Mergers & Acquisition Mastery Program - CPE Credits: 35
In-Person: NY Wall Street
Campus
Duration : 1 week (Full-time)
Teaching Mode : Live Instructor Classes
Virtual Live
Duration : 3 weeks
Teaching Mode : Live Virtual Sessions
Self-Paced Online
Duration : 40 Hours (Learn at your pace)
Teaching Mode : Recorded Sessions +
Q&A with Faculty
Finding the Deal; Acquisition Process
Accounting for Mergers & Acquisitions
Companies facing financial distress but with good prospects &
limited capital.
Special Topics IRC Section 338(G) & 338(H)(10)
Transactions
These provisions offer unique tax advantages & structuring flexibility for specific M&A scenarios. Involves Target Company, Seller Company, Buyer Company.
§338(g) election available when Buyer acquires 80% of publicly-held Target in a taxable transaction.
§338(h)(10) election available when parent sells a consolidated subsidiary (80% for tax purposes) in a taxable transaction.
Stock Price D/k - g (D = dividends, k = risk/rate of return, g = growth rate).
Enterprise Value (Number of common shares * purchase price per share) + Debt Outstanding - Cash & Investments.
EBITDA Earnings Before Interest, Taxes, Depreciation, & Amortization.
EPS Accretion/Dilution Buyer’s EPS increases (accretion)/decreases (dilution) after an acquisition, respectively
Stock Price D/k - g (D = dividends, k = risk/rate of return, g = growth rate).
Enterprise Value (Number of common shares * purchase price per share) + Debt Outstanding - Cash & Investments.
EBITDA Earnings Before Interest, Taxes, Depreciation, & Amortization.
EPS Accretion/Dilution Buyer’s EPS increases (accretion)/decreases (dilution) after an acquisition, respectively
LOI (Letter of Intent): Mutually signed document between buyer and seller outlining merger agreement
Price of Stock: D/k-g (D=dividends, k=risk/rate of return, g=growth rate)
Enterprise Value: (Number of common shares * purchase price per share) + Debt Outstanding - Cash and Investments
Debt to Equity Ratio, Assesses financial leverage: Total Debt / Total Equity
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization
Capital Asset Pricing Model (CAPM), (Determines cost of equity): K = R(f) + b[R(m) - R(f)], where K is the cost of equity, R(f) is the risk-free rate of interest, b is the sensitivity (beta), and R(m) is the expected return of the market.
Weighted Average Cost of Capital (WACC): Weight of Debt * After tax cost of debt + Weight of Equity * Cost of Equity
Investments = Working capital + Fixed Capital + Other Operating Assets - Non-interest bearing current liabilities
Earnings Per Share (EPS) Accretion/Dilution: (Post-Merger EPS - Pre-Merger EPS) / Pre-Merger EPS
Net Operating Profit After Taxes (NOPAT): Earnings Before Interest * (1 - Tax Rate)
Free Cash Flow (FCF) = NOPAT + Depreciation & Amortization - Change in Net Investment
Market Value of Equity = Total Market Value –Market Value of Debt
Return on Investment (ROI): NOPAT/Investment
Value is created when ROI > Cost of Capital
Total value (Equity + Debt) = Present Value of Free Cash Flow (FCF)
First-in, First-out (FIFO) Method: Assumes older inventory is used or sold before newer items.
Last-in, First-out (LIFO) Method: Assumes newer inventory is used or sold before older items.
© 2023 NYIF.com. All Right Reserved. NYIF is licensed by the New York State Education Department (NYSED) and registered with the National Association of State Boards of Accountancy (NASBA).
1. Synergies Cost savings or additional revenue that increases EBITDA & EPS.
2. Strategic Deals Combining entities to enhance growth or reduce risk in cash flows; leading to larger EPS, higher valuation multiples, & increased P/E ratios.
