The Art of M&A, Fifth Edition: A Merger, Acquisition, and Buyout Guide
, by Lajoux, Alexandra Reed; Capital Expert Services, LLC
- ISBN: 9781260121780 | 126012178X
- Cover: Hardcover
- Copyright: 8/5/2019
FOREWORD
PREFACE AND ACKNOWLEDGMENTS
Chapter 1 Getting Started in Mergers and Acquisition
Introduction Key Terms About Our Question-and-Answer Format Concluding Comments Exhibit 1-1: Global M&A Transaction Value (1988 vs. 2018) Exhibit 1-2: The M&A Process Notes
Chapter 2 Strategy
Introduction Strategic Planning The Role of M&A in Strategic
Planning Alternatives to M&A SWOT Analysis Disclosure of
Strategy Levels of Strategy Four Types of M&A Strategy The Search
Process Brokers and Finders Bankers Initial Regulatory and Legal
Considerations Concluding Comments Exhibit 2-1: Outline for a Typical
Strategic Plan Exhibit 2-2: M&A in a Strategic Decision Tree Exhibit 2-3:
Range of Structure for Business Collaboration Exhibit 2-4: Sample SWOT
Analysis Questions Exhibit 2-5: Sample Checklist of Assets for Use in
Complement/Supplement Analysis Exhibit 2-6: Sample Checklist of Risks for
Use in Seeking Complementary Acquisitions Exhibit 2-7: Sample Strategy
Statements Exhibit 2-8: What Is Alphabet? Exhibit 2-9: Examples of
Options Embedded in Strategic Acquisitions Exhibit 2-10: The AI Acquisition
Race Exhibit 2-11: Sherwin-WilliamsVertical Strategy Leads to Horizontal
Move Exhibit 2-12: A Guide to M&A Decisions Exhibit 2-13: Opportunity
Prioritization Exhibit 2-14: Premerger Notification Thresholds Under Hart-
Scott-Rodino Appendix 2A: Types of Organizational Structure Appendix 2B: Checklist of Assets Appendix 2C: Horizontal Merger Guidelines Appendix 2D: Tesoro Strikes Gold in California Notes
Chapter 3 Valuation and Modeling
Introduction Valuation Fundamentals Choosing a Valuation Approach Comparable Companies and Transactions Comparable Transactions Analysis DCF Analysis Forecasting Free Cash Flow Calculating the Discount Rate Ascribing a Terminal Value Conducting Sensitivity
Analyses The IVS Framework Concluding Comments Exhibit 3-1: Valuation Approaches Exhibit 3-2: Advantages and Disadvantages of Valuation Multiples Exhibit 3-3: Common Multiples Used in Selected Sectors Exhibit 3-4: Comparable Companies Checklist Exhibit 3-5: Variations in Accounting May Affect Valuation Multiples Exhibit 3-6: Comparable Transactions Checklist Exhibit 3-7: Summary of Precedent Transactions Exhibit 3-8: Overview of the DCF Analysis Process Exhibit 3-9: Advantages of DCF Analysis Exhibit 3-10: Disadvanatges of DCF Analysis Exhibit 3-11: Defining Free Cash FlowTop-down Approach Exhibit 3-12: Calculating Free Cash FlowExample of Top-down Approach Exhibit 3-13: Defining Free Cash FlowBottom-up Approach Exhibit 3-14: Calculating Free Cash FlowExample of Bottom-up Approach Exhibit 3-15: Present Value Formula Exhibit 3-16: WACC Formula Exhibit 3-17: Cost of Common Equity Formula Exhibit 3-18: Chart Showing Size Premiums by Quartile and Decile Exhibit 3-19: Chart Showing Size Premiums by Decile Exhibit 3-20: Exit Multiple Approach to Estimating Terminal Value Exhibit 3-21: Terminal Value Model Assuming Constant Growth Exhibit 3-22: Perpetuity Value Assuming No Growth in Cash Flows Exhibit 3-23: Perpetuity Value Assuming 2 Percent Growth Exhibit 3-24: DCF for a Business Already in Constant Growth Mode Exhibit 3-25: DCF for a No. 2 Pencil Manufacturer Notes
Chapter 4 Financing and Refinancing
Introduction Financing Overview Financing Instruments: Equity vs. Debt vs. Hybrids Financing Sources Highly Leveraged Transactions Minimizing Borrowing Determining Structure in Debt Financing Senior Debt Sale-Leasebacks Pros and Cons of Preserving Debt and Lease Obligations Seller Takeback Financing Warrants Working Capital Debt of the Seller The Bank Book and Commitment Letter Other Principal Issues in Senior Loan Agreements High-Yield (a.k.a. Junk) Bonds Bridge Loans Equity Investment Funds Registration Rights Intercreditor Issues Subordination Issues Intercreditor Agreements Fraudulent Conveyance and Other Litigation Concerns Refinancing Issues Concluding Comments Exhibit 4-1: The LBO of Beatrice and Its Aftermath Exhibit 4-2: Sample Companys Cash Flow and Debt Service Requirements Exhibit 4-3: Sample Covenant Exhibit 4-4: Subordination and Corporate Structure Appendix 4A: Typical Subordination Provisions of Publicly Issued Notes Appendix 4B: Typical Subordination Provisions of Privately Placed Institutional Notes Appendix 4C: Typical Subordination Provisions of Seller Notes Notes
