Wall St. Prep - M&A
Study online at https://quizlet.com/_cz3u1c
1. Potential reasons * Value Creation from Revenue and Cost Synergies Ownership of Technology
to acquire another Assets (IP, Patents, Proprietary Technology)
company * Talent Acquisitions (New Skilled Employees)
* Expansion in Geographic Reach or into New Product/Service Markets
* Diversification in Revenue Sources (Less Risk, Lower Cost of Capital)
* Reduce Time to Market with New Product Launches
* Increased Number of Channels to Sell Products/Services
* Market Leadership and Decreased Competition (if Horizontal Integration)
* Achieve Supply Chain Efficiencies (if Vertical Integration)
* Tax Benefits (if Target has NOLs)
2. Broad auction In a broad auction, the sell-side bank will reach out to as many prospective
buyers as possible to maximize the number of interested buyers. Since com-
petition directly correlates with the valuation, the goal is to cast a wide net to
intensify an auction's competitiveness and increase the likelihood of finding
the highest possible offer (i.e., removing the risk of "leaving money on the
table")
3. Targeted auction In a targeted auction, the sell-side bank (usually under the client's direction)
will have a shortlist of buyers contacted. These contacted buyers may already
have a strong strategic fit with the client or a pre-existing relationship with the
seller.
4. Negotiated sale A negotiated sale involves only a handful of potential buyers and is most
appropriate when there's a specific buyer the seller has in mind. A potential
reason for this type of sale approach could be the seller intends to stay on and
strongly values the partnership and growth opportunities.
Under this approach, the speed of close and confidentiality are two distinct
benefits. These deals are negotiated "behind-closed-doors" and generally on
friendlier terms based on the best interests of the client.
5.
, Wall St. Prep - M&A
Study online at https://quizlet.com/_cz3u1c
Common reasons 1. Overpaying/overestimating synergies
why M&A deals fail 2. Inadequate due diligence
to create value 3. Lack of a strategic plan
4. Poor execution/integration
6. Examples of mater- 1. Significant changes in economic conditions, financial/credit/capital mar-
ial adverse changes kets
(MACs) 2. Changes in regulation, GAAP, or transaction litigation (ex: anti-trust)
3. Natural disasters, geopolitical change
4. Missing financial performance targets
7. Asset sale In an asset sale, the seller will sell the assets to the buyer with each asset
contractually sold. Once the buyer holds all the assets, it controls the business
by having everything that made the seller's
equity worth something.
In the asset sale, the buyer gets the incremental D&A tax benefits - meaning,
the tax basis of assets is stepped up, which creates tax-deductible D&A and
future cash tax savings.
But the seller potentially faces double taxation - first on the corporate level and
then on the shareholder level
8. Stock sale In a stock sale, the seller gives the buyer shares. Once the buyer holds all the
target shares, it controls the business from being its new owner.
In a stock sale, the buyer doesn't get a stepped-up basis in the seller's assets,
which means the
buyer cannot benefit from lower future taxes due to incremental deal-related
D&A.
The seller is taxed only at the shareholder level (as opposed to the corporate
level).
9. 338(h)(10) election
Study online at https://quizlet.com/_cz3u1c
1. Potential reasons * Value Creation from Revenue and Cost Synergies Ownership of Technology
to acquire another Assets (IP, Patents, Proprietary Technology)
company * Talent Acquisitions (New Skilled Employees)
* Expansion in Geographic Reach or into New Product/Service Markets
* Diversification in Revenue Sources (Less Risk, Lower Cost of Capital)
* Reduce Time to Market with New Product Launches
* Increased Number of Channels to Sell Products/Services
* Market Leadership and Decreased Competition (if Horizontal Integration)
* Achieve Supply Chain Efficiencies (if Vertical Integration)
* Tax Benefits (if Target has NOLs)
2. Broad auction In a broad auction, the sell-side bank will reach out to as many prospective
buyers as possible to maximize the number of interested buyers. Since com-
petition directly correlates with the valuation, the goal is to cast a wide net to
intensify an auction's competitiveness and increase the likelihood of finding
the highest possible offer (i.e., removing the risk of "leaving money on the
table")
3. Targeted auction In a targeted auction, the sell-side bank (usually under the client's direction)
will have a shortlist of buyers contacted. These contacted buyers may already
have a strong strategic fit with the client or a pre-existing relationship with the
seller.
4. Negotiated sale A negotiated sale involves only a handful of potential buyers and is most
appropriate when there's a specific buyer the seller has in mind. A potential
reason for this type of sale approach could be the seller intends to stay on and
strongly values the partnership and growth opportunities.
Under this approach, the speed of close and confidentiality are two distinct
benefits. These deals are negotiated "behind-closed-doors" and generally on
friendlier terms based on the best interests of the client.
5.
, Wall St. Prep - M&A
Study online at https://quizlet.com/_cz3u1c
Common reasons 1. Overpaying/overestimating synergies
why M&A deals fail 2. Inadequate due diligence
to create value 3. Lack of a strategic plan
4. Poor execution/integration
6. Examples of mater- 1. Significant changes in economic conditions, financial/credit/capital mar-
ial adverse changes kets
(MACs) 2. Changes in regulation, GAAP, or transaction litigation (ex: anti-trust)
3. Natural disasters, geopolitical change
4. Missing financial performance targets
7. Asset sale In an asset sale, the seller will sell the assets to the buyer with each asset
contractually sold. Once the buyer holds all the assets, it controls the business
by having everything that made the seller's
equity worth something.
In the asset sale, the buyer gets the incremental D&A tax benefits - meaning,
the tax basis of assets is stepped up, which creates tax-deductible D&A and
future cash tax savings.
But the seller potentially faces double taxation - first on the corporate level and
then on the shareholder level
8. Stock sale In a stock sale, the seller gives the buyer shares. Once the buyer holds all the
target shares, it controls the business from being its new owner.
In a stock sale, the buyer doesn't get a stepped-up basis in the seller's assets,
which means the
buyer cannot benefit from lower future taxes due to incremental deal-related
D&A.
The seller is taxed only at the shareholder level (as opposed to the corporate
level).
9. 338(h)(10) election
