Name: Muskaan Bhadada

Sec: F1
Roll:.20396

Assignment of merger and acquisition (case study)

Q1) What are Horizontal or Vertical mergers? How will you distinguish
between the two? Under which category would you classify this case and
why?
Ans. 1. Horizontal Mergers - When two competing companies merge to form a
new company, they gain a competitive advantage over their competitors.
The proposed acquisition of WhiteWave by PepsiCo is being done in order to
strengthen the target's presence in the industry's growing segments, as well as
the acquirer's manufacturing capacity, scale, and financial resources. PepsiCo
will boost the company's potential, benefiting shareholders in a way Dean Foods
couldn't because of its high debt levels.
2.Vertical Mergers- A merger between two firms producing different goods and
services for one final product. The logic behind this is to increase the synergies
so that the new company would be more efficient operating.
Q2) Are the valuations a single value or a range of values? Give rationales.
What is practiced by valuers across the globe?
Ans- Valuations are of range of value because there are two widely used
methods to value a firm: the DCF (Discounted Cash Flow) analysis, which is
the most used approach, and the APV (Adjusted Present Value) method. The
DFC model is further divided into two techniques namely, ‘Perpetuity Model’
and ‘Exit Multiple Model’. As there are several value drivers that impact a
valuation. Each of these are valued differently by each buyer keeping the
intensity of the impact in impact. So, as a business owner it is important to
understand the range of values and how you can change these values to meet
your business and personal financial goals. This the main reason why valuers
take range of values into consideration
Q3) Elaborate synergies of this merger.
Ans- Synergies of the merger White Wave’s main competitive advantage is its
ability to quickly identify and meet consumers’ changing needs and preferences.
The product categories that distinguish WhiteWave within the industry – plant-
based foods and beverages; coffee creamers and beverages; premium dairy
products and organic products – are aligned with the consumers’ emerging
concerns for health as well as the increase in lactose intolerance. Currently the
firm is focused on meeting consumers’ “increasing desires for nutritious,
flavourful, convenient, and responsibly-produced products”.
The proposed acquisition of WhiteWave by PepsiCo is being done in order to
strengthen the target's presence in the industry's growing segments, as well as
the acquirer's manufacturing capacity, scale, and financial resources. PepsiCo
will boost the company's potential, benefiting shareholders in a way Dean Foods
couldn't because of its high debt levels.
Vertical Mergers- A merger between two firms producing different goods and
services for one final product. The logic behind this is to increase the synergies
so that the new company would be more efficient operating.

Q4.) Why WACC is the calculated and what’s the purpose. Is there a
better measure to WACC in any different scenario?
Ans- In this case it’s very important for the company to examine whether the
synergies created by the acquisition are capable of providing expected returns
that will meet the demands of the shareholders and lenders or not.
But if a manger wants to analyse how financial manoeuvres effect the returns,
then APV is a better than WACC.
Powerful financial manoeuvres are meaningful decisions you make with your
money and lifestyle that have a significant long-term impact on building
wealth. 
APV: It unbundles components of value and analyses each one separately and it
takes into consideration the benefits of raising debts.
In contrast, WACC bundles all financing side effect into the discounting rate.

Q5) Explain the deal in your words in summary (50-100 words) 

Ans- PepsiCo should buy WhiteWave for $46,61 in cash, representing a 12%
premium over the target's market value1. The total value of synergies is
between $873 million and $1,182 million, of which approximately 75% is the
result of cost savings.