Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions 11th Edition

35 With annual sales of about $6.5 billion, ACS handles paper-based tasks such as billing and claims processing for governments and private companies. With about one-fourth of ACSs revenue derived from the healthcare and government sectors through long-term contracts, the acquisition gives Xerox a greater penetration into markets which

Chapter 1: Introduction to Mergers, Acquisitions, and Other Restructuring Activities Answers to End of Chapter Discussion Questions 1.1 Discuss why mergers and acquisitions occur. Answer: The primary motivations for M&As include an attempt to realize synergy by combining the acquiring and target firms, diversification, market power, strategic

21 demand. This would enable the major TV networks to seek partners from firms such as Facebook or Apple when they launch their own internet based video service. The cable companies turned online video and broad band suppliers must remain vigilant and aware of changing circumstances in the industry.

21 following closing. Targacept shareholders ownership would increase to 49% from 35% at closing if the notes are fully converted. Figure 10.1 illustrates how ownership is transferred in a typical reverse merger. Catalyst creates a wholly owned subsidiary shell corporation (Merger Sub) and exchanges the shares of

33 differs from the unregistered shares, in that they are not subject to Rule 144. Based on the trading volume of Taylor common stock over the preceding 12 months, the appraiser believed that it would likely take less than one year to convert the block of registered stock into

Chapter 10: Analysis and Valuation of Privately Held Companies Answers to End of Chapter Discussion Questions 10.1 What is a capitalization rate? When is it used and why? Answer: The capitalization rate, or simply the "cap rate," represents the ratio of net operating income divided

37 attempt to find alternative financing or terminate the agreement. If Wyeth had terminated the agreement, Pfizer would have been obligated to pay the termination fee. Using Form of Payment as a Takeover Strategy: Chevrons Acquisition of Unocal Unocal ceased to exist as an independent company on

Chapter 11: Structuring the Deal: Payment and Legal Considerations Answers to End of Chapter Discussion Questions 11.1 What are the advantages and disadvantages of a purchase of assets from the perspective of the buyer and seller? Answer: The advantages of an asset purchase from the standpoint of

21 But this torrid pace was new for the firm coming after years of operating profit losses and customer attrition. Legere noted that in the past industry consolidation had been driven largely by the need for competitors to accumulate spectrum (i.e., a collection of licenses to transmit signals over

34 Merger Sub 2 (Holds New Merck Stock only) Merger Sub 1 (Holds Cash and New Merck Stock) 34 Merger Sub 2 (Holds New Merck Stock only) Merger Sub 1 (Holds Cash and New Merck Stock) 34 Merger Sub 2 (Holds New

securities on the balance sheet of the combined firms. The use of new AbbVie shares could also have potentially diluted current AbbVie shareholders. securities on the balance sheet of the combined firms. The use of new AbbVie shares could also have potentially diluted current AbbVie shareholders. securities on the balance

Chapter 13: Structuring the Deal: Tax and Accounting Considerations Answers to End of Chapter Discussion Questions 12.1 When does the IRS consider a transaction to be non-taxable to the target firms shareholders? What is the justification for the IRS position? Answer: Under the law, tax-free transactions

40 such spending on behalf of the hospitals. The combination of these factors is likely to constrain cash flow growth. such spending on behalf of the hospitals. The combination of these factors is likely to constrain cash flow growth. such spending on behalf of the hospitals. The combination of

1 Chapter 13: FINANCING THE DEAL Private Equity, Hedge Funds, and Other Sources of Financing Answers to End of Chapter Discussion Questions 13.1 What are the primary ways in which a leveraged buyuot is financed? Answer: In a leveraged buyout, borrowed funds are used to pay

21 LBOs undertaken following the 2008 recession have tended to be more conservatively financed than those prior to 2008 _____________________________________________________________________________________ The realization of sustained earnings growth often requires a sizable initial investment. Investments in software and other intellectual property must be expensed according to Generally Accepted Accounting Principles

21 Table 14.9 illustrates the extent to which this delay in implementing the IPO affected valuation. Enterprise value can be estimated by multiplying EBITDA by the enterprise to EBITDA multiple for similar firms. By using HCAs 2010 EBITDA to estimate the firms enterprise value in both early 2010

Depreciation as % of Sales 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03Amortization as % of Sales 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01Interest on Cash & Marketable Securities % 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03Interest on Senior Debt % 0.07 0.07 0.07 0.07

Amortization as % of Sales 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01Interest on Cash & Marketable Securities % 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03Interest on Senior Debt % 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07Interest on Subordinated Debt % 0.09 0.09 0.09 0.09

Chapter 14: HIGHLY LEVERAGED TRANSACTIONS: LBO Valuation and Modeling Basics Chapter Discussion Questions 14.1 The adjusted present value model is based on the notion that the value of a firm can be divided into present value of the firms cash flows to equity investors plus the present

