Mergers and Acquisitions E-Book

Steven M. Bragg

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 434

Veröffentlichungsjahr: 2008

Beschreibung

Accounting expert Steven Bragg equips you with a working knowledge of the complete M&A process throughout Mergers and Acquisitions: A Condensed Practitioner's Guide, with comprehensive, reader-friendly, and straightforward advice on principal business terms, as well as the due diligence process, the customary contractual provisions, legal background, and how-to's applicable to business acquisitions. Destined to become a well-thumbed addition to every manager's library, this essential guide addresses the entire acquisition process with pragmatic information that will serve you as an excellent reference whether you are a novice or expert acquirer.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Preface

About the Author

Free On-Line Resources by Steven Bragg

Chapter 1 - The Acquisition Process

WHY WE ACQUIRE

WHY A TARGET SELLS

ACQUISITION STRATEGY

THE BASIC ACQUISITION PROCESS FLOW

THE AUCTION PROCESS FLOW

LOCATING AND CULLING ACQUISITION TARGETS

THE OPTIMAL TARGET SIZE

EVALUATE ACQUISITION TARGETS WITH ALLIANCES

ACQUISITION RISKS FOR THE BUYER—VALUATION

ACQUISITION RISKS FOR THE BUYER—LEGAL

ACQUISITION RISKS FOR THE SELLER

ACQUISITION FOLLOW-UP ACTIVITIES

THE HOSTILE TAKEOVER

DEFENDING AGAINST A HOSTILE TAKEOVER

SUMMARY

Chapter 2 - Key Participants

THE ACQUISITION TEAM

ATTORNEYS

BOARD OF DIRECTORS

BROKERS

THE CHIEF EXECUTIVE OFFICER

INVESTMENT BANKERS

INVESTOR AND PUBLIC RELATIONS

LENDERS

LINE MANAGERS

SPECIALIST CONSULTANTS

PLAYERS IN HOSTILE TAKEOVERS

INTEGRATION TEAM

SUMMARY

Chapter 3 - Valuing an Acquisition Target

ALTERNATIVE VALUATION METHODS

THE CONTROL PREMIUM

SYNERGY GAINS

THE DISCOUNTED CASH FLOW (DCF) MODEL

CONSTRUCTING CASH FLOW SCENARIOS

CASH FLOW ADJUSTING FACTORS

THE EARNOUT

QUALITATIVE FACTORS

WHICH VALUATION METHOD IS BEST?

