Mergers & Acquisitions

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Restricted Stock, etc.
Hi, can you tell me which of these should be added to basic shares outstanding when performing comps (not precedents) analysis: RSAs, PSUs, PSAs, Restricted Stock, SARs exercisable/outstanding, Directors Shares? Thanks so much!
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added 2 years ago
Comps when valuing a company for M&A
Hi, thanks again for answering all of our questions! When spreading comps to perform a comps analysis (not precedents) for the purpose of valuing a company for a take-private, should you still use options exercisable instead of outstanding (even though you would expect all of the options outstanding... Read More
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added 2 years ago
Asset Acquisition: Customer Relationship
Our company is currently acquiring assets of a target company. We intend to acquire specifically, (1) PPE's and (2) customer database. For PPE, we hired a third-party service provider to appraise. For the latter, I used discounted cash flow method, valuation is for 10 years. However, my initial mode... Read More
Off-balance sheet Inventory Financing
How to account for off-balance sheet crude inventory financing in calculating initial investment in project IRR? Do we include or exclude the amount? If exclude, the Project IRR seems artificially high. If include, the Project IRR seems artificially low and negative.
Acquisition of assets
Would purchase price for the acquisition of assets normally include or exclude "inventory" since these are mostly spare parts of the main assets? or is it really a deal specific and normally a negotiating point whether to separate pay for the spare parts?
Reverse Morris Trust (RMT)
I have a question regarding this type of M&A structure. What is the profile of the acquirer and target that makes this work, what makes it not work? Why would a company choose this structure over others out there and what are the key financial/valuation metrics to focus on to determine whether a RMT... Read More
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added 5 years ago
Synergies/(Cushion) to break even
I just have a conceptual question on synergies and cushion to break even in an accretion dilution model. What does a positive number (synergies) to break even mean and what does a negative number (cushion) to break even mean? Does this mean that I will need X $ of synergies to make up for the premiu... Read More
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added 5 years ago
Diluted Shares Outstanding Excel Equation
I’m confused about an equation you used in the Merger Model Basics course. You calculated the “Number of Shares Equivalent” – the number of dilutive shares essentially – in the Walmart stores acquires Target accretion/dilution model using the equation =max(0,Number of Options*(1-Option Exe... Read More
Cash requirement
For my job, I'm recently working on an US M&A transaction and come up with some practical questions, while I'd appreciate if you can provide me some insight. The vendor plan to distribute all of its excess cash before the closing, however, the managemnet is yet to provide us a cash requirement le... Read More
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added 6 years ago
Tangible Book Value calculation for Goodwill
Quick question from the war room - We are having a debate about Tangible Book Value used in calculating Goodwill. One faction says that: Tangible book value = Shareholders equity - intangible assets (Intangible assets include patents, trademarks and goodwill) The other faction says: Tang... Read More
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added 6 years ago
DTL in purchase price allocation
Quick question follow-up on DTL on purchase price allocation- As the inventory is sold that was stepped up (and DTL created upon merger), DTL goes down. My understanding is that DTL is written down, cash goes down to pay taxes as the double entry accounting. Thus, I'd like to confirm that goodwill ... Read More
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added 6 years ago
Carve-out Accounting
I'm curious as to how a Parent Company should account for a carve-out >50% of Sub, retains legal control). According to Macabacus, if the parent is selling secondary shares, the accounting should be as follows (i picked arbitrary numbers): dr. Cash 10 cr, Minority Interest 8 cr. Gain on C... Read More
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added 6 years ago
Exchange Ratio in Accretion Dilution
Re an acc/dil analysis: Let’s say you wanted to calculate the historical exchange ratio between a company whose stock trades in Europe and a US company. European company is buying US company.   Is the technically correct way to calculate that historical exchange ratio, say over the past 5 yea... Read More
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added 6 years ago
Complex trading comps - Sears Holdings
