Mergers and acquisitions basics

322 Pages·2005·0.86 MB·English

by  Michael E. S. Frankel

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Mergers and
Acquisitions Basics
The Key Steps of Acquisitions,
Divestitures, and Investments
MICHAEL E. S. FRANKEL
John Wiley & Sons, Inc.
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Mergers and
Acquisitions Basics
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Mergers and
Acquisitions Basics
The Key Steps of Acquisitions,
Divestitures, and Investments
MICHAEL E. S. FRANKEL
John Wiley & Sons, Inc.
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This book is printed on acid-free paper. (cid:2)(cid:2)
Copyright©2005 by John Wiley & Sons. All rights reserved.
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Library ofCongress Cataloging-in-Publication Data:
Frankel, Michael E. S.
Mergers and acquisitions basics : the key steps of acquisitions, divestitures, and
investments / Michael E. S. Frankel.
p. cm.
Includes index.
ISBN-10: 0-471-67518-0 (cloth)
ISBN-13: 978-0-471-67518-1
1. Consolidation and merger of corporations. 2. Corporations—Finance. I. Title.
HG4028.M4F73 2005
658.1'6—dc22
2005002062
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
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contents
Preface ix
Acknowledgments xi
CHAPTER 1 Introduction 1
CHAPTER 2 The Players 7
The Buyer 7
The Seller 11
Investors/Owners 14
Corporate Staff 23
Advisors 31
Regulators 41
Others 44
CHAPTER 3 Decision to Buy or Sell 51
Reasons to Buy 52
Choosing to Sell 67
CHAPTER 4 Buyer’s Preparation for the Deal 83
Developing a Strategy 83
Building a Capability 87
Devising a Process 93
Planning the Message 101
CHAPTER 5 Seller’s Preparation for the Deal 105
Building a Capability 105
Making the Business Most Sellable: Cleaning It Up 108
Setting Expectations with Constituents 131
v
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vi CONTENTS
CHAPTER 6 Deal Process 137
Determining the Universe of Buyers 138
Making the Approach 139
One-on-One Negotiation 141
Formal Auction 145
Informal Auction 149
Bankruptcy Auction 150
Direct versus Proxy 151
Relative Positions of Power 152
CHAPTER 7 Due Diligence 153
Building a Team 154
What the Buyer Wants to Know 166
CHAPTER 8 Valuation 191
Standard Valuation Methods 192
Pro Forma: Finding and Splitting the Upside 211
Getting the Valuation and Pro Forma Done 221
CHAPTER 9 Integration Planning 235
Dedicating Resources 236
Linking Due Diligence to Integration Planning and Execution 237
Key Integration Issues 238
CHAPTER 10 Financing Issues 251
Cost of Capital 251
Lost Opportunities 261
Financing Contingency: “Bird in the Hand” 262
CHAPTER 11 Closing the Deal and After 265
How Is a Deal Closed? 265
Other Signing and Closing Events 268
Postclosing Issues 272
Integration and Look Back (the Postmortem) 272
Appendix A Standard Form Deliverables During a Strategic
Transaction Example 275
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Contents vii
Appendix B Due Diligence Report Table of Contents 277
Appendix C Standard Deal Process Checklist Example 279
Appendix D Standard Approval Process Example 281
Appendix E Approval of a Strategic Transaction: Key Topics
in Presentation 283
Appendix F Generic Valuation Exercise 285
Appendix G Generic Acquisition Term Sheet for Acquisition
by Public Buyer of Privately Held Target 287
Appendix H Generic Investment Term Sheet 293
Index 295
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