Indholdsfortegnelse
M&As involve two different actors:

The main objectives of M&A transactions are:

What about the future of the target (or its assets) after the transaction? It depends on how the deal is shaped:

How is the bidder going to pay the seller(s)?

Financing could be of two different types:

The status of the Target could be:

To calculate the Acquisition Premium, two main methods can be applied:

1. Give a definition of M&A?

2. Why would a company want to acquire another company?

3. Why would an acquisition be dilutive?

4. Is there a rule of thumb for calculating whether an acquisition will be accretive or dilutive?

5. A company with a higher P/E acquires one with a lower P/E; is this accretive or dilutive?

6. What is the rule of thumb for assessing whether an M&A deal will be accretive or dilutive?

7. Why do Goodwill/Intangibles get created in an acquisition?

8. What are synergies, and can you provide a few examples?

9. How are synergies used in merger models?

10. Are revenue or cost synergies more important?

11. All else being equal, which method would a company prefer to use when acquiring another company; cash, stock, or debt?

12. How do you determine the Acquisition Price for the target company in an acquisition?

13. A Buyer pays $100 million for the seller in an all-stock deal, but one day later the market decides it is only worth $50 million. What happens?

14. Why do most mergers and acquisitions fail?

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Uddrag
M&A can be considered any process where the ultimate beneficial ownership, and potentially the control of a firm, are transferred from one subject (or group of subjects) to another.

M&As involve two different actors:
• the acquiring company (that acquires the control or a stake in the target): referred to as the bidder or buyer or acquirer

• the target company (that is to be bought): seller/target

The main objectives of M&A transactions are:
• Strategic Objectives: Bidder is a corporate which executes the M&A transaction to accomplish its own corporate objectives

• Financial Objectives: Bidder is a financial investor (PEs, HFs, the management, etc.) looking for a targeted financial return

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To calculate the Acquisition Premium, two main methods can be applied:

• Estimate the amount of value that can be created by restructuring the Target company (Premium for Control) and then sum the estimated amount of the possible future synergies that the two companies can exploit (Synergies) and discount this value at time 0

• Use Transaction Multiples. In this case, the acquisition premium is calculated as the difference between Transaction and Trading Multiples

The calculation of the Acquisition Premium is fundamental for the Buyer. The sum of the stand-alone value and the estimated premium indicates the maximum price that the Buyer is willing to pay for the Target.

If the price paid is too high, the bidder is paying this extra value with a portion of its own stand-alone value, or in other words, the company is destroying value for its own shareholders.

Therefore, the first reaction of the market to an M&A announcement is a drop in the acquirer’s price (if the acquisition price is perceived to be too high). The market needs time to factor in possible synergies.

An important tool that tells us something about the convenience of the transaction is the accretive/dilutive analysis.

The critical indicator we should look at is Earnings Per Share (EPS) post-merger. If this ratio is greater than the acquirer’s EPS, it means that the deal has been accretive (at least from an accounting perspective).

To the contrary, if the post-merger EPS is lower, then the deal has been dilutive, and the acquirer has destroyed value.

The calculation of the post-merger EPS is different depending on how the transaction has been paid, in cash or shares.