Mergers & Acquisitions

FACT SHEET

Sources & Equity purchase price Acquirer’s cash used

Uses of Funds Refinanced net debt

Revolving credit facility
Transaction fees
Long term debt
OWC adjustment
Pension deficits,
operating leases, other
claims on the business Other Equity issued

USES SOURCES

Offer Premium % = (Offer price ÷ Target unaffected price) − 1

s
ch
Equity Purchase Price = Target diluted shares outstanding × Offer price
a.k.a Acquisition Equity Value
Sa
Acquisition Enterprise Value = Acquisition equity value + Target net debt and debt equivalents

Advisory Equity Issuance Debt Issuance

an

Fees
% OF ACQUISITION EV % OF FUNDS RAISED
dm

Consolidation
ol

Consolidated Balance = Acquirer account balance + Target account balance +/− Transaction effects
G

Balance Sheet Transaction Effects Income Statement

◦ Zero out the Target’s
shareholders’ equity
◦ Zero out the Target’s goodwill
and add deal goodwill
◦ Step ups and Step downs ◦ Increase / Decrease in
interest expense
◦ Changes in Cash / Equity /
Debt for deal financing ◦ Decrease in interest income
◦ Synergies
◦ Additional Depreciation /
Amortization
◦ Tax impacts from all
transactions effects

Target shares
Exchange Ratio = New shares issued ÷ or = Offer price ÷ Acquirer price × Stock %
purchased

Acquisition PE Multiple = Offer price ÷ Target EPS

Debt PE Multiple = 1 ÷ After-tax cost of debt

Synergies to Breakeven = Max(0, (Acquirer EPS − Pro forma EPS) × Pro forma shares) ÷ (1 − Tax rate)

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 Mergers & Acquisitions
FACT SHEET

Goodwill
Consolidated Goodwill = Acquirer goodwill + Target goodwill + (Deal goodwill − Target goodwill)

Shareholder equity
Deal Goodwill = Equity purchase price − + Implied goodwill for NCI share
bought at fair value if applicable

Shareholder Equity Target shareholder equity Target Asset step ups/ Asset step downs/
= − + −
Bought at Fair Value bought at book value goodwill liability step downs liability step ups

Implied Goodwill for NCI Share = NCI fair value − (Target equity on BS × (1 − % purchased))

s
ch
Non-Controlling Interests (NCI) Sa
Ending NCI = Beginning NCI + NCI % of net income − NCI % of dividends paid
an

Accretion and Dilution

+ Acquirer net income
dm

+ Target net income

= Combo net income before adjustments
+/− Post-tax adjustments including synergies, interest expense + Acquirer shares outstanding
/income and incremental depreciation and amortization + New shares issued
ol

Pro Forma Earnings Per Share = Pro forma net income ÷ Pro forma shares outstanding
G

Deal EPS Accretion/Dilution = (Pro forma EPS ÷ Acquirer EPS) − 1

Ownership
Post-deal

Acquirer Post-deal Ownership = Acquirer shares outstanding ÷ Pro forma shares outstanding

Target Post-deal Ownership = New shares issued ÷ Pro forma shares outstanding

Acquisition EV plus
ROIC = (Target NOPAT + (Synergies × (1 − Target marginal tax rate))) ÷
Invested Capital

transaction costs
Return On

Target NOPAT = Target EBIT × (1 − Effective tax rate)

Acquisition EV = Equity purchase price + Target net debt and debt equivalents

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