35 The equity contribution amounted to about one-fifth of the total purchase price, two-to-three times the average of the 1980s. The higher equity contribution was necessary because of the poor track record of many of the deals put together during the 1980s. Cox Enterprises Offers to Take Cox

Chapter 15: Applying Financial Modeling To Value, Structure, and Negotiate Mergers and Acquisitions Answers to End of Chapter Discussion Questions 15.1 Why should a target company be valued as a standalone business? Give examples of the types of adjustments that might have to be made if the

nearly 30% premium, Baxaltas board rejected the offer claiming that it undervalued the firm and insisted that any bid should contain a substantial amount of cash. Shire countered that since 80.5% of its shares1 had been spun off from Baxter International in July 2015 that any cash used

21 21 21 Buying entertainment properties runs counter to decisions by Comcast peers Time Warner and Cablevision systems, which decided to separate content from distribution. Previous attempts to vertically integrate by owning and distributing content have shown mixed results. For example, AOLs acquisition of Time

34 MVRosneft = (.05 / .095) x $154 billion = $81.1 billion MVRosneft = (.05 / .095) x $154 billion = $81.1 billion MVRosneft = (.05 / .095) x $154 billion = $81.1 billion 6. How can BP best protect their interests in the

Chapter 16 Business Alliances: Joint Ventures, Partnerships, and Alliances Solutions to End of Chapter Discussion Questions 15.1 What is a limited liability company? What are its advantages and disadvantages? Answer: LLCs were first recognized for tax purposes in 1988. The LLC combines features of the corporation

Chapter 17: Alternative Exit and Restructuring Strategies Divestitures, Spin-Offs, Carve-Outs, Split-Ups, and Split-Offs Answers to End of Chapter Discussion Questions 16.1 What are the advantages and disadvantages of tracking or target stocks to investors and to the firm? Answer: The purpose in creating tracking stock is to

38 Assumed $300 Million in Kraft Debt $660 Million in Kraft Sub Debt Securities Assumed $300 Million in Kraft Debt $660 Million in Kraft Sub Debt Securities Assumed $300 Million in Kraft Debt $660 Million in Kraft Sub Debt Securities Exhibit 15-1. Structuring the Transaction

21 Merger Sub (RMT Brands) Coty Cosmetics P&G Assets & Liabilities (Excl. divested brands) Merger Sub (RMT Brands) Coty Cosmetics P&G Assets & Liabilities (Excl. divested brands) Merger Sub (RMT Brands) Coty Cosmetics P&G Assets & Liabilities

obligations, union work rule limitations, increasing fuel and ingredients costs, and the 20082009 US recession. Hostesss product offering included such well-known brands as Twinkies, Wonder Bread, Natures Pride, Dolly Madison, Drakes, Butternut, Home pride and Merita. While each brand had a strong consumer following, the firm was an operational

Chapter 18 Alternative Exit and Restructuring Strategies: Bankruptcy Reorganization and Liquidation Chapter Discussion Questions 17.1 Why would creditors make concessions to a debtor firm? Give examples of common types of concessions made? Answer: Creditors may decide to allow the insolvent firm to continue to operate, because they believe

Perhaps reflecting excessive hubris, Sam Zell failed to allow for much of anything to go wrong, even those factors that were beyond his control such as a slowing economy. The advisors to the transaction and the lenders, intent upon reselling Tribune loans, may have been too focused on the

Overcoming Political Risk in Cross-Border Transactions: Chinas CNOOC Invests in Chesapeake Energy Cross-border transactions often are subject to considerable political risk. In emerging countries, this may reflect the potential for expropriation of property or disruption of commerce due to a breakdown in civil order. However, as Chinese efforts to

Chapter 19 Cross-Border Mergers and Acquisitions: Analysis and Valuation Answers to End of Chapter Discussion Questions 18.1 Discuss the circumstances under which a non-U.S. buyer may choose a U.S. corporate structure as its acquisition vehicle. A limited liability company? A partnership? Answer: A C corporation is

modifying the offer price either by raising the all-cash offer, lowering the cash-portion of the cash and stock alternative, or both. From the outset, the deal's size triggered resistance from regulators due to concerns about stifling competition. The global market share of AB InBev and SABMiller together would

Some observers compared the regulatory reaction to the Comcast and TWC tie-up to AT&Ts $39 billion bid to buy T-Mobile in 2011, the last big telecom merger killed by the DoJ. While AT&T and T- Mobile were competitors in large geographic areas, Comcast and TWC did not compete directly. Therefore,

In the wake of these court rulings and in an effort to avoid similar situations in other geographic regions, coordination among antitrust regulatory authorities in different countries has improved. For example, in mid-2010, the U.S. Federal Trade Commission reached a consent decree with scientific instrument manufacturer Agilent in approving its

