Giddy | A 3-day workshop on mergers, acquisitions and divestitures

Mergers, Acquisitions & Divestitures

Prof. Ian Giddy, New York University

A 3-day training workshop dedicated to the valuation, structuring, financing and negotiating of M&A transactions

Evaluating and pricing acquisitions: targets and synergies
Identifying and screening candidates
Rigorous pre-merger analysis of target -- and buyer
Negotiating the terms of the deal
Managing post-acquisition integration and divestitures
Financing and structuring the deal

About the Course
This three-day course uses an analytical "corporate finance" framework and real-world applications to introduce the key principles and techniques of successful mergers and acquisitions. It addresses crucial questions including: Why do mergers that looked great on paper fail in reality? How does one value companies acquiring, or being acquired? What is the best negotiation strategy? When is the time to divest a business? How can a merger be funded in such a way as to retain the merged entity's flexibility? When do leveraged acquisitions make sense, and how can they be financed?

One goal for participants is to develop a check list or rapid overview of the key criteria in an acquisition deal, to consider when analysing a proposal, so as to grasp the main strengths and risks of the strategic and financing alternatives after an initial analysis.

Who Will Benefit?
The workshop is of relevance to professionals involved in acquisitions who need to know more about M&A strategy, valuation and acquisition-related financing techniques. These include corporate finance officers, commercial and investment bankers, securities analysts; investment officers; corporate treasurers and other individuals whose professional future may be enhanced by an understanding of acquisition finance techniques.

Materials
Participants will be provided with a package of materials useful to the structuring and analysis of merger and LBO transactions, including pertinent articles and sample documentation from transactions done in North America, Europe and elsewhere. The workshop will include case studies of actual financings, as well as hands-on exercises, and will give participants the opportunity to demonstrate their understanding of deals through group work and plenary discussions.

Key Issues

How has the M&A world been altered by the global credit crunch?
How can a company develop an acquisition strategy? How should it be implemented?
How should a target company be valued?
How can one assess the potential gains from an acquisition -- and the costs?
What are the key features of screening and due diligence?
Should the buyer pay in cash or in shares? What are the other key elements to be negotiated before signing a letter of intent?
When should a company divest? What are the alternative ways of divesting a business?
What are the essential terms and conditions, covenants and pricing, of different sources of acquisition finance, including bank loans, mezzanine finance and high yield bonds?
What are the essential features of leveraged acquisitions? How can one structure the financing of an LBO, making it attractive to private equity and other investors, without losing flexibility?