3. Financial Arbitrage Private equity firms buy companies & take them public later at a higher value for profit.
Increases
Value
Pricing the Deal: Valuation Approaches
Discounted Cash Flow (DCF) Incorporating free cash flow & terminal value.
Comparable Company Analysis (CCA) Assessing public firms & historical acquisitions.
Leveraged Buyout Approach (LBO) Valuation Optimizing acquisition financing & cash flow dynamics.
Scenarios)
Increased market power
Elimination of competition
Accelerated growth
Cost reduction
Acquisition of management/technical expertise
Quicker market entry compared to startups
Avoidance of product development risk
Using Free Cash Flow for Evaluating Deals
Measuring synergies & assessing their probability can be challenging.
Integration Costs include expenses related to transitioning processes, time, money, severances, stay bonuses, legal & advisory costs.
Reasons to Sell Retirement, capital requirements, strategic partnerships, addressing operational or debt issues.
Optimal Time to Sell When not compelled (avoiding exploitation), during high market confidence, ideally a the peak of the business cycle.
Structuring the Deal Key Documents
Confidentiality Agreement (CA/NDA) Safeguarding Confidential Information.
Term Sheet (TS) Outlining Deal Framework.
Letter of Intent (LOI) Preliminary Agreement for Merger.
Cash Flow
Free Cash Flow (FCF) offers accurate valuation, stronger correlation with stock prices than accounting.
Measures of Cash Flow: EBITDA, cash flow from operations, total cash flow.
Enhancing FCF involves improving NOPAT, prioritizing investments with ROI > Cost of Capital, & reducing investments with ROI < Cost of Capital.
Pre-Deal Phase Establish acquisition search parameters,
search for suitable targets.
Deal-Making Phase Initiate contact, negotiate with potential
targets, conduct due diligence (Financial, Operations, Legal,
Culture, IT, Environment).
Post-Deal Phase Commence transition, prepare PR campaign
to support stock price.
Types of Mergers + Examples:
Facebook & WhatsApp
Acquiring a competitor or a business with primarily the same products/services (70% of mergers)
• Time Warner & AOL
Acquiring a business different from the acquirer’s current operations
FedEx & Mopac (MultiPack)
Acquiring a supplier or customer
• Blackstone Group & Hilton Hotels
An investment fund acquiring a business, often funded by high debt
"In mature M&A markets, big 'concept' deals decrease. Buyers turn to target competitors & 'product line extension' for horizontal consolidation amid rising competition."
Acquisitions are less risky than building from scratch.
Acquisitions can partially finance themselves.
Steps to record acquired balance sheet: Eliminate existing goodwill, reduce equity to common and preferred stock, minority interest, adjust assets & liabilities to fair value, record unrecognized intangible assets, restructuring charges, recalculate deferred tax assets & liabilities.
• Innovative startups with potential.
• Businesses exploring new markets.
• Companies with untapped assets.
Established br&s with growth potential.
Service providers with strong bases.
Manufacturers with advanced techniques.
Potential
Local businesses with regional influence.
Real estate ventures with hidden value.
Specialized service providers in various fields.
of Consolidation
Generally applied to investments exceeding 20% but less than 50%.
Investor’s perspective: Record investment in Stock at Cost, adjust asset carrying value for investor's share of investee's earnings or losses after acquisition.
Financial statements, Income Statement, & Balance Sheet.
Consolidation
Cost Method Applies to investments in debt securities, equity investments where Equity Method doesn't apply.
Four Categories Held to:
- Maturity (Debt Securities),
- Available for Sale (Debt & Equity Securities)
- Trading (Public Companies),
- Equity Investments
(Non-Public Companies).
Integration of Acquisitions Best Practices
Critical for enhancing shareholder value.
Begins with a robust valuation model.
Planning starts during due diligence, involves setting synergy goals, managed as a complex project led by senior management.
Dedicated teams, top management involvement, post-mortems two years after acquisition.
