Acquisition Comparables Flashcards
What does the price paid for an acquired company reflect?
- Control Premium
- Potential Synergies
What does “synergy” mean?
New cash flows created through the combination of two business.
What are three types of synergies?
- Revenue Synergy
- Cost Synergy
- Operations Synergy
When analyzing a precent transaction, how should you frame acquisition process?
With respect to:
- Timing and surrounding events
- Nature
- Considerations paid
When reviewing a precedent transaction, if the transaction occurs in a “bull market”, what would that indicate?
High vauation + premium on top of that = Higher Multiples
When reviewing a precedent transaction, if the transaction occurs in a “bear market”, what would that indicate?
Lower Valuation + Control Premium = Lower Cost = Lower Multiples
Would a hostile takeover result in a higher or lower price paid for a company?
Higher Price
True/False:
To analyze a transaction, we must understand the story and environment behind the transaction.
True
Cash Deal / Stock Deal:
Which type of payment leads to higher premium?
In general, cash deal leads to higher premium because you have to “cash out” the shareholders.
What does offer value refer to?
(Enterprise Value, Equity Value)
Equity Value
What does transaction value refer to?
(Enterprise Value, Equity Value)
Enterprise Value
How do you identify comparable companies for a precedent transactions list?
- Operations
- Financial Aspects
- Timing
- Size
- Consideration Paid
- Circumstances surrounding the deal
- Market conditions
How do you calculate the premium paid?
[Offer Price - Intrinsic Valuation] / [Offer Price]
What type of merger may lead to a low acquisition premium?
Merger of Equals
Where might we find a description of the synergies a company expects to create from the purchase of a company?
Investor Presentation
