mergers & acquisitions

321 Pages·2008·1.04 MB·English

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MERGERS &
ACQUISITIONS
A Condensed
Practitioner’s Guide
STEVEN M. BRAGG
John Wiley & Sons, Inc.
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Mergers &
Acquisitions
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MERGERS &
ACQUISITIONS
A Condensed
Practitioner’s Guide
STEVEN M. BRAGG
John Wiley & Sons, Inc.
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Copyright#2009byJohnWiley& Sons,Inc. Allrights reserved.
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Libraryof CongressCataloging-in-Publication Data
Bragg,Steven M.
Mergers&acquisitions :a condensedpractitioner’sguide/ Steven M.Bragg.
p. cm.
Includes index.
ISBN 978-0-470-39894-4(cloth)
1. Consolidationand mergerof corporations. I. Title. II. Title: Mergersand
acquisitions.
HG4028.M4B69 2009
658.1062–dc22
2008023252
Printed intheUnitedStates ofAmerica
10 9 8 7 6 5 4 3 2 1
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To my extremely tolerant wife, Melissa. Thanks for handling
everything while I hide behind my computer.
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Contents
Preface xiii
About the Author xvii
Free On-Line Resources by Steven Bragg xix
1 The Acquisition Process 1
Why We Acquire 1
Why a Target Sells 5
Acquisition Strategy 7
The Basic Acquisition Process Flow 10
The Auction Process Flow 18
Locating and Culling Acquisition Targets 21
The Optimal Target Size 25
Evaluate Acquisition Targets with Alliances 26
Acquisition Risks for the Buyer—Valuation 28
Acquisition Risks for the Buyer—Legal 29
Acquisition Risks for the Seller 31
Acquisition Follow-Up Activities 32
The Hostile Takeover 33
Defending Against a Hostile Takeover 35
Summary 39
2 Key Participants 41
The Acquisition Team 41
Attorneys 42
Board of Directors 43
Brokers 44
The Chief Executive Officer 46
Investment Bankers 47
Investor and Public Relations 48
Lenders 50
vii
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viii Contents
Line Managers 51
Specialist Consultants 52
Players in Hostile Takeovers 53
Integration Team 54
Summary 54
3 Valuing an Acquisition Target 57
Alternative Valuation Methods 57
The Control Premium 65
Synergy Gains 65
The Discounted Cash Flow (DCF) Model 66
Constructing Cash Flow Scenarios 69
Cash Flow Adjusting Factors 71
The Earnout 74
Qualitative Factors 75
Which Valuation Method is Best? 77
The Method of Payment 78
Summary 82
4 The Term Sheet 83
Reasons for Using a Term Sheet 83
Components of a Term Sheet 85
Summary 92
5 Due Diligence 93
Due Diligence Team Staffing 93
Due Diligence Interviews 95
Due Diligence—Overview 96
Due Diligence—Market Overview 99
Due Diligence—Culture 101
Due Diligence—Personnel 102
Due Diligence—Intellectual Property 106
Due Diligence—Brands 107
Due Diligence—Risk Management 109
Due Diligence—Capacity 110