Effective
Integration Robust
Post-Merger Plan,
Long-Term
Optimizing
Efficiency
Strategic Drive
for Cost
Optimization.
Untapped Opportunities
Strategically Recognizing
Untapped Potential.
ESG
Practices
Sustainable
Operations
& Regulatory
Compliance.
High EI Negotiation
Friendly Approach,
Optimal Terms,
Balanced
Compromises
Mergers & Acquisition Mastery Program - CPE Credits: 35
In-Person: NY Wall Street
Campus
Duration : 1 week (Full-time)
Teaching Mode : Live Instructor Classes
Virtual Live
Duration : 3 weeks
Teaching Mode : Live Virtual Sessions
Self-Paced Online
Duration : 40 Hours (Learn at your pace)
Teaching Mode : Recorded Sessions +
Q&A with Faculty
Types of Mergers + Examples:
Facebook & WhatsApp
Acquiring a competitor or a business with primarily the same products/services (70% of mergers)
• Time Warner & AOL
Acquiring a business different from the acquirer’s current operations
FedEx & Mopac (MultiPack)
Acquiring a supplier or customer
• Blackstone Group & Hilton Hotels
An investment fund acquiring a business, often funded by high debt
"In mature M&A markets, big 'concept' deals decrease. Buyers turn to target competitors & 'product line extension' for horizontal consolidation amid rising competition."
Acquisitions are less risky than building from scratch.
Acquisitions can partially finance themselves.
Scenarios)
Increased market power
Elimination of competition
Accelerated growth
Cost reduction
Acquisition of management/technical expertise
Quicker market entry compared to startups
Avoidance of product development risk
Increases
Value
Synergies Cost savings or additional revenue that increases EBITDA & EPS.
Strategic Deals Combining entities to enhance growth or reduce risk in cash flows; leading to larger EPS, higher valuation multiples, & increased P/E ratios.
Financial Arbitrage Private equity firms buy companies & take them public later at a higher value for profit.
Stock Price D/k - g (D = dividends, k = risk/rate of return, g = growth rate).
Enterprise Value (Number of common shares * purchase price per share) + Debt Outstanding - Cash & Investments.
EBITDA Earnings Before Interest, Taxes, Depreciation, & Amortization.
EPS Accretion/Dilution Buyer’s EPS increases (accretion)/decreases (dilution) after an acquisition, respectively
Finding the Deal; Acquisition Process
Companies facing financial distress but with good prospects &
limited capital.
• Innovative startups with potential.
• Businesses exploring new markets.
• Companies with untapped assets.
Established br&s with growth potential.
Service providers with strong bases.
Manufacturers with advanced techniques.
Potential
Local businesses with regional influence.
Real estate ventures with hidden value.
Specialized service providers in various fields.
Pre-Deal Phase Establish acquisition search parameters,
search for suitable targets.
Deal-Making Phase Initiate contact, negotiate with potential
targets, conduct due diligence (Financial, Operations, Legal,
Culture, IT, Environment).
Post-Deal Phase Commence transition, prepare PR campaign
to support stock price.
Effective
Integration Robust
Post-Merger Plan,
Long-Term
Optimizing
Efficiency
Strategic Drive
for Cost
Optimization.
Untapped Opportunities
Strategically Recognizing
Untapped Potential.
ESG
Practices
Sustainable
Operations
& Regulatory
Compliance.
High EI Negotiation
Friendly Approach,
Optimal Terms,
Balanced
Compromises
Pricing the Deal: Valuation Approaches
Discounted Cash Flow (DCF) Incorporating free cash flow & terminal value.
Comparable Company Analysis (CCA) Assessing public firms & historical acquisitions.
Leveraged Buyout Approach (LBO) Valuation Optimizing acquisition financing & cash flow dynamics.
Reasons to Sell Retirement, capital requirements, strategic partnerships, addressing operational or debt issues.
Optimal Time to Sell When not compelled (avoiding exploitation), during high market confidence, ideally a the peak of the business cycle.
