MERGERS AND ACQUISITIONS

1. As a member of BANK OF NEW YORK’s board of director’s would you vote to approve the merger under
the terms (particularly the exchange ratio) described in the case?
2. Why would you vote “Yes”?
3. How valuable are the synergies? Give the Synergy valuation
4. How certain can we of forecasted cost savings?
5. What steps have the two companies taken to mitigate these risks?
6. Will the synergy cash flows allow the combined banks to increase debt in proportion to value?
7. What are the comparable companies (used in estimating the required rate of return on assets)?
8. In calculating betas, should deposits be included in a bank’s capital structure?
9. Under the terms of the proposed deal, what fraction of the synergies will be captured by Mellon shareholders?
The BNY legacy shareholders?
10. Under these assumptions who benefits from the deal?
11. Absent synergies, what exchange ratios would keep the share values constant?
12.why was BNY not satisfied with this “zero –premium” or value – neutral exchange ratio?
13. What is the impact of “zero –premium” exchange ratio on the earnings attributable to each legacy share?
14. Why is the value neutral deal dilutive for BNY?
15. Absent synergies, what exchange ratios would hold EPS constant?
16. Is it possible to find an exchange ratio that holds wealth constant and that holds EPS constant for all
shareholders?
17. Would you sacrifice wealth for EPS? Vice-versa? Why?
18. The proposed exchange ratios are MEL 1:1 and BK 0.9434:1. Absent synergies, will this exchange be
accretive or dilutive to Mellon? To the BANK OF NEW YORK? Will there be a wealth transfer from one
firm to the other?
19. What impact do synergies have? At the proposed exchange what fraction of the synergies will be captured
by MEL shareholders? BK shareholders?
20. What impact will synergies have on EPS for the two firms?
21. The BANK OF NEWYORK argues the exchange ratio is fair –in spite of current market prices-because
they are undervalued .Is BK undervalued? Or is it a negotiation tactic? Is their threat to walk away from a
dilutive deal credible?
22. Is Bob Kelly selling out his shareholders ((and Pittsburgh) in exchange for a bigger office?
23. As a member of Mellon Financial ‘s Board of Directors, would you vote to approve the merger under the
terms (particularly the exchange ratio) described in the case?

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