THE METHOD OF PAYMENT

SUMMARY

Chapter 4 - The Term Sheet

REASONS FOR USING A TERM SHEET

COMPONENTS OF A TERM SHEET

SUMMARY

Chapter 5 - Due Diligence

DUE DILIGENCE TEAM STAFFING

DUE DILIGENCE INTERVIEWS

DUE DILIGENCE—OVERVIEW

DUE DILIGENCE—MARKET OVERVIEW

DUE DILIGENCE—CULTURE

DUE DILIGENCE—PERSONNEL

DUE DILIGENCE—INTELLECTUAL PROPERTY

DUE DILIGENCE—BRANDS

DUE DILIGENCE—RISK MANAGEMENT

DUE DILIGENCE—CAPACITY

DUE DILIGENCE—ASSETS

DUE DILIGENCE—LIABILITIES

DUE DILIGENCE—EQUITY

DUE DILIGENCE—PROFITABILITY

DUE DILIGENCE—CASH FLOW

DUE DILIGENCE—CUSTOMERS

DUE DILIGENCE—PRODUCT DEVELOPMENT

DUE DILIGENCE—PRODUCTION PROCESS

DUE DILIGENCE—INFORMATION TECHNOLOGY

DUE DILIGENCE—LEGAL ISSUES

DUE DILIGENCE FOR A BUSINESS SEGMENT

DUE DILIGENCE—FORECASTS

DUE DILIGENCE—MISSING INFORMATION

COMPLEXITY ANALYSIS

DUE DILIGENCE—RED FLAGS

DUE DILIGENCE—SELLER’S PERSPECTIVE

Chapter 6 - The Purchase Agreement

COMPONENTS OF A PURCHASE AGREEMENT

THE MERGER SECTION

THE LETTER OF TRANSMITTAL SECTION

THE REPRESENTATIONS AND WARRANTIES SECTION—SELLER

THE REPRESENTATIONS AND WARRANTIES SECTION—BUYER

THE SURVIVAL OF REPRESENTATIONS AND WARRANTIES SECTION

THE CONDUCT OF BUSINESS SECTION

THE ADDITIONAL AGREEMENTS SECTION

THE CLOSING SECTION

THE TERMINATION PRIOR TO CLOSING SECTION

THE SUPPORTING DOCUMENTS SECTION

EXHIBITS

THE SELLER DISCLOSURE SCHEDULE

THE CLOSING MEMORANDUM

SPECIAL CLAUSES

POST-CLOSING ACTIVITIES

NEGOTIATING THE PURCHASE AGREEMENT

MECHANICS OF THE CLOSE

SUMMARY

Chapter 7 - The Acquisition Integration Process

INTEGRATION TIMING

INTEGRATION PLANNING

SYNERGY REALIZATION

THE INTEGRATION MANAGER

THE INTEGRATION TEAM

INTEGRATION COMMUNICATIONS—INTERNAL

INTEGRATION COMMUNICATIONS—EXTERNAL

ANGER MANAGEMENT

PROGRESS REPORTING—EXTERNAL

CULTURAL ISSUES

EMPLOYEE INTEGRATION—QUALIFICATION ASSESSMENT

EMPLOYEE INTEGRATION—JOB POSITIONING

EMPLOYEE INTEGRATION—RELOCATIONS

EMPLOYEE INTEGRATION—KEY EMPLOYEES

EMPLOYEE INTEGRATION—FOUNDERS

EMPLOYEE INTEGRATION—UNIONS

LAYOFFS

COMPENSATION INTEGRATION

SALES INTEGRATION

PROCESS INTEGRATION

TECHNOLOGY INTEGRATION

CONTROLS INTEGRATION

BOARD INTEGRATION

INTEGRATION METRICS

INTEGRATION PACING

SUMMARY

Chapter 8 - Accounting for Acquisitions

PURCHASE PRICE ALLOCATION

FAIR VALUE DETERMINATION

INTANGIBLES IDENTIFICATION

DUPLICATIVE ASSETS AND ASSETS TARGETED FOR DISPOSITION

EXAMPLE OF THE ACCOUNTING FOR AN ACQUISITION (WITH GOODWILL)

EXAMPLE OF THE ACCOUNTING FOR AN ACQUISITION (WITH NO GOODWILL)

INITIAL GOODWILL IMPAIRMENT TESTING

ONGOING GOODWILL IMPAIRMENT TESTING

EXAMPLE OF GOODWILL IMPAIRMENT TESTING

TIMING OF ANNUAL GOODWILL IMPAIRMENT TESTING

PUSH-DOWN ACCOUNTING

SUMMARY

Chapter 9 - Types of Acquisitions

THE TAX IMPLICATIONS OF AN ACQUISITION

THE ASSET ACQUISITION

THE TYPE “A” REORGANIZATION

THE TYPE “B” REORGANIZATION

THE TYPE “C” REORGANIZATION

THE TYPE “D” REORGANIZATION

THE TRIANGULAR MERGER

THE REVERSE TRIANGULAR MERGER

THE ALL-CASH ACQUISITION

APPRAISAL RIGHTS

SUMMARY

Chapter 10 - Government Regulation

ANTI-TRUST REGULATIONS

INTERNATIONAL ANTI-TRUST REGULATIONS

ENVIRONMENTAL REGULATIONS

SUMMARY

Appendix A - Due Diligence Checklist

Index

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Library of Congress Cataloging-in-Publication Data

Bragg, Steven M. Mergers & acquisitions : a condensed practitioner’s guide / Steven M. Bragg. p. cm. Includes index.

eISBN : 978-0-470-44731-4

1. Consolidation and merger of corporations. I. Title. II. Title: Mergers and acquisitions. HG4028.M4B69 2009 658.1’62-dc22 2008023252

To my extremely tolerant wife, Melissa. Thanks for handling everything while I hide behind my computer.

Preface

Thousands of companies are bought and sold every year. Many of these transactions leave the buyers and sellers frustrated, because either they don’t know how the process works, or because the results are below their expectations. Here are some common problems:

• The seller does not know how to maximize its value before being acquired

• The seller does not know how to conduct an auction, or the issues related to doing so

• Both parties are unaware of the various methods used to value the transaction

• The buyer misses key issues during due diligence that adversely impact the value of the deal

• Both parties are unaware of the key points in the purchase agreement to be negotiated

• The seller discovers too late that the transaction is not structured to be tax-deferred

• The buyer has difficulty accounting for the acquisition

• The buyer does not realize that it has run afoul of government anti-trust regulations

• The buyer does not know how to integrate the acquired company into its operations

Mergers & Acquisitions: A Condensed Practitioner’s Guide provides answers to all of these problems, and many more. It is designed for the business manager who must be fully aware of all key steps in the acquisition process, and is organized to approximate the flow of an acquisition.

