Mergers and Acquisitions A Condensed Practitioner's Guide

by Bragg, Steven M.

• ISBN13: 9780470398944
• ISBN10: 0470398949
• Edition: 1st
• Format: Hardcover
• Copyright: 2008-10-06
• Publisher: Wiley

Summary

Praise for Mergers & AcquisitionsA Condensed Practitioner's Guide"On a subject that encompasses so many possibilities, Steven Bragg's Mergers and Acquisitions is an excellent and comprehensive practical review of the myriad issues that can arise. Amidst the emotion of the M&A roller coaster that so many managers find themselves on in these fast-moving times, this guide provides an excellent and comprehensive aid for managers to ensure that the deal does not just get done but gets done effectively and efficiently. An invaluable addition to the armory of any manager considering or actually working on a merger or acquisition." --James Dunning, founder and Managing DirectorGeotrupes Consulting"Mr. Bragg offers a unique combination of accounting expertise and insight into the merger and acquisition process. The comprehensive, yet practical, nature of the material obviously comes from having been in the trenches and participated as the Chief Financial Officer in both mergers and acquisitions. This is an excellent guide for the first-time acquirer as well as a tool for the experienced CFO to ensure a smooth and comprehensive process. Mr. Bragg has written an excellent reference book, which will be useful before and during your acquisition process." -Richard V. Souders, President & CEOKaba Workforce Solutions"Mergers and Acquisitions: A Condensed Practitioner's Guide is beyond any ready-reckoned reference book. The treatment of each topic by Mr. Bragg compiles a thought checklist against a mere action checklist for any practitioner. The term 'Condensed' in the title is a misnomer as the treatment is exhaustive and relevant!" -K V Ramesh, Chairman & Managing DirectorECHC Management Services Private Limited, Chenna"Successful transactions are a result of an enduring desire for two worlds to meet as one. This is a daunting task for all participants, and Steven Bragg identifies a road map of processes and procedures that anyone considering a divesture or entering the M&A space should call 'the handbook of M&A.' " -Peter Cahill, Principal, Middle Market Investment BankingTransCapital Partners, LLC

Author Biography

Steven M. Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Mr. Bragg resides in Centennial, Colorado. He is also the author of Accounting Best Practices and Accounting Policies and Procedures Manual (both published by Wiley).

