Major flaws with the accretion/dilution analysis Lack of full-scale financials Pro-forma balance sheet Interest expense: neglecting the debt that could be paid down each year Postmerger cost savings Depreciation & amortization: it would be more accurate to combine the total assets and rebuild a depreciation schedule from scratch Building a full-scale model Assumptions (purchase price,…
Author: Finterest
Journal Report 15: Today-I-learn about Accretion/Dilution Analysis
Major steps to conducting an M&A analysis Obtaining a purchase price Estimating sources and uses of funds Creating a pro-forma analysis Obtaining a purchase price The acquirer would need to consider a purchase based on the acquiree’s diluted shares, not basic ones. Uses of funds Purchase price Net debt Transaction fees Net debt (as opposed…
Journal Report 14: Today-I-learn about Asset acquisitions and Asset Divestitures
3 major methods of facilitating acquisitions Asset acquisitions: purchase only assets; the higher price paid for the assets is amortized and deductible for tax purposes. Stock acquisitions: purchase the whole entity, including all assets and liabilities; the higher price paid, specifically goodwill, is not amortized. 338(h)(10) elections: best of both worlds; available to buyers of…
Journal Report 13: Stress testing
Definition A computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Helping gauge investment risk and the adequacy of assets, as well as to help evaluate internal processes and controls. E.g: What happens if unemployment rate rises to v% in a specific year? What happens if…
Ep 110: Winner Takes All
What’s Going On Here? JPMorgan became the 1st investment bank to reveal its first-quarter results – and they seemed to like what they saw. What Does This Mean? While JPMorgan’s total revenue was slightly lower than investors had predicted, the bank did well where it mattered most. Its “net interest income” was higher than expected,…
Journal Report 12: Today-I-Learn about M&A
The M&A Takeover tactics Although there are many facets to M&A and the industry is constantly evolving, it is important to understand the possible steps an acquirer would take in order to pursue a target business. The early stages are considered friendly, and the latter hostile. Donald DePamphilis, Mergers, Acquisitions, and Other Restructuring Activities. Available…
Journal Report 11: The Best Acquisitions of All Time
Methodology The list is ranked by the estimate of the absolute dollar return to the acquirer. Acquisitions must be at least a majority stake in the target company. Revenue multiples are used to estimate the current value of the acquired company, equal its current estimated revenue x the market cap-to-revenue multiple of the parent company’s…
Journal Report 10: The big picture of the Rise and Decline of the Economy
Introduction This post gives a description of the cause-effect relationships behind the rise and decline of the most powerful empires. It is the author’s distillation of the dynamics he saw in studying the 3 reserve currency empires (the Dutch, the British, and the American), the 6 other significant empires (Germany, France, Russia, India, Japan, and China), and…
Journal Report 9: COVID-19 – McKinsey Briefing note
Epidemiological swing factors for COVID-19 Growth of new transmission complexes and evidence of seasonality; Impact of physical-distancing measures; The readiness of the health system to navigate recurrence; The emergence of herd immunity. Two new insights Beyond coronavirus: The path to the next normal; Safeguarding our lives and our livelihoods: The imperative of our time. Image…
Ep 109: Two Accounting Scandals in China in One Week Burn Investors
What’s going on here? China’s second accounting scandal in less than a week is underscoring concern over lax corporate governance at some of the country’s fastest-growing companies. TAL Education Group, a tutoring business, delivered the latest bombshell after a routine internal audit found an employee had inflated sales by forging contracts. Forgery is usually considered…
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