8K ReleaseMergers & Acquisitions
Kevin M BrettApril 30, 2013
1,896 mergers or acquisitions $471.5 billion Hewlett Packard/Compaq Disney/ABC ABC/ESPN AOL/ Time Warner Time/Warner Brothers Daimler Benz/Chrysler Budweiser/Corona
Let’s Make a DealFriendly or Hostile
Gain new technology and talent
Grow Revenue
Strategic Assets
Market Share
Synergies
Why M&A?
“I'm all for progress. It's change I object to.” – Mark Twain
Change Resistant?
Approximately 70 percent of deals fail
Inadequate “Due Diligence”
Acquiring companies blow integration
Acquired employees head for the exits
Need to welcome acquired employees
Why NOT M&A
Size of Deal?
Financing?
How many are going to be laid off?
Is the deal accretive or dilutive to EPS?
Is there any product or customer overlap?
How will you integrate the two companies?
Anti-Trust Issues?
Will you report the deal on a Pro Forma basis?
Common Questions on Deals
Cash from Balance Sheet
Stock (1 for 1 or Ratio)
S4 (Issue More Stock)
LBO (Leveraged Buyout): Combo of Cash/Stock and Debt
Financing the Deal?Paying a “Premium?”
GAAP Greater or Equal Prominence to Pro Forma – SEC Reg. G
GAAP: Generally Accepted Accounting Principles
Pro Forma, Non-GAAP or Earnings Before Special Items
Pro Forma: “For The Sake of Form”
Pro Forma: Results from Continuing Operations
GAAP vs. Pro Forma
Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Amortization: $1 million Operating Margin: ($500,000) Taxes: $200,000 Net Loss: ($700,000)
GAAP: Q1 Income StatementMallard.com (DUCK: NASDAQ)
Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Operating Margin: $500,000 Taxes: $200,000 Net Income (Loss): $300,000
Pro Forma: Q1 Income StatementMallard.com (DUCK: NASDAQ)
Writing the M&A Release (8K)
Anheuser Busch, 39%
Miller Coors, 26%
Grupo Modelo, 7%
Heineken USA, 6%
Others, 22%
DOJ Sues to Block $20.1 Billion BUD/Corona Merger
M&A (8K) Class Assignment
M&A (8K) Class Assignment
M&A (8K) Class Assignment
M&A (8K) Class Assignment
“Class Assignment: Do Not Trade” Both companies announce definitive merger
agreement Establish the price of the deal Announce cash and/or stock financing (1 for 1) Accretive to acquiring company’s EPS in one year Subject to successful completion of Hart-Scott-
Rodino and other closing conditions Quotes from both CEOs Both Boilerplates/One Safe Harbor
M&A News Release Guidelines
