the world largest leasing fleet GECAS constantly
has to sell about $3 billion- worth of aircraft to renew its fleet
• The onset of new technology and aircraft
• Customary Closing conditions including regulatory approvals
13. References
• ACCA global (2015) Business Valuation [online], available:
http://www.accaglobal.com/content/dam/acca/global/PDF
-students/2012s/sa_feb12_f9_valuationsv2.pdf [accessed
23 Oct 2015].
• Alfred, R. and Mark, L. S. (1999) ‘Stock or Cash?: The Trade-
offs for Buyers and Sellers in Mergers and Acquisitions’,
Harvard Business Review [online], 160(11), 147-158,
available: https://hbr.org/1999/11/stock-or-cash-the-
trade-offs-for-buyers-and-sellers-in-mergers-and-
acquisitions [accessed 24 Oct 2015].
• Andrei, S. and Robert, W.V. (2002) ‘Stock Market Driven
Acquisitions’, Journal of Financial Economics, 70(2003),
295-311.
• Hsuan-Chu, L., Ting-Kai, C. and Jia-Chi, C. (2010) ‘Does
market mis-valuation drive post-acquisition
underperformance in stock deals?’, international Review of
Economics and Finance, 20(2011), 690-706.
• Leonidas, B. and Sudi, S. (2011) ‘Determinants of
earn out as acquisition payment currency and
bidder’s value gains’, Journal of Banking &
Finance, 36(2012), 678-694.
• Mara, F. and Ronald, W. M. (2005) ‘The choice of
payment method in European mergers and
acquisitions’, The Journal of Finance, 60(3), 1345-
1388.
• Milestone Aviation Group A GECAS Company
(2015) Milestoneaviation.com [online], available:
http://milestoneaviation.com/about-milestone/
[accessed 29 Oct 2015].
• Robin, J. A. (2011) International Corporation
Finance, International ed., New York: McGrew-
hill.
• Milestone Aviation Group Limited (2015) GE
Capital Aviation Services Closes Acquisition of
Milestone Aviation Group [online],
available:http://milestoneaviation.com/ge-
capital-aviation-services-closes-acquisition-of-
milestone-aviation-group/ [accessed 24 Oct
2015].
