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Package 5: Merger Modeli...
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Simple Merger Model
Questions/Discussions
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(1). I'm confused with the GW calculation. In our "Accretion Dilution Model" we did it one way (P. price - book value). While in this module, we did: P. price - book value + transaction fees. Which one should I use? And why did you guys use it differently in each module?
(2). Why did we completely disconsider the target Book value when calculating the Pro Forma Shareholder's Equity? Does it have to do with the way we are funding the deal (debt vs. equity) or not?
(3). When we are linking the Enterprise Value with the %age of cash / equity in the deal structure, we are assuming that the target debt is being refinanced 1/2 by a new debt and retired by 1/2 equity raised. But how it happens if in the previous post in this forum, WST answered that you cannot pay your transaction fees in equity, as it is a cash coming out. So, the same concept applies here: considering that %age relates to the physical currency you pay, how can one retire the debt with shares (whereas you should be doing that with cash - in physical currency)?
(4). That percentage table (of %cash / %equity) relates to how you pay the target (physically speaking) or how you fund the transaction as a whole (raising debt and equity in the markets, and them using the proceeds to pay the purchase price, refinance target debt and pay for transaction fees)?
(5). Shouldn't we simply link the %cash / %equity to the purchase price (them assuming it is the way I'm paying the target in physical terms) and them include another line below "Stock issued" saying "Refinanced Target debt" in which we will assume we drawdown a new debt, pay off target's existing debt? Meaning that we refinance debt entirely w/ another debt (of course w/ better terms & rates), and not splitting the refinanced debt in equity and debt.
I appreciate your help in each of those questions.
Rgds. Read More