Chapter 5 Structuring Transactions: General, Tax, and Accounting Considerations
Introduction General Considerations Structuring Asset Transactions Structuring Stock Transactions Structuring Merger Transactions General Accounting Considerations Allocating the Price of a Transaction for Accounting Purposes Difference Between Accounting and Tax Treatments Tax Considerations Basic Tax Concepts and Definitions Basic Tax Structure: Taxable Transactions Basic Tax Structure: Tax-Deferred Transactions Choice of Entity Tax Consequences in Structuring Acquisition
Debt Financing Management Buyout Tax Basics Postacquisition Tax Issues Other Tax Issues Concluding Comments Transaction Diagrams Exhibit 5-1: A Guide to US (Federal) and State Codes Exhibit 5-2: Forward Subsidiary Merger (FSM) vs. Reverse Subsidiary Merger (RSM) Exhibit 5-3: Anatomy of a Merger, Acquisition, and Buyout Transaction Exhibit 5-4: Description of Acquisition Allocation from Emcor Group, Inc. Exhibit 5-5: Differences in the Purchase Price Computation Exhibit 5-6: Section 368: Types of Reorganization Exhibit 5-7: Stock Purchase Exhibit 5-8: Asset Purchase Exhibit 5-9: Taxable Forward Merger Exhibit 5-10: Taxable Reverse Merger Exhibit 5-11: Taxable Forward Subsidiary Merger Exhibit 5-12: Tax-Free Forward Merger (A Reorganization) Exhibit 5-13: Tax-Free Forward Triangular Merger Exhibit 5-14: Tax-Free Acquisition of Stock for Voting Stock (B Reorganization) Exhibit 5-15: Acquisition of Property for Voting Stock (C Reorganization) Exhibit 5-16: Acquisition of Property for Voting Stock (D Reorganization) Exhibit 5-17: National Starch Transaction (Section 351 Acquisition) Appendix 5A: Meeting the Reorganization Test: US Examples from the Internal Revenue Service Notes
Chapter 6 The Due Diligence Inquiry
Introduction Getting Started Duration of Due Diligence Due Diligence Levels Securities Laws and Due Diligence Red Flags Relations with the Seller Location of Due Diligence Research Evaluating Assets Litigation Analysis Emerging Legal Issues Due Diligence After Closing Concluding Comments Exhibit 6-1: VDR Menu Screen Shot Exhibit 6-2: A Representative List of Virtual Data Room Providers Exhibit 6-3: Some Typical Plaintiff Claims in M&A Litigation Exhibit 6-4: Venn Diagram Showing Interrelationship of M&A, Due Diligence Standards, and Securities Law Appendix 6A: Sample Confidentiality Agreement Appendix 6B: Due Diligence Checklist Appendix 6C: An Annotated Initial Document and Information Request List Appendix 6D: Sample Index of VDR Documents Notes
Chapter 7 Negotiating the Letter of Intent and Acquisition Agreement
Introduction Letter of Intent The Acquisition Agreement Components of the Agreement Introductory Material Representations and Warranties Covenants Conditions to Closing Indemnity Section Acquisitions from an Affiliated Group Transactions Involving Public Companies Negotiating and Documenting an MBO Employment Agreements Stockholders Agreements Concluding Comments Exhibit 7-1: Seller vs. Buyer Key Goals Exhibit 7-2: The Safeguards-Price Negotiating Matrix Exhibit 7-3: The FASB on Materiality Appendix 7A: Sample Letter of Intent Appendix 7B:Typical Merger Agreement and Commentary Notes
Chapter 8 Closing
Introduction The Basics of Closing Planning the Closing Preclosing Closing Wire Transfers Postclosing Concluding
Comments Appendix 8A: Sample Closing Memorandum (Including a Detailed Schedule of Closing Documents) Notes
Chapter 9 Postmerger Integration and Divestitures
