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M&A: A Practical Guide to Doing the Deal, 2nd Edition

Book Description

The comprehensive M&A guide, updated to reflect the latest changes in the M&A environment

M&A, Second Edition provides a practical primer on mergers and acquisitions for a broad base of individuals numbering in the hundreds of thousands:

  • Investment bankers involved with mergers and acquisitions (M&A).

  • Equity analysts at hedge funds, risk arbitrage funds, pension funds, and banks, who invest in firms engaged in M&A.

  • Private equity professionals at buyout funds, venture capital funds, and hedge funds, who routinely buy and sell companies.

  • Corporate executives and business development professionals.

  • Institutional loan officers working with M&A and buyout transactions.

  • Business students at colleges and graduate business schools.

  • Investor relations professionals at corporations and public relations firms.

  • Lawyers who work with corporate clients on M&A-related legal, financial, and tax matters.

  • Independent public accounting firms that review M&A accounting.

  • Government regulators

  • Sophisticated individual investors

  • Its comprehensive approach covers each step in the process, from finding an opportunity, to analyzing the potential, to closing the deal, with new coverage of private equity funds and international transactions. This updated second edition also includes information on emerging markets, natural resource valuation, hostile takeovers, special deals, and more, plus new examples and anecdotes taken from more current events. Additional illustrations and charts help readers quickly grasp the complex information, providing a complete reference easily accessible by anyone involved in M&A.

    The mergers and acquisitions environment has changed in the thirteen years since M&A was initially published, creating a tremendous need for authoritative M&A guidance from a banker's perspective. This M&A update fills that need by providing the characteristic expert guidance in clear, concise language, complete with the most up-to-date information.

  • Discover where M&A fits into different corporate growth strategies, and the unique merits it confers

  • Delineate clear metrics for determining risk, valuation, and optimal size of potential acquisitions

  • Gain deeper insight into the fundamentals of negotiation, due diligence, and structuring

  • Understand the best time to sell, the best way to sell, and the process of the sale itself

  • In the past decade, the dollar value of M&A deals has jumped ten-fold, and the number of individuals involved has expanded considerably. More and more executives, analysts, and bankers need to get up-to-date on the mechanics of M&A, without wading through volume after volume of dense, legalistic jargon. Finally, M&A is back - providing a complete reference to the current state of the M&A environment.

