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Posted: March 2nd, 2022
Mergers & Acquisition: Combination Analysis
Downside 2
Solutions required in all mild red-shaded containers.
Downside 2
80% Debt
Professional-Forma
Goal Purchaser NewCo
E book Worth Mkt Worth E book Worth Mkt Worth
12/31/18 12/31/18 12/31/18 12/31/18 12/31/18
Present Property 50,000 40,000 500,000 400,000
PP&E 2,000,000 four,000,000 9,000,000 eight,000,000
Goodwill – zero – zero – zero – zero
Different Property 200,000 300,000 800,000 750,000
Complete Property 2,250,000 four,340,000 10,300,000 9,150,000 – zero
Accts Payable 50,000 50,000 50,000 50,000
Lengthy-Time period Debt 1,000,000 1,290,000 four,000,000 four,100,000
Fairness 1,200,000 three,000,000 6,250,000 5,000,000
Complete Liabilities and Fairness 2,250,000 four,340,000 10,300,000 9,150,000 – zero
2019E EPS 1.00 three.00
Shares Outst. 100,000 75,000
Value/Share 40.00 40.00
P/E A number of 40x 13.33x
Debt/Capital 45.5% 39.zero%
Curiosity Fee on Debt pre-tax eight.zero%
% Debt 80.zero%
Tax Fee for each 25.zero%
1. Assume Purchaser is buying Goal, financed with 80% debt and 20% inventory. The inventory costs proven above
are the costs concerned (i.e., the customer’s inventory at time of deal is $40 and they’re paying $40/share for the goal).
The deal is closing on 12/31/18. Rate of interest and tax charge assumptions are proven above.
Shares excellent and 2019 Estimated standalone EPS are given above.
Calculate the 2019E EPS of the mixed entity. Assume zero synergies.
EPS =
2. What quantity of pre-tax synergies are required to make the mixed
EPS break-even? If the deal is already break-even or accretive, you’ll be able to reply “n/a.”
Pre-Tax to Breakeven =
three. Fill within the mixed pro-forma Stability sheet at 12/31/18 for the brand new Purchaser firm
Embody the brand new variety of Purchaser shares excellent after the shut. See Above Pink Containers inside H9-H29 vary
four. Fill within the containers for the money portion per share and the change ratio of the deal (purple containers): You’d say this deal is structured as:
Money, plus
shares of Purchaser per share of Goal
5. What’s the Professional Forma Debt/Capitalization Ratio for NewCo?
6. What share of NewCo does Purchaser management?
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