PAPERWORK AS CHECKLISTS & CHECKS

There are many factors to be considered.

• Costs
• • Restructuring Charges - early debt payment
  • Equity Issuance Fees - Investsment bank fees for issuance of Shares
  • Debt Issuance Fees - Fees to issue debt
  • Accounting Charges
  • Legal Charges
  • Investment Bank  (Confidential Information Memorandum)
  1. Executive Summary
  • Key Business Products and Service Offerings of the Company
  • Financial Overview – Revenue, EBITDA Margins, Cash Flow, profitability
  • The Nature of the Transaction
  • Investment Rational
• (continued) ….
• 1. Investment Thesis
  2. Overview of the Market
  3. Overview of the Target Company
  4. Products and Services
  5. Revenue Profile
  6. Employee Profile
  7. Customer Profile
  8. Financials – Historical and Projections
  9. Management Structure
  • Professional Services
  • Other
• Transaction close date 
• antitrust laws
• securities regulations
• corporate law
• rival bidders
• taxes
• Accounting issues
• contacts
• market conditions
• forms of Financing
• specific negotiation points in the M&A deal itself
• Term Sheet (used for raising money)
• Non-Disclosure Agreement
• Memorandum of Understanding
• Memorandum of Information
• Letter of Intent (LOI)

 

 

DEAL ASSUMPTIONS & ANALYSIS

 

·        TRANSACTION INPUTS

 

o   Company Acquirer

 

o   Company Target

 

o   Target Share Price

 

o   Transaction Close Date

 

o   Financial Reporting Units

 

o   Currency

 

o   Re-structuring Charges

 

o   Equity Issuance Fees

 

o   Debt Issuance Fees

 

o   Other Closing Costs

 

o   Replace Target Debt

 

o   REplace Aquirer Debt

 

o   Aquirer Fully-Diluted Shares O/S

 

o   Target Fully-Diluted Shares O/S

 

o   Shares Issued in Deal

 

o   Pro-Forma Shares O/S

 

o   Share Issuance Discount

 

o   Share Issuance Price

 

 

 

·        SCENARIOS

 

o   Revenue Growth (% Change)

 

o   Cost of Goods Sold (% of Revenue)

 

o   Salaries & Benefits (% of Revenue)

 

o   Rent & Overhead (€000’s)

 

o   Depreciation & Amortization (% of PP&E)

 

o   Interest (% of Debt)

 

o   Tax Rate (% of Earnings Before Tax)

 

o   A/R - Days

 

o   Inventory Days

 

o   A/P - Days

 

o   Capital Expenditures (€000’s)

 

o   Debt Issuance (Repayment €000’s)

 

o   Equity Issued (Repaid €000’s)

 

o   Payment of Dividends

 

 

 

·        PURCHASE PRICE

 

o   Target Share Price  * (1+Takeover Premium) = Offer Price

 

o   Acquirer Share Price

 

o   Acquirer Share Ratio

 

o   Target Shares O/S * Offer Price = Purchase Price

 

o   Purchase Price + Target Debt – Target Cash = Enterprise Value

 

 

·        SYNERGIES

 

o   Year 1

 

o   Year2

 

o   Year 3

 

o   Etc.

 

 

·        FINANCING

 

o   Debt Tranche

 

§  Senior A

 

§  Senior B

 

§  Subordinated Debt

 

o   Interest Rate

 

§  Senior A

 

§  Senior B

 

§  Subordinated Debt

 

 

 

·        TRANSACTION

 

o   Takeover Premium

 

o   Cash Consideration

 

 

·        PURCHASE PRICE ALLOCATION

 

o   Total Purchase Price

 

o   Less Net Book Value of Assets

 

o   Excess Purchase Price

 

o   Write-off Existing Goodwill

 

o   Fair Value Adjustments

 

o   Excess Purchase Price After Adjustments

 

o   Goodwill

 

 

 

·        Goodwill and Purchase Price Allocations

 

o   Inventory & Other Current Assets

 

o   Target PP&E

 

o   Identifiable Tangible Assets

 

= Net Identifiable Assets

 

 

 

·        *Sources & Uses of Cash

 

o   Cash Consideration*

 

o   Stock Consideration*

 

o   Target Debt Replace*

 

o   Acquirer Debt Replace*

 

o   Debt Financing Fees*

 

o   Equity Financing Feeds*

 

o   Other Closing Costs*

 