Structuring the Deal Key Documents
Confidentiality Agreement (CA/NDA) Safeguarding Confidential Information.
Term Sheet (TS) Outlining Deal Framework.
Letter of Intent (LOI) Preliminary Agreement for Merger.
Cash Flow
Free Cash Flow (FCF) offers accurate valuation, stronger correlation with stock prices than accounting.
Measures of Cash Flow: EBITDA, cash flow from operations, total cash flow.
Enhancing FCF involves improving NOPAT, prioritizing investments with ROI > Cost of Capital, & reducing investments with ROI < Cost of Capital.
Using Free Cash Flow for Evaluating Deals
Measuring synergies & assessing their probability can be challenging.
Integration Costs include expenses related to transitioning processes, time, money, severances, stay bonuses, legal & advisory costs.
Integration of Acquisitions Best Practices
Critical for enhancing shareholder value.
Begins with a robust valuation model.
Planning starts during due diligence, involves setting synergy goals, managed as a complex project led by senior management.
Dedicated teams, top management involvement, post-mortems two years after acquisition.
Accounting for Mergers & Acquisitions
of Consolidation
Generally applied to investments exceeding 20% but less than 50%.
Investor’s perspective: Record investment in Stock at Cost, adjust asset carrying value for investor's share of investee's earnings or losses after acquisition.
Financial statements, Income Statement, & Balance Sheet.
Consolidation
Cost Method Applies to investments in debt securities, equity investments where Equity Method doesn't apply.
Four Categories Held to:
- Maturity (Debt Securities),
- Available for Sale (Debt & Equity Securities)
- Trading (Public Companies),
- Equity Investments
(Non-Public Companies).
Steps to record acquired balance sheet: Eliminate existing goodwill, reduce equity to common and preferred stock, minority interest, adjust assets & liabilities to fair value, record unrecognized intangible assets, restructuring charges, recalculate deferred tax assets & liabilities.
Special Topics IRC Section 338(G) & 338(H)(10)
Transactions
These provisions offer unique tax advantages & structuring flexibility for specific M&A scenarios. Involves Target Company, Seller Company, Buyer Company.
§338(g) election available when Buyer acquires 80% of publicly-held Target in a taxable transaction.
§338(h)(10) election available when parent sells a consolidated subsidiary (80% for tax purposes) in a taxable transaction.
LOI (Letter of Intent): Mutually signed document between buyer and seller outlining merger agreement
Price of Stock: D/k-g (D=dividends, k=risk/rate of return, g=growth rate)
Enterprise Value: (Number of common shares * purchase price per share) + Debt Outstanding - Cash and Investments
Debt to Equity Ratio, Assesses financial leverage: Total Debt / Total Equity
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization
Capital Asset Pricing Model (CAPM), (Determines cost of equity): K = R(f) + b[R(m) - R(f)], where K is the cost of equity, R(f) is the risk-free rate of interest, b is the sensitivity (beta), and R(m) is the expected return of the market.
Weighted Average Cost of Capital (WACC): Weight of Debt * After tax cost of debt + Weight of Equity * Cost of Equity
Investments = Working capital + Fixed Capital + Other Operating Assets - Non-interest bearing current liabilities
Earnings Per Share (EPS) Accretion/Dilution: (Post-Merger EPS - Pre-Merger EPS) / Pre-Merger EPS
Net Operating Profit After Taxes (NOPAT): Earnings Before Interest * (1 - Tax Rate)
Free Cash Flow (FCF) = NOPAT + Depreciation & Amortization - Change in Net Investment
Market Value of Equity = Total Market Value –Market Value of Debt
Return on Investment (ROI): NOPAT/Investment
Value is created when ROI > Cost of Capital
Total value (Equity + Debt) = Present Value of Free Cash Flow (FCF)
First-in, First-out (FIFO) Method: Assumes older inventory is used or sold before newer items.
