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Strategic Alternatives: M&A and Buyout Options

Strategic Alternatives: M&A and Buyout Options

Our merger modeling topics introduce critical skills required for understanding how to structure and analyze mergers & acquisitions. After modeling a company's profits / cash flow and valuing the entity, one must decide what to do with the company in the grand scheme of its strategic alternatives, including a merger or acquisition. We introduce the basics of deal structuring and implications on accretion/dilution to building more involved merger models with the complexity of complicated FASB and IFRS accounting rules.

Our LBO modeling courses introduce critical skills required for properly understanding and quantifying capital structure changes from simple share repurchases to the extreme of a leveraged buyout. The techniques and concepts learned in building proper, robust, dynamic and flexible LBO models are highly valued given the relatively difficult nature of setting up, quantifying and articulating the complex relationships and intricacies of the LBO. We clearly convey the complexities involved in understanding the deal structure, sources & uses, refinancing options, credit ratios and the all-important debt sweep.

Courses

Last 10 posts

Valuation Summary - Private Company Differences
Hello. What differences are there in Valuation Summary for a private company vs. a public company (as shown on slide 14)?

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by Charles Z.

added 7 years ago

Marginal Interest Rate (A/D Analysis example)
Where specifically do you get the Marginal Interest Rate (is it savings rate, or treasury?) from, especially in the current low interest rate environment?

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by Tomasz P.

added 8 years ago

NOL cap (due to M&A) affects "ALL FUTURE" NOLs?
In the tax schedule excel worksheet, NOL Used to Shelter Income (cell g13) formula takes the NOL cap per year if there is a change of control forward forever. So it appears that this “cap” affects all future (ending NOL) balances (and not just the acquired/historical target NOL portion)? Also i... Read More

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by Guest 1.

added 10 years ago

Merger Modeling Basics: about the goodwill amortization
Hi, if there is no goodwill amortization, but under certain circumstances, the deal can be considered as asset deal , or can be applied the normal asset depreciation, even there is no amortization on goodwill in this case, I think you still have to incorporate the depreciation into the model, becaus... Read More

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by Guest 1.

added 10 years ago

GAAP requirement to recognize all known liabilities
In the M&A module, when illustrating the different effective tax rates in the Pre-/Post-142/338 election scenarios, it is stated that GAAP requires all companies to recognize all known liabilities as soon as possible, hence why under a 338 election, the reported GAAP effective tax rate is lower ... Read More

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by Guest 1.

added 10 years ago

Tax implications on Cash vs Stock deal
Do Stock deals enjoy a distinct financial advantage over cash deals due to U.S. tax policy (since stock-for-stock deals are not considered taxable events)? If so, what are the tax implications of stock vs. cash (besides the fact that cash clearly has forgone interest income or the interest expense f... Read More

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by Guest 1.

added 10 years ago

Leveraged Buyout Overview: about goodwill
hello I am a little unclear about the accounting treatment. You mentioned the goodwill is the difference between the purchase price and the book value. But from my knowledge:if the M & A is viewed prospectively (restate everything and look forward) by treating the transaction as a purchase. ... Read More

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by Guest 1.

added 10 years ago

Leveraged Buyout Overview: About LBO Overview
Hi there, As usual, I have a couple of questions/validations to make sure I fully understood the concepts here to move on to the Q&D Basic LBO Model course: (1). Is goodwill created only when when we purchase 100% of the target company? What's the relationship between GW creation and the %... Hi there, As usual, I have a couple of questions/validations to make sure I fully understood the concepts here to move on to the Q&D Basic LBO Model course: (1). Is goodwill created only when when we purchase 100% of the target company? What's the relationship between GW creation and the %age bought? And if less than 100% creates GW, do I account for it proportionally? (2). When explaining the Purchase Accounting you said that the target Balance Sheet is blown out. But what if you are not purchasing 100% of the company? Do you still blown it out or do something different in this case? (3). Rollover: let's say that there is a rollover of 3%. In this case, Should I consider it a purchase accounting (once the acquirer bought more than 94.9%)? But I'm confused here because the slide says Purchase accounting occurs only when you buy 100% of the target. To be a purchase accounting do you have to buy 100%? Could please clarify all that for me? (4). If you have a rollover of 4%, let's say. Should you adjust your purchase price (in the uses) and the equity funding (in sources) to reflect that you're not buying the whole company? (5). On the slide that you talk about the IRR, the EBIIDA used to calculate the Exit Enterprise Value is the one porjected as a Status Quo or the one which incorporates any efficiency/cost reductions achieved by the new management (PE firm)? (6). In this LBO overview, why didn't you mention any of the deal structures discussions that we had in the M&A deal structuring module (in relation to whether or not it is an asset deal, stock deal or to treat it as a 338(h)10 election)? Does it matter here (for LBO) or not? (7). Can we have an LBO in a privately held company? If yes, what are the factors that can make it more difficult than doing an LBO w/ a public company? Actually, is it usual to have LBO in private companies? (8). Why the Pro Forma Total Debt / EBITDA ratio (6.38x - 2004PF) in our credit statistics table is above the 6.0x ratio assumed in the debt capacity? I appreciate your assistance on each of these questions as usual. Thanks again for all your support. Regards Read More

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by Guest 1.

added 10 years ago

Cost of Equity and Debt
How does the cost of equity of the target affect an LBO or investment decision? This is a private company and I know that publicly traded entities with the same risk characteristics have a cost of equity of 8.5%. I am wondering if it affects anything other than the initial standalone valuation used ... Read More

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by Guest 1.

added 10 years ago

Quick & Dirty Basic LBO Model: Modeling Private Cos
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 let's as... Read More

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by Guest 1.

added 10 years ago