Mastering Mergers and Acquisitions

Explore the diverse categories of mergers and acquisitions, including vertical and horizontal integration, backward and forward integration, and reverse mergers, and learn how these types shape modern markets.

Explore how horizontal mergers between firms in the same industry exploit economies of scale and expand geography and product portfolios, such as Procter and Gamble acquiring Gillette.

Examine vertical mergers and vertical integration, detailing forward and backward integration, concentric mergers, and supply chain control with examples like Indian Rayon and IBM.

Explore conglomerate mergers as diversification by combining uncorrelated assets and cash flows to reduce business risk, aligning with portfolio management principles.

Uncover motives behind mergers, including synergy and economies of scope and scale. Explore rapid inorganic growth, increased market power, and diversification through unique competencies.

Explore the life cycle of mergers and acquisitions, detailing startup, rapid growth, stabilization, and declining stages, their traits, motivations, and merger and acquisition types, with payment forms and tax implications.

Examine modes of payment in mergers and acquisitions, including stock and cash offers, and how equity, warrants, and asset purchases affect liabilities, risk, and leverage.

Explore dividend discount models and the Gordon growth model to value stocks, calculate price with D1, K, and G, and distinguish friendly from hostile takeovers.

Analyze capital structure and after-tax costs to compute the weighted average cost of capital and growth in value through dividends, as shown in Gordon's model. Contrast friendly and hostile takeover.

Explore hostile takeovers and how acquirers build ownership via open market purchases. Learn tactics: bear hug, tender offer, and proxy battle, and how they can lead to a friendly merger.

Understand the typical merger and acquisition steps and timeline—from preliminary buyer shortlisting and information packs to due diligence, final bids, and closure—emphasizing synergy and valuation concepts.

Explore valuation techniques through case studies, comparing comparable companies and transactions, accounting for synergies and the takeover premium, and calculating post-merger value, target gains, and acquirer gains.

Assess a hostile tender offer where Strong Limited seeks to acquire Weak Limited, estimating fair value with DCF, comparable company, and comparable transaction methods, including an EBITDA approach.

Apply valuation techniques to a case study, analyzing CapEx and 10% free cash flow growth with an 11% WACC, using comparable data and methods like market cap, PE, and DDM.

Learn how to value a target using earnings per share, price-earnings ratios, and book value per share. Explore comparable transaction statistics and relative valuation concepts.

Explore core valuation concepts in mergers and acquisitions, including cost of capital, market value, and EVA, and compare relative methods such as EV/EBITDA, price to book, and NAV.

Explore industry-specific valuation methods, including DCF, forward P/E, net asset value, EBITDA, price-to-book and adjusted book value, plus real options and benchmarking, with case studies and upcoming methods.

Build a discounted cash flow model by turning net income into free cash flow, adding after-tax interest and depreciation, then discount at the wacc to derive terminal value.

Compute free cash flows, deduct market value to obtain free cash flow from equity, and estimate per-share value using net income, post-tax interest, depreciation, deferred taxes, working capital, and capex.

Compute terminal value by perpetually growing the last cash flow at the discount rate minus the growth rate, using the dividend discount and Gordon's growth models with free cash flow.

Learn how growth and vac affect terminal value, discount free cash flows, and determine a firm's value as equity plus debt.

Evaluate a target using a DCF framework, adjust for debt, derive free cash flow to equity, and apply comparable company metrics to estimate takeover value.

Calculate free cash flow to firm and equity, discount with wacc or cost of equity, and value the firm and equity. Use comparables with multiples like ev/ebitda and ebitda ratios.

Explore how to evaluate peers using comparable company analysis with p/e, p/b, and p/s ratios, estimate mean values, and assess takeover premiums to determine target stock value.

Learn to build a practical takeover model using comparable firms A, B, and C, applying price/earnings, price/book, and price/sales to calculate the average and the takeover premium.

Multiply price multiples by earnings per share, book value per share, and sales per share to estimate stock value. Then average these estimates to determine the final stock value.

Define the peg ratio as price-earnings divided by growth, with growth equal to ROE times the retention ratio, linking growth to valuation and aiding M&A and pair trading decisions.

Compute a takeover price using comparable transactions by selecting recent peers and applying P/E, P/B, and P/S ratios to EPS, book value, and sales per share.

Explore calculating stock value using averages and key multiples—p/e, p/b, and p/s—selecting the acquisition price over pre-takeover price, and comparing discounted cash flow, comparable company, and comparable transaction valuations.

Explore the breakup value method, or chop shop approach, and the earning value added method for valuing multi-industry firms by segment, using pure-play benchmarks and average capitalization ratios.

Students learn to apply the breakup value method across four divisions using market capitalization to sales and assets ratios, guided by industry average capitalization ratios to estimate segment values.

Compute the breakup value by averaging three theoretical values derived from market capitalization, assets, and operating income. Gather data and apply consistent formatting to obtain the final value.

Assess the earning value method, or economic value added, by subtracting capital costs from earnings and show how it links to market value added.

Compute the weighted average cost of capital using capm for equity, post-tax debt cost, and weights of 0.56 equity and 0.44 debt, yielding about 4.8%.

Calculate the cost of equity and capital employed, derive nopat from ebit after 30% tax, and assess earning value added and market value added to estimate enterprise value.

Apply the constant growth method to forecast earnings value added, compute market value added as the present value of future EVA discounted at WACC, linking enterprise value to equity.

Explore real time case study insights on reverse mergers and internal versus external reorganization, and learn how synergy is calculated across cash and stock deals, plus EPS and NPS implications.