Last-in, First-out (LIFO) Method: Assumes newer inventory is used or sold before older items.
© 2023 NYIF.com. All Right Reserved. NYIF is licensed by the New York State Education Department (NYSED) and registered with the National Association of State Boards of Accountancy (NASBA).
Mergers & Acquisition Mastery Program - CPE Credits: 35
In-Person: NY Wall Street
Campus
Duration : 1 week (Full-time)
Teaching Mode : Live Instructor Classes
Virtual Live
Duration : 3 weeks
Teaching Mode : Live Virtual Sessions
Self-Paced Online
Duration : 40 Hours (Learn at your pace)
Teaching Mode : Recorded Sessions +
Q&A with Faculty
Types of Mergers + Examples:
Facebook & WhatsApp
Acquiring a competitor or a business with primarily the same products/services (70% of mergers)
• Time Warner & AOL
Acquiring a business different from the acquirer’s current operations
FedEx & Mopac (MultiPack)
Acquiring a supplier or customer
• Blackstone Group & Hilton Hotels
An investment fund acquiring a business, often funded by high debt
"In mature M&A markets, big 'concept' deals decrease. Buyers turn to target competitors & 'product line extension' for horizontal consolidation amid rising competition."
Acquisitions are less risky than building from scratch.
Acquisitions can partially finance themselves.
Scenarios)
Increased market power
Elimination of competition
Accelerated growth
Cost reduction
Acquisition of management/technical expertise
Quicker market entry compared to startups
Avoidance of product development risk
Synergies Cost savings or additional revenue that increases EBITDA & EPS.
Strategic Deals Combining entities to enhance growth or reduce risk in cash flows; leading to larger EPS, higher valuation multiples, & increased P/E ratios.
Financial Arbitrage Private equity firms buy companies & take them public later at a higher value for profit.
Increases
Value
Stock Price D/k - g (D = dividends, k = risk/rate of return, g = growth rate).
Enterprise Value (Number of common shares * purchase price per share) + Debt Outstanding - Cash & Investments.
EBITDA Earnings Before Interest, Taxes, Depreciation, & Amortization.
EPS Accretion/Dilution Buyer’s EPS increases (accretion)/decreases (dilution) after an acquisition, respectively
Finding the Deal; Acquisition Process
Companies facing financial distress but with good prospects &
limited capital.
• Innovative startups with potential.
• Businesses exploring new markets.
• Companies with untapped assets.
Established br&s with growth potential.
Service providers with strong bases.
Manufacturers with advanced techniques.
Potential
Local businesses with regional influence.
Real estate ventures with hidden value.
Specialized service providers in various fields.
Pre-Deal Phase Establish acquisition search parameters,
search for suitable targets.
Deal-Making Phase Initiate contact, negotiate with potential
targets, conduct due diligence (Financial, Operations, Legal,
Culture, IT, Environment).
Post-Deal Phase Commence transition, prepare PR campaign
to support stock price.
Effective
Integration Robust
Post-Merger Plan,
Long-Term
Optimizing
Efficiency
Strategic Drive
for Cost
Optimization.
Untapped Opportunities
Strategically Recognizing
Untapped Potential.
ESG
Practices
Sustainable
Operations
& Regulatory
Compliance.
High EI Negotiation
Friendly Approach,
Optimal Terms,
Balanced
Compromises
Pricing the Deal: Valuation Approaches
Discounted Cash Flow (DCF) Incorporating free cash flow & terminal value.
Comparable Company Analysis (CCA) Assessing public firms & historical acquisitions.
Leveraged Buyout Approach (LBO) Valuation Optimizing acquisition financing & cash flow dynamics.
Reasons to Sell Retirement, capital requirements, strategic partnerships, addressing operational or debt issues.
Optimal Time to Sell When not compelled (avoiding exploitation), during high market confidence, ideally a the peak of the business cycle.
Structuring the Deal Key Documents
Confidentiality Agreement (CA/NDA) Safeguarding Confidential Information.
