4-25 - (4/25): Other M&A topics - Deal Structure: o...

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(4/25): Other M&A topics - Deal Structure: o What are the big issues with deal structure? Assets? Stocks? Combo of both? This matter a lot of tax and accounting issues o Where are the assets coming from? Public or private? o Is the buyer paying with cash or stock? o Who bears the risk and how do you allocate this risk amongst the parties? You can agree on price but there will still be uncertainty remaining and you have to address how you plan to handle that risk - Cash, Stock, or Debt o Cash Basically if you’ve got it, use it Don’t keep too much cash because it makes you an attractive target Projects should be NPV positive Think about BATNA: what else could I do with this cash? Basically all you can do is give it back to shareholders but this is inefficient in regards to tax purposes therefore you should use the cash for acquisitions/investing If you’re using cash, you should therefore use a lower discount rate, essentially cash is the cheapest form Goodwill is no longer amortized, its only deducted if its impaired You can reevaluate the assets increase assets by increasing cash to increase overall net income Accretive to earnings per share all you have to do is increase net income Biggest negative is the increased taxation to the target
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4-25 - (4/25): Other M&A topics - Deal Structure: o...

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