Chapter 2 The Regulatory Environment Answers to End of Chapter Discussion Questions 2.1 What factors do U.S. antitrust regulators consider before challenging a merger or acquisition? Answer: Regulators attempt to measure the likelihood of increased market power, i.e., the ability to raise prices resulting from a business

37 less the MCI special dividend). The $1.4 billion special dividend reduced MCI's cash in excess of what was required to meet its normal operating cash requirements. Qwest consistently attempted to outmaneuver Verizon by establishing a significant premium between its bid and Verizon's, often as much as 25

21 for any remaining shares outstanding. Minority shareholders must tender their shares at this point, ask the courts to determine if the offer is fair (if this is permitted by the laws of the state in which the target is incorporated) or risk holding worthless stock. determine if the

Chapter 3: The Corporate Takeover Market: Common Takeover Tactics, Anti-Takeover Defenses, and Corporate Governance Answers to End of Chapter Discussion Questions Common Takeover Tactics, Anti-Takeover Defenses, and Corporate Governance Answers to End of Chapter Discussion Questions Common Takeover Tactics, Anti-Takeover Defenses, and Corporate Governance Answers to End of Chapter

Chapter 4 Planning: Developing Business and Acquisition PlansPhases 1 & 2 of the Acquisition Process Planning: Developing Business and Acquisition PlansPhases 1 & 2 of the Acquisition Process Planning: Developing Business and Acquisition PlansPhases 1 & 2 of the Acquisition Process 4.1 How does planning facilitate the acquisition process?

21 The terms of the deal called for all outstanding shares of WhatsApp stock and options to be canceled in exchange for $4 billion in cash and 183,865,778 shares of Facebook Class A common stock. The Class A common stock was valued at $12 billion based on

33 In 2010, about one-fourth of U.S. homes used only cell phones, and cable behemoth Comcast, with 7.6 million residential and business phone subscribers, ranked as the nations fourth largest landline provider. CenturyTel has no intention of moving into the wireless and cable markets, which are maturing rapidly and

Chapter 5 Implementation: Search through ClosingPhases 3 to 10 Answers to End of Chapter Discussion Questions 5.1 Identify at least three criteria that might be used to select a manufacturing firm as a potential acquisition candidate. A financial services firm? A high technology firm? Answer: Selection criteria

21 Struggling Johnson Controls and Tyco Merge to Create More Focused Global Business KEY POINTS Having a clear business strategy makes target selection easier Approaching the target firm at the appropriate time with a compelling vision for the combined firms increases the probability of reaching

36 put itself at a major disadvantage in the U.S. cellular phone market. The merger did not close until October 26, 2004, due to the need to get regulatory and shareholder approvals. This gave Verizon, the industry leader in terms of operating margins, time to woo away customers from

2. How did private equity investments in both firms affect the size of the premium paid for Jos. A. Bank? Were the Private equity firms simply interested in getting a deal since it boosted the value of their investment? Explain your answer. Answer: Private equity

former Lucent managers and generate a brain drain. Other challenges include language and cultural differences due to the firms headquarters centered in France. Moreover, the French government remains a major shareholder in Alcatel and given the reluctance of French unions to accept layoffs, most of the terminations are likely to

Chapter 6 Integration: Mergers, Acquisitions, and Business Alliances Answers to End of Chapter Discussion Questions 6.1 Why is the integration phase of the acquisition process considered so important? Answer: If done correctly, the integration process can help to mitigate the loss of key talent or managers and

d. Discounts free cash flow to equity by the weighted average cost of capital e. None of the above Answer: B Answer: B Answer: B 14. Which of the following is true of the equity valuation model? a. Discounts free cash flow

Chapter 7: Merger and Acquisition Cash Flow Valuation Basics Answers to End of Chapter Discussion Questions 7.1 What is the significance of the weighted average cost of capital? How is it calculated? Do the weights reflect the firms actual or target debt to total capital ratio? Why?

18 Target Valuation Based on Following Multiples (MVC/VIC) Comparable Company Forward P/Ea Price / Revenueb Price /Bookc Enterprise Value to EBITDA Enterprise Value to Revenue Average Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Cols. 1-5 Medtronic 16.14 4.17 2.32 15.19 4.69 Boston Scientific

Chapter 8: Relative, Asset-Oriented, and Real Option Valuation Basics Answers to End of Chapter Discussion Questions 8.1 Does the application of the comparable companies valuation method require the addition of an acquisition premium? Why? / Why not? Answer: Yes. The use of multiples of comparable companies to

In an effort to demonstrate how conservative they had been, the CEO indicated that potential revenue synergies had not even been included in their financial models. However, he was convinced that there were significant upside revenue opportunities. He argued that by testing alternative scenarios reflecting a myriad of outcomes

Chapter 9: Financial Modeling Basics: Valuing the Target Firm Answers to End of Chapter Discussion Questions 9.1 What is financial modeling? How is it helpful in analyzing a firms financial statements? Answer: Financial modeling refers to the creation of a mathematical representation or model of the financial