Introduction Basic Concepts of Integration The Postmerger Plan Communicating the Integration Plan Combining Company Names Integrating Cultures Integrating Mission, Policy, Ethics, and Vision Statements Integrating Key Resources, Processes, and Responsibilities Integrating Resources Integrating Processes Integrating Responsibilities Commitments to Employees Postmerger Compensation: A Complex Issue Planning Pay Integration: A Strategic Overview Merging Benefits Plans Some General Postmerger Technology Considerations Divestitures Concluding Comments Exhibit 9-1: Audience Media Communications Matrix Exhibit 9-2: Steps for Naming a Newly Combined Company Exhibit 9-3: A Matrix for Planning Cultural Integration Exhibit 9-4: Acquisition Integration Plan for Human Resources Operation Exhibit 9-5: Three Brand Approaches Exhibit 9-6: Sample Plan for 30-, 60-, and 90+-Day Milestones Exhibit 9-7: Old Line Bank and Bay Bank Merger FAQ (Excerpts) Exhibit 9-8: Marathon Patent Press Release Addressing the Dilution Issue Exhibit 9-9: Sample Matrix for Postmerger Compensation Planning Exhibit 9-10: Valuing the Divestiture Option Exhibit 9-11: The WARN Act: Basic Provisions/Requirements Appendix 9A: Sample Postmerger Press Release Highlighting Strategic Motivation Appendix 9B: Sample Assets Checklist of Resources, Processes, and Responsibilities Appendix 9C: Integration Planning Worksheet Appendix 9D: Integration Timeline from a Midsized Acquirer Appendix 9E: Pairwise Comparison Appendix 9F: Principles for Responsible Business Exhibit 9E-1: Setting Up the Pairwise Comparison Matrix Exhibit 9E-2: Identifying the Useful Part of the Matrix Exhibit 9E-3: Filling the Useful Part of the Matrix Notes
Chapter 10 Special Issues for M&A in Public Companies
Introduction General Considerations Proxy Voting Dodd-Frank, Sarbanes-Oxley, and M&A Duties of Care and Loyalty Director Responsibilities in Responding to Unsolicited Bids M&A Forms Tender Offer Basics Proxy Solicitations Going Private Merger Disclosure Issues Insider Trading Financing the Two-Step Public Transaction with Debt Takeover Defenses State Laws Related to Takeover Defense Concluding Comments Exhibit 10-1: Some Typical Plaintiff Claims in M&A Litigation Exhibit 10-2: Federal Class Actions on M&A 20102018 Exhibit 10-3: Likely Responses to Tender Offers Versus Management Promises Notes
Chapter 11 Workouts, Bankruptcies, and Liquidations
Introduction General Considerations Workouts Bankruptcy State Insolvency Proceedings Investing Opportunities: Structuring the Purchase of a Troubled Company Structuring a Buyout to Minimize Insolvency
Risk Financing Alternatives for Companies with Losses Accounting/Tax Issues for Companies with Losses Liquidation Concluding Comments Diagrams Showing Various Structures for Reorganizations and Workouts of Insolvent Companies Exhibit 11-1: Definitions of Bankruptcy Exhibit 11-2: Average Corporate Debt Recovery Rates Measured by Ultimate Recoveries, 19872018 Exhibit 11-3: Business vs. Computer Bankruptcies Exhibit 11-4: Some Common Consolidation Scenarios Applying ASC 810 Exhibit 11-5: The 10 Largest Bankruptcies in the United States (by Total Assets Pre-Bankruptcy) Exhibit 11-6: Structure Posing No Fraudulent Conveyance Risk Exhibit 11-7: Structure Posing Fraudulent Conveyance Risk via Guarantee Exhibit 11-8: Structure Posing Fraudulent Conveyance Risk via Transfer of Loan Recipient Exhibit 11-9: Structure Posing Fraudulent Conveyance Risk via Simple Merger Exhibit 11-10: Structure Posing Fraudulent Conveyance Risk via Distribution to Target Shareholder Exhibit 11-11: Structure Posing Risk of Fraudulent Conveyance in Multistep Transaction Involving Small Stock Purchase and Large Loan Exhibit 11-12: Structure Posing Fraudulent Conveyance Risk via Transfer of Risk to a Subsidiary Notes
Chapter 12 Global Deals: Structuring for Success
Introduction Nontax Inbound: Issues Regarding Foreign Investment in the United States Nontax Outbound: Acquisitions Involving Assets Located Outside the United States Foreign Exchange Other Global Realities Financing Outbound Transactions International Tax and Disclosure Considerations Tax Considerations in Inbound Acquisitions Tax Considerations in Outbound Acquisitions Concluding Comments Exhibit 12-1: Examples of Eurocurrencies Appendix 12-1:Meeting the Reorganization Test: Foreign Examples from the Internal Revenue Service Notes
Landmark and Recent M&A Legal Cases
Cases Alleging Impropriety in Purchasing (or Disclosing an Offer to Purchase) a Company or Controlling Shares Cases Alleging Impropriety in the Valuation and/or Sale of a Business, Assets, or Controlling Shares Cases Involving M&A Agreements or Other Contracts Cases Alleging Violation of Antitrust Laws Cases Alleging Violations of Health, Safety, and Labor Laws in an M&A Context Cases Dealing with Jurisdiction or Right to Sue Following a Merger Additional Cases
INDEX
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