Training provided by Ferdinand Petra (in English or French)
1.Why companies decide to pursure Mergers & Acquisitions (« M&A »)?
- Three bad reasons (CEO human nature, diversification, the P/E game)
- Two good reasons (synergies and growth)
- Classification of synergies and how to value them (DCF, multiples)
- Different types of M&A operations
- Acquisition vs. Merger Of Equals (MoE)
2. Analysis of an acquisition
- What is a merger analysis?
- Key results from such analysis
- Overview of the methodology
- Buil up of financial statement for the acquirer and the target
- Valuation key points and market data needed
- Transaction and financing assumptions
- Source & Uses of funds
- Computation of pro-forma number of shares of the acquirer and computation of the potential patrimonial dilution
- EPS accretion/dilution computation & sensitivities
- Computation of synergies to break-even if need be
- Goodwill computation
- Transaction impact on the acquirer’s balance sheet
- Transaction impact on the credit rating of the acquirer
- Relative P/E rules
- Analysis at various price
- Contribution analysis
- Side-by-side analysis
- Analysis of premium paid vs. present value of the net synergies
- Transaction impact on the acquirer’s ROCE (return on capital employed)
- What financing mix to choose for an M&a operation?
- Indicative method to choose the right financing mix depending on the acquirer’s constraints
- What is the maximum price an acquirer can pay for a target?
3. Advanced modelling of an M&A transaction
- Case where less than 100% of the share capital is acquired in a target company
- Transaction impact on the acquirer’s income statement, including EPS accretion/dilution analysis
- Two methods to compute goodwill
- Transaction impact on the acquirer’s balance sheet
- Transaction impact on the acquirer’s cash flow statement
- Case of the creation of a Joint Venture
- Accounting treatment of a joint venture
- Joint Venture’s governance issues
- Possible exits from a Joint Venture
- Case of the purchase of a minority stake in a target with a path to control through call options
A more advanced financial model can be included in order to compute forward credit ratios and forward EPS accretion/dilution more accurately.