Workshop Outline

Date	Topics	Materials
Day 1	Corporate Finance, Strategy and the Economics of M&A The M&A market and the effect of the credit crunch Decisions that create shareholder value The five principles of corporate value: Investments, acquisitions, financing, payback and risk management Managers’ vs shareholders’ vs lenders' interests: the agency problem Mergers and acquisitions: when do they make sense? Mini-case studies: Wärtsilä NSD, Sterling Drug, AOL-Time Warner The distinguishing features of successful and unsuccessful deals Research evidence on which mergers add value, and which destroy value When an acquisition goes wrong Case study: The Acquisition of Allied Colloids. Delegates will follow the sequence of events in this cross-border merger and develop a due diligence checklist. The four sources of acquisition value Screening and Analysis of Acquisition Targets Defining your acquisition objectives Establishing specific acquisition criteria Selecting advisors Screening: from long list to short Discussion: Acquisition Criteria for Akis Corporation Is it the right target? Where is the value added? Pre-offer analysis of the potential target Are shareholders going to like the deal? Why or why not? Required performance improvements embedded in the acquisition premium What does it take after doing the deal to make it all work? Acquisition Valuation: Tools What are the target's value-drivers? Valuation methods for acquisitions Asset-based and balance-sheet approaches Multiples and comparables Enterprise value and EBITDA Free cashflow-discount models Leveraged Buyout method Case study: Active Generation. Delegates value a private company for acquisition, using both comparables and cash flow methods and incorporating the results of potential synergies Special-situation valuation methods Real option valuation: buying opportunities despite negative cash flows Distress and turnaround situations Blank-check acquisition companies Application: DeCode Genetics. Delegates are challenged to identify the upside opportunity in this Icelandic biotechnology company.	Presentations M&A Strategy Acquisition Screening and Analysis M&A: Tools of Valuation Case Studies Goldfield 2009 Allied Colloids: Episode 1 Allied Colloids: Episode 2 Active Generation DeCode Genetics Articles Glossary of M&A Terms Technology Mergers Types of Mergers and Acquisitions Calculating a Company’s Cost of Capital Methods of Valuing a Business Spreadsheets wacccalc.xls corpvaluation.xls actavis_valuation.xls active_generation_valuation.xls
Day 2	Estimating the Synergies Review: The sources of acquisition value-added Case study: The SBC-AT&T Merger. Delegates seek to isolate the potential synergies in a merger of two mature telecoms companies. A restructuring checklist Total cost computation Valuing the combined company Break-up valuation Synergy analysis Sensitivity analysis Case study: MTC-Celtel. Delegates value the synergies resulting from a potential acquisition, adjusting for risk and cost-of-capital effects and employing sensitivity analysis on the hoped-for synergy gains. Negotiating the Merger's Terms Role of investment bankers and other advisors Developing a negotiating stance Understanding sellers' goals and constraints Dealing with defensive strategies: poison pills and other devices Mini case study: Goldfield's Anti-Takeover Defenses Dealing with rival bidders Dealing with private owners Structuring the deal: How much should we pay? How should we pay? The proposed basic Term Sheet Keep the romance alive during due diligence and while you secure financing Closing the deal Case study: Lifetime-AGI. Delegates engage in a hands-on negotiating exercise including valuation, setting the price and payment terms of the merger, and negotiating control Post-Agreement Due Diligence A due diligence checklist What due diligence can reveal – and what it cannot When diligence goes wrong Tailoring due diligence to the company and industry Case study: New York Magazine. What are the key aspects of due diligence in the publishing world?. Post-Merger Integration Major factors determining success of post-merger integration Checklist of areas of risk Compensation and motivation issues Setting milestones Divestitures Case studies: Penn State and Geisinger, Lacsa and Taca. Delegates discuss pitfalls and alternative approaches to post-merger integration success. They prepare an action plan for the effective integration of two companies.	Presentations M&A: Valuation Applications Negotiating a Merger Post-Agreement Due Diligence Post-Merger Integration Case Studies The SBC-AT&T Merger MTC-Celtel Goldfield: Anti-Takeover Defenses Johnson & Johnson vs Guidant Life Time: Acquisition of AGI New York Magazine Penn State and Geisinger: Post-Merger Integration Articles and Documents Sample Letter of Intent Sample Confidentiality Agreement Sample Purchase Agreement Sample Due Diligence Checklist Post-Merger Integration: Airlines Analysis of a Merger Failure Spreadsheets mergersynergy.xls bofafleetupdate.xls mtc-celtel.xls
Day 3	Divestitures Post-acquisition divestitures Measuring and managing break-up value Taxable and tax-free corporate breakups Before-and-after divestiture analysis Case study: Caterpillar. Delegates learn how to perform a before-and-after divestiture valuation Acquisition Finance and Buyouts The different approaches of financial vs strategic buyers Capital structure considerations Case study: Photronics. Delegates evaluate alternative financing techniques in the context of this Asian acquisition situation. Senior secured bank financing - terms and conditions The cost of revolvers. term loans and bridge finance Sources of acquisition debt finance - no longer just the banks Asset-based finance, including sale-leaseback Case study: Madras Appliances: Financing the acquisition of an an Indian retail company Mezzanine finance, including second-lien, PIKs and warrant loans Subordinated seller notes and earn-outs Example of spreadsheet-based debt capacity analysis for leveraged finance Focus: synthetic ratings and debt pricing Case study: Acquiring Plato Data. We plan the financing of a management-led leveraged acquisition. Focus: mezzanine and private equity finance Valuation in LBOs: “The VC Method” Paydown and exit analysis Summary and Conclusions	Presentations Divestitures Selling a Company Acquisition Finance Case Studies Caterpillar Financing Photronics Funding the Madras Acquisition Acquiring Plato Data Articles A Note on LBOs Mezzanine Debt 1 and 2 Exit Valuation Spreadsheets breakup.xls caterpillar_breakup.xls ratings.xls platodata_case.xls platodata_solution.xls

Additional Resources
Books
Applied Mergers and Acquisitions (Robert Bruner). The MBA textbook
Mergers, Acquisitions and Corporate Restructuring (Donald dePamphilis). The book I use
Doing the M&A Deal (Michael P. Gendron). Due diligience and integration planning
Damodaran on Valuation (Aswath Damodaran). Essential and practical
Valuation for Acquisitions, Buyouts and Restructuring (Enrique Arzac). Good but quite mathematical

Background Articles
Methods of Corporate Valuation
Notes on cost of capital and capital structure .
Critique of Valuation Methods
Private Equity Valuation Guidelines
A Company in One Page
The Fool's Method
Warren's World
Corporate Financial Restructuring
Real options valuation

Useful Links
dealbook (M&A and private equity deals)
biz.yahoo.com (summary data and financials)
morningstar.com (summary financials)
investinginbonds.com (treasury rates, corporate bond prices and ratings)
standardandpoors.com (bond ratings)
fitchratings.com (leveraged finance)
damodaran.com (industry ratios)
advfn.com (corporate financial ratios)

The Instructor
Ian Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in over 45 countries worldwide for the past three decades. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, he has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous corporations and financial institutions in the U.S. and abroad. As a banker and consultant he has been involved in the growth of the capital markets in the USA, Europe and Asia. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail Guide. He and his wife are the founders of Cloudbridge, a nature reserve in Costa Rica.