9/8/2021
1
Introduction to VMA
VMA; S1
Prof. Jijo Lukose P.J.; IIM Kozhikode
Introduction
VMA S1 2
Acquisitions are great for target companies but not always for
acquiring company stockholders…
Acquisitions seems to be a “loser’s game”as acquiring firms tend to
Pay too much for target firms
Over estimate the value of “synergy”and “control”
9/8/2021
2
Global Deal Volumes and Values
VMA S1 3
Source: Refinitiv, Dealogic and PwC analysis
Megadeals—those with a deal value over US$5bn
The surprising strength in deal valuations
VMA S1 4
Following the global financial crisis, deal multiples dropped by about 30%
over two years. During2020, the opposite has happened.
Globally, median EV to EBITDA deal multiples increased to 14 times from
13 times in 2019, underpinned by faster-growing industries, where multiples
either held steady or increased. In the current low-growth environment,
the premium for growth remains high.
In industries such as technology, telecommunications, digital media, and
pharmaceuticals, valuations increased.
The opposite was the case in industries such as retail and energy, where
valuations weakened
If Covid-19–inspired consumer behavior continues- that is, if consumers
maintain their preference for food delivery, telemedicine, online gaming, and the
like-valuations are likely to continue to remain healthy
Government stimulus, low interest rates, a spike in household savings rates,
record PE dry powder, and accessible debt capital markets, contributed to
sustained asset prices in 2020.
9/8/2021
3
Deal activities in India during 2020.
VMA S1 5
Deal summary Volume Value (USD mi)
Year 2019 2020 2019 2020
Domestic 255 209 16,393 16,406
Cross-border 177 142 9,900 21,019
•Inbound 95 66 7,905 18,076
•Outbound 82 76 1,995 2,943
Restructuring 11 7 1,340 35
Total M&A 443 358 27,633 37,460
PE 816 943 33,452 40,207
Grand Total 1,259 1,301 60,085 77,667
Source: Annual Dealtracker 2021, Grant Thornton India
VMA S1 6
Year Purchaser Target ( USD B)
1 1999Vodafone Group Mannesmann 202
2 2000AOL Inc Time Warner 165
3 2013Verizon Communications Verizon Wireless 130
4 2015Dow Chemical DuPont 130
5 2015Anheuser-Busch InBev SAB Miller 117.4
6 1999Pfizer Warner-Lambert 111.8
7 2015Heinz Kraft 100
8 2007RFS Holdings BV ABN Amro BV 98
9 2015Charter Communications Time Warner Cable 78.7
10 1998 Exxon Mobil 77.2
9/8/2021
Agenda
VMA S1 7
Course outline
Introduction: Terminology, Economic rationale and Strategy
Valuation and Financial Modeling
M&A Deal Structuring and Financing
Terminology
Types of Mergers
Empirical Patterns
M&A
Mergers – Any transaction that forms one
economic unit from two or more previous units.