= *Total Uses

 

o   Total Uses = Cash - Stock Issued + Debt Issued

 

 

 

SUPPORTING SCHEDULES

 

·        Working capital

 

·        Amortization

 

·        Senior Debt A

 

·        Senior Debt B

 

·        Sub-ordinated Debt

 

·        Target Debt

 

·        Acquirer Debt

 

·        Total Debt

 

·        Interest Rates

 

·        Interest Expense

 

 

DCF

 

·        Discounted Cash Flow

 

·        Unlevered FCF

 

·        Transaction FCF

 

·        IFF FCF

 

·        Intrinsic Value

 

·        Market Value

 

·        Rate of Return

 

·        Equity Value / Share

 

 

 

MERGER INTEGRATION

 

·        Revenue (A,T,S)

 

·        COGS (A,T,S)

 

·        Marketing, Advertising, Promotion (A,T,S)

 

·        G&A (A,T,S)

 

 

COMBINED INCOME STATEMENT

 

10-Step COMBINED BALANCE SHEET

 

1.      Acquirer Balance on Target Close Date

 

2.      Target Balance on Target Close Date

 

3.      Adjustments Fair Market Value

 

4.      = Target Pro-forma Balance Sheet

 

5.      Purchase Transactions

 

a.      Less Cash Paid for Consideration

 

b.      Add Goodwill

 

c.      Less Target Equity

 

d.      Less Target Retained Earnings

 

6.      Financing (Debt + Equity)

 

a.      Less Equity Paid for Consideration

 

b.      Plus Cash Received for

 

c.      Senior Debt A - i

 

d.      Senior Debt B - ii

 

e.      Subordinated Debt - iii

 

f.       Plus Debt Contracted for

 

g.      Senior Debt A - i

 

h.      Senior Debt B - ii

 

i.       Subordinated Debt - iii

 

7.      Financing Fees

 

8.      Financing Re-Finance Debt

 

9.      =Total Adjustments

 

10.   Consolidated Balance Sheet

 

 

 

 

 

ACCRETION / DILUTION ANALYSIS

 

ACCRETION / DILUTION ANALYSIS - Earnings Per Share

 

§  Acquirer Net Earnings

 

§  Target Net Earnings

 

§  Pro-Forma Net Earnings

 

 

 

§  Acquirer Shares O/S

 

§  Target Shares O/S

 

§  Pro-Forma Shares O/S

 

 

 

§  Acquirer EPS

 

§  Target EPS

 

§  Pro-Forma EPS

 

 

 

PCT -   ACCRETION / DILUTION ANALYSIS – Cash Flow Per Share

 

 

 

§  Acquirer Cash Flow

 

§  Target Cash Flow

 

§  Pro-Forma Cash Flow

 

 

 

§  Acquirer Shares O/S

 

§  Target Shares O/S

 

§  Pro-Forma Shares O/S

 

 

 

§  Acquirer CF per Share

 

§  Target CF per Share

 

§  Pro-Forma CF per Share

 

PCT -  ACCRETION / DILUTION ANALYSIS - Cash Flow Per Share

 

 

 

SUMMARY & SENSITIVITY

 

 

 

       I.          Share Price Impact

 

a.      Target Share Price

 

b.      Acquirer

 

c.      Acquirer Price Per Share

 

d.      Pro-forma Price Per Share

 

e.      Change in Acquirer NPV per share

 

 

 

      II.          Capital Structure

 

a.      Equity

 

b.      Cash

 

c.      Debt

 

d.      = Enterprise Value

 

e.      Shares O/S

 

f.       Equity Value / Per Share

 

 

 

    III.          Implied Share Price Change

 

                                                    i.     Takeover Premium (X)

 

                                                   ii.     Revenue Enhancement (Y)

 

 

 

    IV.          EPS Accretion (Dilution)

 

                                                    i.     Takeover Premium (X)

 

                                                   ii.     Target Share Price  (Y)

 

 

 

 

 

Due Dilligence Report

 

-        Corporate Records

 

-        Financial Information

 

-        Indebtedness

 

-        Employement & Labor

 

-        Real Estate

 

-        Agreements

 

-        Supplier and Customer Information

 

-        Legal