    Table of Contents

    1. Preface
      1. Recent Trends
      2. Overview of the Contents
      3. What’s New in the Second Edition
    2. Part One: The Big Picture
      1. Chapter 1: The Global M&A Market: Current Status and Evolution
        1. An Upward Trend, Interrupted by Booms and Busts
        2. M&A Activity by Geography
        3. Deal Categories
        4. Large versus Small Transactions
        5. M&A: No Guarantee of Success
        6. Note
      2. Chapter 2: U.S. M&A History, Trends, and Differences from Other Nations
        1. U.S. M&A History
        2. Advanced M&A Industry in the United States
        3. M&A in Wealthy Nations Other Than the United States
        4. Emerging Market M&A
        5. Notes
      3. Chapter 3: The Need for Growth Spurs Acquirers to Buy Other Companies
        1. Ten Buyer Motivations
        2. The Most Popular of the 10 Motivations
        3. Summary
        4. Notes
      4. Chapter 4: The Three Financial Tactics That Dominate the M&A Business
        1. Enterprise Value
        2. Earnings per Share Dilution
        3. EBITDA Considerations
        4. Tactic #1: Cost Cuts/Revenue Gains
        5. Tactic #3: Financial Arbitrage
        6. Conveying the Three Tactics to Investors
        7. Discounted Cash Flow Analysis Supplements the Tactics
        8. Summary
        9. Notes
    3. Part Two: Finding a Deal
      1. Chapter 5: The Buyer Must Have a Methodical Plan in Order to Find a Quality Transaction
        1. An Active Approach
        2. The Acquisition Plan
        3. Internal Assessment
        4. Summary
      2. Chapter 6: To Begin an Acquisition Search, the Buyer First Sets the Likely Parameters of a Deal
        1. Defining the Parameters
        2. Case Study
        3. Summary
      3. Chapter 7: The Buyer Starts the Formal Acquisition Search by Alerting Intermediaries and Contacting Possible Sellers
        1. Laying the Groundwork
        2. Four Steps in Beginning a Search
        3. Retaining an Intermediary to Assist in the Search
        4. Summary
        5. Note
      4. Chapter 8: Finding a Deal: Likely Results of a Search
        1. Due Diligence
        2. Structure the Deal
        3. Financing the Deal
        4. Closing and Integration
        5. Publicly Traded Companies
        6. Summary
        7. Notes
      5. Chapter 9: The Four Principal Risks Facing a Buyer in the M&A Business
        1. Overpayment Risk
        2. Operating Risk
        3. Debt Leverage Risk
        4. Macroeconomic Risk
        5. Downplaying M&A Risks
        6. Summary
        7. Notes
    4. Part Three: Target Financial Analysis
      1. Chapter 10: Sizing Up the M&A Target from a Financial Point of View
        1. Starting the Historical Financial Analysis
        2. Beginning the Historical Analysis
        3. Normalizing Results
        4. Absolute Amount Analysis
        5. Percentage Changes
        6. Common Size Analysis
        7. Growth Ratios
        8. Ratio Analysis
        9. Industry-Specific Indicators
        10. Comparable Company Performance
        11. Review of P.F. Chang’s Financial Analysis
        12. Notes
      2. Chapter 11: To Facilitate Financial Projections, the Buyer Needs to Classify the Target as a Mature, Growth, or Cyclical Business
        1. Company Classifications
        2. The Mature Company
        3. The Growth Company
        4. The Cyclical Company
        5. The Declining Company
        6. The Turnaround
        7. The Pioneer
        8. Summary
      3. Chapter 12: How Practitioners Forecast an M&A Target’s Sales and Earnings
        1. Means of Forecasting
        2. Critiquing P.F. Chang’s Projection
        3. Preparing Projections
        4. Three Scenarios
        5. Summary
        6. Notes
    5. Part Four: Acquisition Valuation
      1. Chapter 13: The M&A Industry Typically Uses Four Valuation Methodologies
        1. Assessing Each Methodology
        2. Applying Multiple Methodologies
        3. Summary
      2. Chapter 14: The Use of Discounted Cash Flow in M&A Valuation
        1. Discounted Cash Flow versus Comparables
        2. The Discounted Cash Flow Valuation Process
        3. Choosing the Right Discount Rate in Valuing a Standalone Business
        4. Summary
        5. Note
      3. Chapter 15: Valuing M&A Targets Using the Comparable Public Companies Approach
        1. Real Estate Analogy
        2. What’s the Right P/E Ratio?
        3. A Word about Value Multiples
        4. Summary
      4. Chapter 16: Valuing an M&A Target by Considering Comparable Deals and Leveraged Buyouts
        1. Control Premium Is Embedded in Comparable Acquisitions
        2. Understanding Leveraged Buyouts
        3. LBO Mechanics
        4. Case Study: Crane Co.
        5. Summary
        6. Note
      5. Chapter 17: Valuation Situations That Don’t Fit the Standard Models
        1. Sum-of-the-Parts
        2. The Cyclical Company
        3. Speculative High-Tech Companies
        4. Low-Tech, Money-Losing Companies
        5. Turnaround Considerations
        6. High-Leverage Company Considerations
        7. Natural Resources
        8. Emerging Market Acquisitions
        9. Discounted Cash Flow (DCF)
        10. Comparable Public Companies and Comparable Acquisitions in the Emerging Markets
        11. Summary
        12. Notes
    6. Part Five: Combination, the Sale Process, Structures, and Special Situations
      1. Chapter 18: Combining the Buyer’s and Seller’s Financial Results for the M&A Analysis
        1. Combining the Buyer’s and Seller’s Projections
        2. Reality Check
        3. Financing Sources
        4. Summary
        5. Notes
      2. Chapter 19: When Is the Best Time for an Owner to Sell a Business?
        1. Seller Categories
        2. Timing Considerations
        3. Making the Decision
        4. Confronting Reality
        5. Selling the Business versus an Initial Public Offering
        6. IPO versus Sale
        7. Partial Sale/Leveraged Recapitalization
        8. Summary
        9. Notes
      3. Chapter 20: The Sale Process from the Seller’s Vantage Point
        1. Retaining a Financial Adviser
        2. Setting the Stage for the Sale
        3. The Buyer’s List
        4. Approach Tactics
        5. Confidentiality, Operational, and Personnel Issues
        6. Due Diligence Visits
        7. Coming Up with a Bid
        8. Final Due Diligence and Legal Documentation
        9. Summary
      4. Chapter 21: A Review of Legal and Tax Structures Commonly Used in Transactions
        1. Acquisition Legal Structures
        2. Legal Considerations
        3. Triangular Merger
        4. Simplified Tax Structures
        5. Legal Documents
        6. Summary
        7. Note
      5. Chapter 22: Unusual Transaction Categories
        1. Tax-Free Deal
        2. DEMERGER
        3. Reverse Merger
        4. Special Purpose Acquisition Corporation (SPAC)
        5. Hostile Takeover
        6. Summary
        7. Note
      6. Chapter 23: Final Thoughts on Mergers and Acquisitions
    7. About the Author
    8. Index
    9. End User License Agreement