M&A Flashcards
What was the size of the M&A market recently, and how does it compare to past years?
$3.6 trillion — up 30% from last year but only 50% of 2021 levels.
Is M&A cyclical or secular?
Cyclical
What are the two types of crises affecting M&A activity?
Structural Changes → Slow recovery but stable
Shocks → Fast rebound but hard to normalize
What do frequent $10B+ transaction signal?
Potential start of a new disruptive trend in the market.
Which market reacts faster to macro changes: Equity or M&A?
Equity market — reacts faster to interest rate changes.
Why is M&A more correlated with equity markets in the U.S. than in Europe?
U.S. better estimates terminal value → less bid-ask spread.
Which sectors were M&A-active recently?
TMT (Tech, Media, Telecom) and Natural Resources.
Why has cash become a more common payment method?
Sellers want to crystallize value due to historically high multiples.
Why must sellers and buyers agree when cash is used?
Cash is final — no future upside sharing like with shares.
What are the 3 ways private equity creates value?
Multiple arbitrage
Leverage (less relevant today)
EBITDA growth
How is private capital distributed across PE firms?
80% to top 10 firms (e.g., Blackstone, KKR), 20% to the rest.
What helps smaller PE firms attract capital?
Specialization and focus.
What does “laser-focused investment” mean?
Targeting firms with clear EBITDA improvement potential.
What is a common exit route for PE firms?
Secondary buyouts.
How much is current dry powder estimated at?
Around $1 trillion.
Why are some public firms going private?
Lack of liquidity/trading → they seek PE support to go private.
What has impacted cross-border M&A?
Conflicts and past U.S. policy (e.g., Trump admin).
Which types of businesses are expected to increase M&A?
Formerly regulated sectors due to deregulation.
How does capex compare between organic growth and M&A?
Organic growth needs 3× more capex than M&A. In tech, it’s 11×.
What is the nature of a “change of control” in M&A? what are types of payment related to different transactions?
- Acquisition Cash, shares, mix
- Merger Merger ratio
- Joint-venture Shares
- Spin Off Neutral
- Sale of the asset Cash, mic
How do you raise capital for an acquisition?
1) For acquisition: debt, convertible, and equity raising through market or existing shareholders.
2) Merger Ratio: new shares are issued to existing shareholders of the merging party
What’s the difference between friendly and hostile acquisitions?
Friendly: Management → Board → Shareholders
Hostile: Bidder goes straight to shareholders or management.
Are mergers ever hostile?
No, mergers are always friendly.
List the 10 steps of an M&A transaction.
NDA
Letter of Intent
Process Letter
Information Memorandum
Due Diligence
Non-Binding Offer (NBO)
Final Negotiation/Exclusivity
Binding Offer
Signing
Closing
