Mergers And Acquisitions

Flashcards about Mergers and Acquisitions

Valuation methods

Analytical tools used to assess a company's worth during an M&A transaction.

Discounted Cash Flow (DCF) Analysis

A forward-looking approach focusing on intrinsic value.

Comparable Company Analysis (CCA)

A market-based valuation using peer performance.

Precedent Transaction Analysis (PTA)

A deal-based method using past acquisition data.

DISCOUNTED CASH FLOW (DCF) ANALYSIS

Estimating a company’s future cash flows and discounting them to present value using an appropriate discount rate, typically the Weighted Average Cost of Capital (WACC).

COMPARABLE COMPANY ANAYLYSIS (CCA)

Valuing a company based on how similar firms are valued in the market

PRECEDENT TRANSACTION ANALYSIS (PTA)

Analyzing recent M&A transactions involving similar companies to establish a reasonable valuation benchmark.

DUE DILIGENCE

A thorough investigation and evaluation of a business before entering into a merger or acquisition.

Financial Due Diligence

To ensure the target company’s financial information is accurate, reliable, and sustainable.

Legal Due Diligence

To identify any legal barriers, obligations, or risks associated with the company and its assets.

Operational Due Diligence

To assess the internal workings of the business, from day-to-day operations to strategic capabilities.

DEAL STRUCTURING

Involves determining how the transaction will be executed, after considering legal, financial, and operational aspects.

STOCK PURCHASE

The buyer acquires the target company’s shares, gaining ownership of all its assets and liabilities. The target company remains intact, but with new ownership.

ASSET PURCHASE

The buyer selects and purchases specific assets and liabilities, rather than the entire company.

MERGER AGREEMENT

Two companies combine to form a single legal entity. This can be structured as a merger of equals or an acquisition disguised as a merger.

Financing in M&A

Securing the money needed to buy another company.

Restructuring in M&A

The process of reorganizing the company after the deal. It focuses on aligning operations, people, and finances to combine two companies into one smooth-running business.

Cash Financing

Paying for the deal using the company’s available cash.

Debt Financing

Borrowing money (loan or bonds) to fund the deal.

Equity Financing

Paying by giving shares (stock) to the seller.

Mix Financing

Combining cash, debt, and equity to fund the deal.

Financial restructuring

Involves reorganizing a company’s finances and operations after a merger. The goal is to better combine resources, cut costs, and create a stronger, more efficient business.

Operational Restructuring

Focuses on how the business runs every day. The goal is to remove duplicated work, simplify processes, and close overlapping offices or branches to save costs.

Financial Restructuring

About managing the company’s money better. It includes adjusting debts, selling unneeded assets, or changing how the company’s capital is organized to improve financial health.

Bankruptcy Restructuring

A more serious type of restructuring. When a company has very high debt or very low profits, it might ask for legal protection to reorganize its management and operations.

Anti-Trust laws

Designed to promote fair competition in the market by preventing anti-competitive practices such as monopolies, cartels, and price-fixing.

Philippine Competition Act (PCA)

The legal framework for anti-trust regulation in the Philippines.

Securities and Exchange Commission (SEC)

Oversees and enforces the laws related to the securities market, ensuring transparency and fairness in trading.

Letter of Intent (LOI)

Outlines the understanding between two or more parties that they intend to formalize later in a legally binding agreement.

Term Sheet

A document stating the terms and conditions of an intended financial investment, in this case, a merger or acquisition.

Philippine Competition Commission (PCC)

Ensure that the deal is fair

Bangko ng Sentral ng Pilipinas (BSP)

Checks if banks are involved

National Telecommunications Commission (NTC)

Ensures the deal complies with laws that protect consumers and promote fair competition in the telecom industry.

Post-Merger Integration

The process of merging and reorganizing companies and their activities after a merger or acquisition

G

Goal alignment

R

Role clarity

O

Operations merging

W

Workforce unity

T

Tech/system synchronization

H

Harmony in culture

Financial Performance

Assess whether the merger or acquisition has led to improved financial outcomes, such as increased revenues, profits, and shareholder value.

Synergy Realization

Means that the combined company should perform better than the two would have separately.

Integration Success

Evaluates how smoothly the merging organizations combine their operations, cultures, and systems to function as a cohesive unit.

Market Share and Competitive Advantage

Assesses whether the merger or acquisition has strengthened the company's position in the market, leading to increased market share and a competitive edge over rivals.

Strategic Goals Achievement

Evaluates whether the merger or acquisition has fulfilled the strategic objectives set by the companies, such as entering new markets, acquiring new technologies, or diversifying product offerings.

Stakeholder Response

Is all about how the people involved in and affected by the M&A react to the deal.