Hi, For Sears Holdings Corp, why do we need to adjust the "Gain on sale of assets" from operating income? Here is the footnote: NOTE 16—REAL ESTATE TRANSACTIONS The Company recognized $39 million, $946 million and $89 million in gains on sales of assets during fiscal 2005, fiscal 2004 ... Read More
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added 6 years ago
Purchase Price - Net Tangible Book Value
In the context of an accretion/dilution analysis, got a quick question for you: is it valid to calculate amortization of [purchase price in excess of net tangible book value] as: = [ [ [Equity purchase price in an M&A transaction ] – [book value of equity – goodwill – intangible assets]... Read More
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added 6 years ago
PV of Synergies in an M&A Deal
Let’s say you’re calculating the PV of synergies per share in an M&A deal. and let’s say Target expects to have $250mm in SG&A savings during years 1-5, as well as into forever (ie terminal value). And let’s say that we are using a 10x terminal multiple approach to calculate terminal... Read More
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added 6 years ago
Stock vs Asset Deal in M&A
I attended your Merger Modeling class on 5th March in Shanghai. Re the Stock vs. Asset topic, my understanding was clear when you said buy asset from XYZ, then seller bears liabilities (I was sort of understood it by that moment). But now I rethink it and use the example you raised in the class, I b... Read More
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added 6 years ago
M&A Purchase Price Allocation - intangibles calculation
I found another point which i woul like to discuss with you. on your merger model (from the c0omplex M&A module), the adjustment with regards to the intangibles must be wrong. The reason being that when i used to model any merger, i did not substrct the target's intangibles. If i did so, then th... Read More
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added 6 years ago
338(h)(10) elections and NOLs
1. Stock sales are taxed only once (shareholder level) while asset sales are taxed twice (corporate level and shareholder level), correct? 2. Why would a seller be motivated to do a 338(h)10 since they would be taxed twice, since the 338(h)10 treats the sale as an asset sale, vs. only being tax... Read More
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added 6 years ago
Negative Goodwill
I am working an a case where the purchase price of a company is far below its market cap. This will definately create negative goodwill. I have read that under IFRS this negative goodwill will appear on the B/S as a negative figure. But there was an obligation to report as income on the P&L the ... Read More
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added 6 years ago
Options & Shares exercisable vs outstanding
In reviewing some of the materials in the videos and the notes I took, for LBO, M&A, and just normal standalone valuation there seems to be some contradiction in info so if you could please clarify I'd appreciate it and please explain why as to which is the appropriate method. 1) In a standalon... Read More
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added 6 years ago
Dividends from Subsidiary
Hi there I just want to clarify dividends recording from Subsidiary. Suppose Holdco holds say 90% of Subsidiary while 10% is NCI. There are two cases now: 1) How to record dividends received from Subsidiary by Holdco in its all three statements while preparing stand alone financial statements o... Read More
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added 6 years ago
att and t-mobile deal
Hi, I am a rookie and have some questions in understanding the att and t-mobile deal. 1. purchase price of 39b is comprised of 25b in cash and 14b in att stocks. What would be the balance sheet effect to att? ( my thoughts: att 's cash is going to be reduced by 25b less the increase t... Read More
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added 6 years ago
338h10 Election and pro forma balance sheet
How would you go about modeling a 338h10 election on the balance sheet. Lets say all of the assets on the books were at $100, but you paid $200 for the company with a 338h10 election. How do you know how to allocate the extra 100 across the assets? Or would you create a new asset category that would... Read More
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added 6 years ago
How do you treat NOLs in a M&A deal?
Full Question:
What is the proper treatment of NOL carryforwards in a M&A deal for the acquiring company?
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added 6 years ago
How to u treat of amortization of intangibles and taxation?
Full Question:
What is the correct treatment of amortization of intangibles and taxation in a M&A deal?
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added 6 years ago
Explain the difference between Stock vs Asset deals.
Full Question:
What are the different treatment of Stock vs Asset sales and how does it affect the M&A model?
