Kevin M Brett April 30, 2013
1,896 mergers or acquisitions $471.5 billion Hewlett Packard/Compaq Disney/ABC ABC/ESPN AOL/ Time Warner Time/Warner Brothers Daimler Benz/Chrysler Budweiser/Corona
Gain new technology and talent Grow Revenue Strategic Assets Market Share Synergies
“I'm all for progress. It's change I object to.” – Mark Twain
Approximately 70 percent of deals fail Inadequate “Due Diligence” Acquiring companies blow integration Acquired employees head for the exits Need to welcome acquired employees
Size of Deal? Financing? How many are going to be laid off? Is the deal accretive or dilutive to EPS? Is there any product or customer overlap? How will you integrate the two companies? Anti-Trust Issues? Will you report the deal on a Pro Forma basis?
Cash from Balance Sheet Stock (1 for 1 or Ratio) S4 (Issue More Stock) LBO (Leveraged Buyout): Combo of Cash/Stock and Debt
GAAP Greater or Equal Prominence to Pro Forma – SEC Reg. G GAAP: Generally Accepted Accounting Principles Pro Forma, Non-GAAP or Earnings Before Special Items Pro Forma: “For The Sake of Form” Pro Forma: Results from Continuing Operations
Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Amortization: $1 million Operating Margin: ($500,000) Taxes: $200,000 Net Loss: ($700,000)
Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Operating Margin: $500,000 Taxes: $200,000 Net Income (Loss): $300,000
Anheuser Busch, 39% Miller Coors, 26% Grupo Modelo, 7% Heineken USA, 6% Others, 22%
“Class Assignment: Do Not Trade” Both companies announce definitive merger agreement Establish the price of the deal Announce cash and/or stock financing (1 for 1) Accretive to acquiring company’s EPS in one year Subject to successful completion of Hart-Scott- Rodino and other closing conditions Quotes from both CEOs Both Boilerplates/One Safe Harbor