Explore how a reverse merger lets a loss-making acquirer absorb a profit-making target for tax benefits. Learn key takeover defenses like white knight, white square, crown jewels, and golden parachute.

Explore poison pills and callable and puttable bonds as takeover defenses, and analyze synergy in cash and stock deals, focusing on value and earnings synergy.

Calculate the value of firm A after merger by adding A, B, and synergy, then subtract cash. Assess NPVs for A and B and confirm a positive synergy of 120.

Compute the maximum offer A can pay for B: 520 lakh (52 per share) from B value 400 plus 120 synergy; true cost equals excess over B's value.

Calculate promoter share value using 2 lakh shares at 40 and add 90 lakh from new management plus 120 lakh synergy. Explore cash and stock deals and breakeven exchange rates.

Explore a cash acquisition of firm B for 400 lakh, compute the npv for firm B, and evaluate merger synergy in earnings and the bootstrap effect on post-merger value.

Maintain the post merger P/E ratio at 20; compute post merger market cap as 20 times the combined earnings minus cash consideration, and evaluate the NPV to the firm.

Analyze stock deals and synergy value in mergers, deriving the exchange ratio, merger price, and post-merger share price through case study three.

This lecture guides calculating post-merger share prices for A and B using the 0.7 exchange ratio, computing pre- and post-merger prices, and determining the NPV and acquisition costs of the merger.

Learn to distinguish true versus apparent costs of acquisition, compute the NPV to the target, and compare post-merger and pre-merger EPS using stock deals and exchange ratios.

Learn to compute post merger eps using exchange ratios, total shares after merger, and combined profits with synergy, then assess eps accretion or dilution and price effects.

Study core merger concepts and valuation techniques, including dcf, comparable companies, comparable transactions, and eva. Learn cross-border and reverse mergers, synergy calculations, and merger model with eps accretion or dilution.

Map the merger analysis roadmap and build a combo full model incorporating target ownership, EPS accretion or dilution, pretax synergies, and EBITDA; perform scenario, price, and contribution analyses.

Examine target ownership by analyzing market data and basic and diluted share info, and compute offer price as share price times (1 plus premium), illustrated by Etihad and Jet Airways.

Explore a cross-border reverse merger where Highgate, a US-based company, acquires Putney, an India-based company, analyzing the acquisition price, accretion and dilution, and key financials from sales to net worth.

Analyze merger deal assumptions for Highgate and Putney, focusing on currency conversion on the acquisition date, financing mix, debt costs, and synergy-driven revenue and cost savings.

forecast and build pro forma profit and loss statements by forecasting sales growth, setting cost of sales as a percentage of sales, and deriving gross margin and sg&a.

Analyze restructuring charges and goodwill impairment and their impact on gross profit, ebitda margin, depreciation and amortization as a percentage of sales, ebit, and profit in a consolidated merger model.

Learn how profit after tax includes income from discontinued operations, handles minority interests, and reconciles US GAAP with Indian standards in consolidated net income and forecasted financials.

Calculate gross profit margin and EBITDA margin, derive EBIT and tax rate from forecasted earnings before tax, and incorporate cash balances, secured loans, and net worth.

Learn to handle market data in merger analysis by distinguishing base and price currencies, applying currency conversion factors with an if formula, and understanding interest rate parity.

Explore acquirer target combinations in mergers and acquisitions by building your own model, handling confidential information and applying financing mix concepts like cash vs stock.

Examine the drivers and assumptions in a merger model, including cash balances, deal cash flows, synergy estimates, and optimistic and pessimistic scenarios for valuation.

Learn to calculate pre-tax synergies from cross-selling, economies of scale, and other cost savings. Forecast synergy growth at 4% and translate these into net income projections.

Compute equity data by analyzing in-the-money options, profit, and options outstanding, then determine equity consolidation via the option rollover with a shortcut formula.

Learn how to compute diluted earnings per share by incorporating options and other convertibles, distinguish dilutive from anti-dilutive scenarios, and apply related revenue and EBITDA calculations.

Analyze how 8% to 40% premiums over market price influence the merger plan, purchase price per share, and equity consideration across scenarios.

Compute enterprise value by equity consideration diluted with debt minus cash, and determine new shares issued and option dilution financed by stock.

Learn how target ownership is analyzed using market data, basic and diluted share information, and offer price calculations, including premiums, in cross-border turnaround cases like Etihad and Jet Airways.

Learn to model the cash required to finance a merger by balancing equity considerations, cash from the acquirer and target, and new debt, including transaction fees and dilution effects.

Master the financing mix by issuing new debt, calculating financing fees, and evaluating goodwill as the excess of purchase price over the book value of equity in mergers.

Calculate after-tax merger costs by amortizing transaction fees and assessing pre-tax cash opportunity costs. Examine financing mix, equity purchase price, advisory fees, and net assets acquired, including goodwill and PPE.

Compute the performer net income and diluted eps using inputs, apply the tax rate, add post-tax merger costs, and allocate diluted shares across the merger model.

Analyze target ownership under merger scenarios by calculating diluted shares and option values, considering premium effects, and derive exchange ratios, while evaluating ev/ebitda and p/e multiples to assess financing needs.

Understand how share dynamics unfold in an M&A deal, where the seller's price moves toward the offer price and the buyer's stock behavior informs accretion and dilution.

In mergers, the buyer's share price moves with market perception of the combined entity, while the seller's price tends to align with it, reflecting equity value and synergies.

Earnout modeling ties part of the purchase price to future performance, showing its impact on the three financial statements and purchase price allocation in private company acquisitions—tech, biotech, and pharma.