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added 6 years ago
Explain 338(h)10 elections and the impact on a M&A deal.
Full Question:
Explain 338(h)10 elections and the impact on a M&A deal.
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added 6 years ago
How do you maximize earnings accretion?
Full Question:
What are different ways to structure a transaction in view of maximizing earnings accretion?
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added 6 years ago
How can a Company with little cash do an all-cash deal?
Full Question:
What is the feasibility of all-cash transaction when the Company has little cash on Balance Sheet (determine borrowing capability of Company)?
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added 6 years ago
Treatment of liabilities on the BS (as debt) in an M&A
Full Question:
In determining a total transaction value for an acquisition (Including the stock/cash offer, plus the assumption of long term liabilities and working capital), would all liabilities from the balance sheet be included?
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added 6 years ago
Private Company M&A and LBO adjustments
Full Question: In the Core Merger Modelling Topics module, the models you build concern public listed companies either as acquirors or as targets. What are the effects on a model when the target is a private (not listed company) or a Business Unit that a corporation wants to dispose. For example le... Read More
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added 6 years ago
Employee Stock Purchase Plan
Some companies have employee stock purchase plans where employees can buy stock at a discounted price at certain dates.

Do shares purchased under the employee stock purchase plan increase "basic" share count? Or does it affect the diluted share counts only? Thanks!!
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added 6 years ago
Purchase Price Allocation
Hi there, I have two questions related to Purchase Price Allocation that I believe you may be able to help me with: 1. Do you know why we write-off the entire Existing Deferred Tax Liability (DTL) balance from the Target’s balance sheet during Purchase Price Allocation? 2. Also, in some model... Read More
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added 6 years ago
buyout of equity value?
Hello, I'm trying to understand why in an M&A transaction, we are only acquiring the equity portion of a company? For example, if your target company is worth EV of 100, Equity=500, Debt=700 and Cash =200. Why are we not buying the company at 1000 as opposed to a (usual) premium over equity v... Read More
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added 6 years ago
Merger Modeling & LBO Modeling - FASB 141r
With the new FASB 141r in place, can you let me know how transactions costs (which were earlier added to Purchase Price to compute Goodwill) is to be treated? Do we directly expense it via the IS or hit Retained earnings in BS (just like tender costs)? I know the impact is the same, but just want to... Read More
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added 6 years ago
Goodwill and Minority Interest for less than 100%
Hi there, Let's assume the following example: Co.A has acquired 80% of Co.B for $1million in cash, and has incurred $20,000 in merger related costs. Co.B's net assets (100% book value) are $500,000, and for simplicity purposes let's assume fair value equals book value in this case. Co.B has an exis... Read More
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added 6 years ago
M&A Cash Purchase Question
Often times we hear on the headlines, Company A is buying Company B for $X in CASH. My question is that are they really using the cash on their balance sheet to make this purchase? I think I may have heard somewhere that when companies use "cash" they are really using a bank loan to make... Read More
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added 6 years ago
Building in divestitures/future acquisitions/stock buybacks
Full Question:
How do you build in divestitures / future acquisitions / stock buybacks in a M&A model?
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added 6 years ago
338(h)(10) elections and foreign (non-US) companies
Full Question:
I had a question re the 338(h)(10): is that something that only can be elected if both target and acquirer are US domiciled companies, or can a foreign buyer and/or foreign target do a 338(h)(10), as well?
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added 6 years ago
Leveraged-adjusted exchange ratios in M&A stock deals
Full Question: I would like to know how to correctly estimate exchange ratios in case of all-stock-transactions based on leverage-adjusted EBITDA, TEV, Equity Value, and Earnings contribution analysis. Think an adjustment needs to be made to account for the difference in capital structure of both c... Read More
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added 6 years ago
question about exercisable options in an M&A transaction
For a target, in an M&A transaction, why does the fully diluted shares outstanding include all outstanding in-the-money options and not all exercisable options?
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added 6 years ago