Chapter 1 addresses the overall acquisition process. It also notes why companies are interested in buying and selling businesses, the risks of doing so, how to locate and qualify acquisition targets, and how to both initiate and fend off a hostile acquisition attempt.

Chapter 2 describes the roles of the multitude of participants in the acquisition process, including the acquisition team, attorneys, board of directors, brokers, investment bankers, investor relations officer, lenders, line managers, and consultants.

Chapter 3 addresses the key area of valuation. The chapter reveals a broad range of valuation methodologies, with particular attention to the discounted cash flow method. It also notes the impact on valuation of the control premium, synergies, earnouts, and qualitative factors, as well as the strategic use of various types of payment.

Chapter 4 describes the use and contents of a term sheet, and gives examples of its primary components.

Chapter 5 delves into the due diligence process in considerable detail. Supplemented by the due diligence list in Appendix A, it describes the due diligence team and how it functions, and offers pointers on many due diligence topics, including such key areas as marketing, culture, intellectual property, risk management, capacity planning, customers, and many financial issues. It also highlights red flags, complexity analysis, and how to handle missing information.

Chapter 6 describes all main components of the purchase agreement and related exhibits and disclosure schedules. It includes sample text, and also notes which areas are the most important from the perspective of the buyer and seller. It also provides commentary on post-closing activities, and how to negotiate the purchase agreement.

Chapter 7 covers the acquisition integration process. This is a massive chapter, given the exceptional importance of the topic. It covers the timing, planning, and implementation of an acquisition’s integration, and also delves into the identification and realization of synergies, communications processes, cultural issues, employee management, and numerous additional topics.

Chapter 8 is designed for the accountant who must consolidate the results of an acquisition into the financial statements of the buyer, including the use of purchase accounting, goodwill impairment testing, and push-down accounting.

Chapter 9 addresses the various legal forms of acquisitions, including their tax implications to both the buyer and seller.

Chapter 10 covers anti-trust regulations, who they affect, and the related reporting requirements of the buyer. It also covers key environmental regulations that the buyer should be particularly aware of.

In short, the book comprehensively addresses the entire acquisition process, and so should make Mergers & Acquisitions: A Condensed Practitioner’s Guide a well-thumbed addition to any manager’s library.

Steven M. Bragg Centennial, Colorado May 2008

About the Author

Steven Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a bachelor’s degree in Economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written the following books through John Wiley & Sons:

Accounting and Finance for Your Small Business

Accounting Best Practices

Accounting Control Best Practices

Accounting Reference Desktop

Billing and Collections Best Practices

Business Ratios and Formulas

Controller’s Guide to Costing

Controller’s Guide to Planning and Controlling Operations

Controller’s Guide: Roles and Responsibilities for the New Controller

Controllership

Cost Accounting

Design and Maintenance of Accounting Manuals

Essentials of Payroll

Fast Close

Financial Analysis

GAAP Guide

GAAP Implementation Guide

Inventory Accounting

Inventory Best Practices

Just-in-Time Accounting

Management Accounting Best Practices

Managing Explosive Corporate Growth

Mergers and Acquisitions

Outsourcing

Payroll Accounting

Payroll Best Practices

Revenue Recognition

Sales and Operations for Your Small Business

The Controller’s Function

The New CFO Financial Leadership Manual

The Ultimate Accountants’ Reference

Throughput Accounting

Also:

Advanced Accounting Systems (Institute of Internal Auditors)

Investor Relations (Accounting Tools)

Run the Rockies (CMC Press)

Free On-Line Resources by Steven Bragg

Steve offers a broad array of free accounting resources at www.accountingtools.com. The site includes dozens of Accounting Best Practices podcast episodes, as well as hundreds of best practices articles. It also contains control charts, process flows, costing methodologies, job descriptions, metrics, and much more.

Chapter 1

The Acquisition Process

An acquisition occurs when a buyer acquires all or part of the assets or business of a selling entity, and where both parties are actively assisting in the purchase transaction. If the buyer is doing so despite the active resistance of the other party, this is known as a hostile takeover. A merger occurs when two companies combine into one entity. The vast majority of all business combinations are handled as an acquisition, where one entity clearly takes over the operations of the other.

In this chapter, we will address the basics of the acquisition process—why buyers acquire, why sellers have an interest in selling, and the process flow for both a basic acquisition and one conducted through an auction process. The chapter also addresses a variety of other issues, including acquisition strategy, risks, target criteria, and hostile takeovers.

WHY WE ACQUIRE

Why do companies feel compelled to acquire other businesses? After all, the typical buyer knows its own market niche quite well, and can safely increase its revenues over time by continual, careful attention to internal organic growth. Nonetheless, thousands of acquisitions occur every year. Here are some reasons for doing so: