M&A
What is the core purpose of M&A?
"the buying and selling of corporate assets to achieve on or more strategic objectives"
Capitalism/Synergy
(Making more money together than apart)
Pepsi wants to acquire Coca-Cola to create a new entity, Pepco.
Horizontal Merger
What act separated commercial and investment banks, effectively erradicating universal banks?
This alliterative term refers to the largest and most prestigious global investment banks, such as Goldman Sachs and Morgan Stanley.
Bulge Bracket Banks
Which corporate restructuring method allows a parent company to generate new equity from its subsidiary via a partial IPO to sell stocks to new shareholders?
A Carve-out.
SEC
Securities and Exchange Commission.
A blank is a public offer by an acquirer to all shareholders of a target company to tender their stock for sale at a specified price during a specified period of time.
A Tender Offer.
Walmart acquires a trucking company that delivers its goods.
Vertical Acquisition
This portion of the registration statement is provided directly to investors and summarizes key information about the offering.
A Prospectus.
Investment bankers utilize this valuation method to answer the question "Buy or Build?"
M&A Greenfield Analysis
What are the three types of synergies covered in your book?
Cost, Revenue, and Financial Synergies.
FTC
Federal Trade Commission
Every M&A transaction requires a blank process, which investigates a company's business in detail to review any issues regarding the target company.
A Due Diligence Process.
A company buys only the equipment and patents of another firm.
Asset Purchase
Which post-Great Depression act deals with regulating primary market activity?
The Securities Act of 1933.
Give a brief explanation of a Strategic Rationale.
A desire to achieve cost savings through legal, accounting, finance, and executive management.
Reducing redundant assets such as real estate holdings or corporate airplanes.
Determining the resulting benefit of an M&A transaction.
A spin-off provides the newly-formed subsidiary company with its own blank currency.
Acquisition Currency
LBO
Leveraged Buy Out
Name the 5 M&A structures covered in class.
- Horizontal
- Vertical
- Product Extension
- Congeneric
- Conglomerate
A company acquires a business in the same industry but with a different product line within that category.
Product-Extension Acquisition
This 2002 law was passed in response to major accounting scandals like Enron to improve corporate governance and financial reporting.
The Sarbanes-Oxley Act (SOX)
What is the role of an investment banker?
To initiate, conduct valuation on, and execute M&A transactions.
M&A Greenfield Analysis is conducted when a firm is trying to expand and determine what type of synergy?
Supply Chain Synergy
DCF
Discounted Cash Flow
Even though country-to-country regulations vary, M&A transactions occur globally.
When a non-US company acquires a US company in a stock-for-stock arrangement, blanks are used as an acquisition currency.
American Depositary Receipts (ADRs)
A commercial bank purchases an investment bank to offer a broader range of financial services to the same customer base.
Congeneric Merger
This 1938 act expanded corporate bankruptcy law and introduced modern reorganization procedures under federal oversight.
The Chandler Act
Name the 4 Alternative Sell-Side Processes listed in your book.
Preemptive, Targeted Solicitation, Controlled Auction, & Public Auction
A corporate blank involves changing a US company's legal domicile to another country that has a lower tax rate while still retaining most of the company's US operations.
Corporate Inversion.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization