Ability to Pay Analysis
- the Net Income of $10m is the Target company Net Income? Not sure here since Change in NI assumes NIL accretion/dilution at break even PE, right? If so then it would be NI of Target & Acquiror since accretion/dilution is calculated on the new NI? Confused here - If it is Target NI then why is ... - the Net Income of $10m is the Target company Net Income? Not sure here since Change in NI assumes NIL accretion/dilution at break even PE, right? If so then it would be NI of Target & Acquiror since accretion/dilution is calculated on the new NI? Confused here
- If it is Target NI then why is the Target Company getting the benefit of synergies in this analysis? Synergies are to the combined entity
- Total Debt is the Target Company debt?

So the point of the analysis is to show potential Target Enterprise Value which will generate NIL accretion/dilution in a all cash scenario assuming different cost of financing of the all cash bid? Then clearly you can see what is the target PE ratio to see if an all cash offer makes sense? Read More

Distressed Credit Overview - Valuation questions
1. Slide 29 a. Where do bank vs bonds fall in this cap structure diagram (unclear) b. Senior debt i. Even though it has a 1st or 2nd lien on assets, is it always considered “unsecured” and not “secured”? why – i... 1. Slide 29
a. Where do bank vs bonds fall in this cap structure diagram (unclear)
b. Senior debt
i. Even though it has a 1st or 2nd lien on assets, is it always considered “unsecured” and not “secured”? why – is it because Senior Secured Debt is typically
placed in SPV vehicles?
ii. Does this category include bank debt only (eg, 1st and 2nd lien term loans, etc), not including bonds

2. Slide 34
a. Under Distressed Value boxes, if TEV = 300, shouldn’t the entire 300 go to pay the Senior Debt outstanding since it has seniority over Sub Debt (shouldn’t Senior Debt
be paid in full before moving on to the next claimant)? Why is the 300 TEV split 250 to Senior Debt and 50 to Sub debt?

3. Slide 36
a. try to tie to slide 29 – please help me place the 5 capital structure security categories from slide 29 into slide 36 buckets (where does it fall under Secured Bank
Claims, Secured Asset Financing, Bondholders, etc)
b. Why is Secured Bank Claims senior to “business operations” like Secured Asset Financing and Trade Claims, but Bondholders and Equity subordinate to these
“business operations” Read More

Re: Merger modeling - Purchase price allocation
And what was the reasoning for you guys to "choose the base of the %ages to be applied to the excess..."? That's what I am interested to understand... the logic you used here?
Thanks.

Footing my accretion/dilution model with reported numbers
Full Question:
Why is it that in attempting to replicate a merger analysis of an announced deal, an accretion/dilution merger model does not foot to companies' presentation materials even after including all relevant data items?

Re: Merger modeling - Merger BS
Hi, a quick follow up question here: my point is: if we are not subtracting the intangibles in the calculation of "Tangible book value" (it doesn't matter if it is $0 or not), we are actually calculating incremental Intangibles for the deal ONLY, so our formula on the BS (cell G17) should... Hi, a quick follow up question here:
my point is: if we are not subtracting the intangibles in the calculation of "Tangible book value" (it doesn't matter if it is $0 or not), we are actually calculating incremental Intangibles for the deal ONLY, so our formula on the BS (cell G17) should not say "subtract any target's existing Intangibles", did you get my point?
As far as I know, we only subtract any existing Intangibles or GW if we are calculating a "Post-transaction" / Cumulative balance, as we did in the LBO class...
But since here (Complex M&A) we are not deducting any intangibles in the tangible book value formula, the BS pro forma adj. formula should be only a link to the Intagibles allocation in the Merger Summary (and without that subtraction).
Does that make sense?

P.S: I read the previous topics but none was sufficient to clear this doubt... Read More