Corporate Restructuring, Mergers & Acquisitions, and Buyouts

Explore the management buyout process, typically 3–6 months, covering team assembly, credible planning, seller negotiations, raising finance, due diligence, and deal closure.

Explore the types of management buyouts, including management buyout, management buy in, institutional buyout, and leveraged buyout, and how external finance and equity stakes empower the core management team.

Learn sources of MBO funding, including debt, mezzanine, equity, vendor finance, and banks, with typical allocations and the skin in the game—one year salary.

Outline buyout criteria: a strong management team and a cash-generating, sale-ready business. Perform commercial, financial, and legal due diligence with market demand analysis and credible projections.

Analyze the ebitda multiple (debt by ebitda) in management buyouts, using 100m debt with 10m ebitda (10x) and later 50m debt with 25m ebitda (2x) to discuss risk and benchmarking.

Examine how GM and Ford faced financial distress during the 2008–2009 recession, with debt burdens and declining sales, and compare private workouts and formal bankruptcy as pathways to restructuring.

Examine stock-based and flow-based insolvency, where negative net worth or insufficient cash flow drives a firm's inability to meet debts, potentially leading to bankruptcy.

Explain the absolute priority rule in liquidation, detailing creditor before shareholder payments under chapter seven. Explore chapter eleven reorganization, petitions, timelines, and approval thresholds for plans, including new securities.

Explore the z-score model to assess bankruptcy risk and walk through the absolute priority rule calculations under chapter 7 and chapter 11, including salvage value and Excel worksheets.

Analyze a reorganization plan reallocating mortgage bonds and debentures into new securities, including senior and subordinated debentures and preferred stock, while highlighting secured creditor concerns under the absolute priority rule.

Explain how a share exchange ratio works in a stock-for-stock merger, using the example of X limited and Y limited with a 1.2-to-1 ratio and its EPS implications.

analyze merger funding options by modeling eps growth from 2% per annum indefinitely due to synergies, compare exchange ratios (0.5 vs 0.375), and assess post-merger earnings and market value.

Explore determinants of merger and acquisition financing decisions, including liquidity, stock performance, and how leverage, ownership structure, and share exchange versus cash payments influence the payment choice.

Examine financing options for mergers, including equity shares (private placement and non voting or differential voting rights) and preference shares. Assess costs, compliance, and post-merger implications.

Explore external commercial borrowings (ECB) as a financing option for mergers and acquisitions, covering automatic and approval routes, eligible sectors, three-year maturity, and disinvestment use of ECB proceeds.

Stock financing dominates large mergers such as HP–Compaq, affecting capital structure; cash funds smaller deals. Synergy is the value gained from combining firms, minus the sum of values, with premiums.

Explore how leveraged recapitalization uses debt to issue bonds for share buybacks or equity dividends, unlock illiquid wealth, and boost earnings per share, ROE, and future cash flows.

Explore three methods of leveraged recapitalization: leveraged cash outs, leveraged share repurchases, and leveraged buyouts, including debt-financed dividends and stub equity attracting long-term investors.

Leverage share repurchase and leverage dividend do not affect sales or ebitda. They raise debt by 28.8 million and reduce cash to zero, lowering net income and net margin.

Explore the concepts of merger and acquisition, including consolidation and being absorbed into another company, stakeholder impact, and the role of valuation, regulation, and strategic management.

Explore the parties to an acquisition—the target and the acquirer—and examine friendly and hostile takeovers, tender offers, and proxy fights; then distinguish horizontal, vertical, and conglomerate mergers with examples.

Examine conglomerate mergers that diversify into unrelated businesses to spread risk. Identify how cost and revenue synergies, external growth, market power, and tax and managerial incentives shape merger motives.

Examine the advantages and disadvantages of comparable company analysis (CCA), including sensitivity to market mispricing and takeover premiums, and apply bid evaluation formulas for target and acquirer gains.

Learn the cost of an acquisition using incremental value and NPV, illustrated by a cash case: a $150 bid yields $50 NPV and a $2 per share gain (to $22).