Term Sheet (TS) Outlining Deal Framework.
Letter of Intent (LOI) Preliminary Agreement for Merger.
Introduction to Free Cash Flow
Free Cash Flow (FCF) offers accurate valuation, stronger correlation with stock prices than accounting.
Measures of Cash Flow: EBITDA, cash flow from operations, total cash flow.
Enhancing FCF involves improving NOPAT, prioritizing investments with ROI > Cost of Capital, & reducing investments with ROI < Cost of Capital.
Using Free Cash Flow for Evaluating Deals
Measuring synergies & assessing their probability can be challenging.
Integration Costs include expenses related to transitioning processes, time, money, severances, stay bonuses, legal & advisory costs.
Integration of Acquisitions Best Practices
Critical for enhancing shareholder value.
Begins with a robust valuation model.
Planning starts during due diligence, involves setting synergy goals, managed as a complex project led by senior management.
Dedicated teams, top management involvement, post-mortems two years after acquisition.
Accounting for Mergers & Acquisitions
of Consolidation
Generally applied to investments exceeding 20% but less than 50%.
Investor’s perspective: Record investment in Stock at Cost, adjust asset carrying value for investor's share of investee's earnings or losses after acquisition.
Financial statements, Income Statement, & Balance Sheet.
Consolidation
Cost Method Applies to investments in debt securities, equity investments where Equity Method doesn't apply.
Four Categories Held to:
- Maturity (Debt Securities),
- Available for Sale (Debt & Equity Securities)
- Trading (Public Companies),
- Equity Investments
(Non-Public Companies).
Steps to record acquired balance sheet: Eliminate existing goodwill, reduce equity to common and preferred stock, minority interest, adjust assets & liabilities to fair value, record unrecognized intangible assets, restructuring charges, recalculate deferred tax assets & liabilities.
Special Topics IRC Section 338(G) & 338(H)(10)
Transactions
These provisions offer unique tax advantages & structuring flexibility for specific M&A scenarios. Involves Target Company, Seller Company, Buyer Company.
§338(g) election available when Buyer acquires 80% of publicly-held Target in a taxable transaction.
§338(h)(10) election available when parent sells a consolidated subsidiary (80% for tax purposes) in a taxable transaction.
LOI (Letter of Intent): Mutually signed document between buyer and seller outlining merger agreement
Price of Stock: D/k-g (D=dividends, k=risk/rate of return, g=growth rate)
Enterprise Value: (Number of common shares * purchase price per share) + Debt Outstanding - Cash and Investments
Debt to Equity Ratio, Assesses financial leverage: Total Debt / Total Equity
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization
Capital Asset Pricing Model (CAPM), (Determines cost of equity): K = R(f) + b[R(m) - R(f)], where K is the cost of equity, R(f) is the risk-free rate of interest, b is the sensitivity (beta), and R(m) is the expected return of the market.
Weighted Average Cost of Capital (WACC): Weight of Debt * After tax cost of debt + Weight of Equity * Cost of Equity
Investments = Working capital + Fixed Capital + Other Operating Assets - Non-interest bearing current liabilities
Earnings Per Share (EPS) Accretion/Dilution: (Post-Merger EPS - Pre-Merger EPS) / Pre-Merger EPS
Net Operating Profit After Taxes (NOPAT): Earnings Before Interest * (1 - Tax Rate)
Free Cash Flow (FCF) = NOPAT + Depreciation & Amortization - Change in Net Investment
Market Value of Equity = Total Market Value –Market Value of Debt
Return on Investment (ROI): NOPAT/Investment
Value is created when ROI > Cost of Capital
Total value (Equity + Debt) = Present Value of Free Cash Flow (FCF)
First-in, First-out (FIFO) Method: Assumes older inventory is used or sold before newer items.
Last-in, First-out (LIFO) Method: Assumes newer inventory is used or sold before older items.
