Professional Documents
Culture Documents
Michael H. Grote
©Frankfurt–School.de 1
overview and some figures
Worldwide M&A activity totaled US$5.9 trillion during full year 2021
increase of 64% in value compared to 2020
©Frankfurt–School.de 2
headline-making transactions
Private Equity (PE) hit all-time high, accounting for 20% of M&A
activity during full year 2021
PE value reached US$1.2 trillion, more than doubling year ago levels
more than 14,500 PE backed deals announced, +56% 2020
©Frankfurt–School.de 6
ca. 1/3 of transaction volume cross-border
Mergers
tax and legal
accounting &
& Acquisitions
auditing
antitrust psychology
contract
©Frankfurt–School.de 11
complex setup – lead has important role
Transaction Lead
Investment Bank or
Consultancy Client
M&A advisory
source: Lo 2001
Tax advisor Lawyer Auditor
Specialists Specialists
©Frankfurt–School.de 12
complex setup – mirrored
Buyer Seller
main communication
©Frankfurt–School.de 13
M&A – it’s about coordination
bottom line:
even after attending this m&a-course, in your next job you will
presumably not talk to Christian Sewing about what global bank
to buy next or how much to pay for it ...
©Frankfurt–School.de 14
M&A – what to expect from the course
©Frankfurt–School.de 15
Investment banking is a profitable business
©Frankfurt–School.de 17
schedule
introduction
competition and league tables
vocabulary: types of mergers and acquisitions
task
success of m&a – methods and measurement challenges
short-term studies
©Frankfurt–School.de 18
winning mandates by trust
©Frankfurt–School.de 19
reputation and league tables
advisor gains
advisor gets high rank
experience and
in league table
reputation
clients choose
experienced advisor (as
proven by league table
rank)
©Frankfurt–School.de 20
league table reporting
in virtually every presentation of m&a advisors, you will find at least
one or two league tables
usually proving that the respective advisor is no. 1 in the market
advisors are very creative in finding out how to put themselves in the
first ranks
oh, yes - of course, every advisor claims the whole deal volume for
the own books
©Frankfurt–School.de 21
some leading M&A data providers
dealogic
mergermarket
©Frankfurt–School.de 22
league tables sorting
©Frankfurt–School.de 23
league table: global announced deals 2021
©Frankfurt–School.de 29
league tables, jobs and FIPEMA
less visible players may offer great opportunities in M&A, too, but
receive considerable less attention
luckily, the Frankfurt Institute for Private Equity and M&A is here to
help:
https://www.frankfurt-school.de/home/research/centres/fipema
©Frankfurt–School.de 30
observations from Goldman Sachs juniors
©Frankfurt–School.de 31
schedule
introduction
competition and league tables
vocabulary: types of mergers and acquisitions
task
success of m&a – methods and measurement challenges
short-term studies
©Frankfurt–School.de 32
mergers vs. acquisitions
©Frankfurt–School.de 33
acquisition: asset vs. share deal
asset deal
the assets to be acquired are specified in the contract
in a complete deal, the buyer purchases all of the company's
equipment, furniture, fixtures, inventory, trademarks, trade names,
goodwill and other intangible assets
usually, no liabilities - except perhaps accounts payable - convey
the selling corporation uses the proceeds from the sale to liquidate
short-term and long-term liabilities
©Frankfurt–School.de 34
asset deal
buyer may acquire a new cost basis in the assets which allows a
larger depreciation deduction
buyer may prefer an asset transaction for liability reasons (income
taxes, payroll withholding taxes and legal actions against the
company that are contemplated but as yet uninitiated)
seller must pay taxes on the difference between the basis in the
assets and the price paid for the company
©Frankfurt–School.de 35
share deal (sometimes stock deal)
©Frankfurt–School.de 36
share vs. asset deal in practice
site A
headquarters | production site
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share vs. asset deal in practice
to sell the whole business line, the deal will be structured as three
share deals
and one asset deal (building site at headquarters)
again: legal contracts are different, economic logic remains the same
©Frankfurt–School.de 38
sell-offs, spin-offs and carve-outs
©Frankfurt–School.de 40
carve-outs
©Frankfurt–School.de 41
tracking stock
©Frankfurt–School.de 42
LBOs - Leveraged Buyouts
©Frankfurt–School.de 43
reverse mergers
©Frankfurt–School.de 44
advantages of reverse mergers
in an IPO, the process of going public and raising capital is combined
in a reverse merger, these two functions are unbundled - a company
can go public without raising additional capital
through this unbundling operation, the process of going public is
simplified:
the costs are signifigantly less than the costs required for an IPO
the time is considerably less than that for an IPO
©Frankfurt–School.de 45
SPAC - Special Purpose Acquisition Company
SPACs work similar to private equity, but focus on one firm, and
listing it
SPAC shares can be bought at the stock exchange before and after
the acquisition (“blank check companies” before)
©Frankfurt–School.de 46
schedule
introduction
competition and league tables
vocabulary: types of mergers and acquisitions
task
success of m&a – methods and measurement challenges
short-term studies
©Frankfurt–School.de 47
task
see document
00 project_ma_2022.pdf
©Frankfurt–School.de 48
schedule
introduction
competition and league tables
vocabulary: types of mergers and acquisitions
task
success of m&a – methods and measurement challenges
short-term studies
©Frankfurt–School.de 49
success of m&a
„success” is relative
a lot of different parties may have different thoughts about
the success of an m&a transaction
investment banks & other advisors
(any deal done is a success)
shareholders of
bidder
target
combined entity after merger
management
employees
©Frankfurt–School.de 50
success of m&a
clients
competitors
suppliers
society
©Frankfurt–School.de 51
success of m&a
A ?
A+B
B ?
time time
©Frankfurt–School.de 52
success of m&a
©Frankfurt–School.de 53
success of m&a
©Frankfurt–School.de 54
success of m&a
©Frankfurt–School.de 55
success of m&a
©Frankfurt–School.de 56
success of m&a
which index?
©Frankfurt–School.de 57
success of m&a
©Frankfurt–School.de 58
calculation of “beta“
announcement day
-255 -6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5
©Frankfurt–School.de 59
success of m&a
©Frankfurt–School.de 60
success of m&a
©Frankfurt–School.de 62
Schedule
©Frankfurt–School.de 63
schedule
introduction
competition and league tables
vocabulary: types of mergers and acquisitions
task
success of m&a – methods and measurement challenges
short-term studies
©Frankfurt–School.de 64
success of m&a
©Frankfurt–School.de 65
success of m&a
two commonly used event windows are the three days immediately
surrounding the merger announcement
that is, from one day before to one day after the announcement
©Frankfurt–School.de 66
success of m&a
period
(days around merger announcement)
©Frankfurt–School.de 67
success of m&a
over time, the sizes of the effects change, but the pattern remains the
same:
Alexandridis et al. (2017) obtain US target CARs of 29% for the 2010s
©Frankfurt–School.de 68
success of m&a
©Frankfurt–School.de 69
success of m&a
©Frankfurt–School.de 70
success of m&a
©Frankfurt–School.de 71
success of m&a
©Frankfurt–School.de 72
Mergers & Acquisitions – Slide Set Session 1
-- END OF SESSION 1 --
Michael H. Grote
©Frankfurt–School.de 73