Table of Contents

Preface	p. xiii
About the Author	p. xvii
Free On-Line Resources	p. xix
The Acquisition Process	p. 1
Why We Acquire	p. 1
Why a Target Sells	p. 5
Acquisition Strategy	p. 7
The Basic Acquisition Process Flow	p. 10
The Auction Process Flow	p. 18
Locating and Culling Acquisition Targets	p. 21
The Optimal Target Size	p. 25
Evaluate Acquisition Targets with Alliances	p. 26
Acquisition Risks for the Buyer-Valuation	p. 28
Acquisition Risks for the Buyer-Legal	p. 29
Acquisition Risks for the Seller	p. 31
Acquisition Follow-Up Activities	p. 32
The Hostile Takeover	p. 33
Defending Against a Hostile Takeover	p. 35
Summary	p. 39
Key Participants	p. 41
The Acquisition Team	p. 41
Attorneys	p. 42
Board of Directors	p. 43
Brokers	p. 44
The Chief Executive Officer	p. 46
Investment Bankers	p. 47
Investor and Public Relations	p. 48
Lenders	p. 50
Line Managers	p. 51
Specialist Consultants	p. 52
Players in Hostile Takeovers	p. 53
Integration Team	p. 54
Summary	p. 54
Valuing an Acquisition Target	p. 57
Alternative Valuation Methods	p. 57
The Control Premium	p. 65
Synergy Gains	p. 65
The Discounted Cash Flow (DCF) Model	p. 66
Constructing Cash Flow Scenarios	p. 69
Cash Flow Adjusting Factors	p. 71
The Earnout	p. 74
Qualitative Factors	p. 75
Which Valuation Method is Best?	p. 77
The Method of Payment	p. 78
Summary	p. 82
The Term Sheet	p. 83
Reasons for Using a Term Sheet	p. 83
Components of a Term Sheet	p. 85
Summary	p. 92
Due Diligence	p. 93
Due Diligence Team Staffing	p. 93
Due Diligence Interviews	p. 95
Due Diligence-Overview	p. 96
Due Diligence-Market Overview	p. 99
Due Diligence-Culture	p. 101
Due Diligence-Personnel	p. 102
Due Diligence-Intellectual Property	p. 106
Due Diligence-Brands	p. 107
Due Diligence-Risk Management	p. 109
Due Diligence-Capacity	p. 110
Due Diligence-Assets	p. 113
Due Diligence-Liabilities	p. 116
Due Diligence-Equity	p. 119
Due Diligence-Profitability	p. 120
Due Diligence-Cash Flow	p. 124
Due Diligence-Customers	p. 126
Due Diligence-Product Development	p. 128
Due Diligence-Production Process	p. 130
Due Diligence-Information Technology	p. 132
Due Diligence-Legal Issues	p. 132
Due Diligence for a Business Segment	p. 136
Due Diligence-Forecasts	p. 137
Due Diligence-Missing Information	p. 138
Complexity Analysis	p. 139
Due Diligence-Red Flags	p. 140
Due Diligence-Seller's Perspective	p. 143
Due Diligence-Documentation	p. 144
Summary	p. 146
The Purchase Agreement	p. 147
Components of a Purchase Agreement	p. 147
The Merger Section	p. 148
The Letter of Transmittal Section	p. 153
The Representations and Warranties Section-Seller	p. 154
The Representations and Warranties Section-Buyer	p. 162
The Survival of Representations and Warranties Section	p. 163
The Conduct of Business Section	p. 165
The Additional Agreements Section	p. 165
The Closing Section	p. 167
The Termination Prior to Closing Section	p. 168
The Supporting Documents Section	p. 169
Exhibits	p. 170
The Seller Disclosure Schedule	p. 170
The Closing Memorandum	p. 171
Special Clauses	p. 173
Post-Closing Activities	p. 177
Negotiating the Purchase Agreement	p. 178
Mechanics of the Close	p. 179
Summary	p. 180
The Acquisition Integration Process	p. 181
Integration Timing	p. 181
Integration Planning	p. 182
Synergy Realization	p. 186
The Integration Manager	p. 192
The Integration Team	p. 195
Integration Communications-Internal	p. 196
Integration Communications-External	p. 198
Anger Management	p. 199
Progress Reporting-External	p. 200
Cultural Issues	p. 201
Employee Integration-Qualification Assessment	p. 205
Employee Integration-Job Positioning	p. 206
Employee Integration-Relocations	p. 208
Employee Integration-Key Employees	p. 209
Employee Integration-Founders	p. 212
Employee Integration-Unions	p. 213
Layoffs	p. 214
Compensation Integration	p. 215
Sales Integration	p. 217
Process Integration	p. 219
Technology Integration	p. 220
Controls Integration	p. 221
Board Integration	p. 222
Integration Metrics	p. 222
Integration Pacing	p. 224
Summary	p. 225
Accounting for Acquisitions	p. 227
Purchase Price Allocation	p. 227
Fair Value Determination	p. 228
Intangibles Identification	p. 229
Duplicative Assets and Assets Targeted for Disposition	p. 233
Example of the Accounting for an Acquisition (with Goodwill)	p. 233
Example of the Accounting for an Acquisition (with no Goodwill)	p. 237
Initial Goodwill Impairment Testing	p. 239
Ongoing Goodwill Impairment Testing	p. 241
Example of Goodwill Impairment Testing	p. 242
Timing of Annual Goodwill Impairment Testing	p. 245
Push-Down Accounting	p. 245
Summary	p. 249
Types of Acquisitions	p. 251
The Tax Implications of a Acquisition	p. 251
The Asset Acquisition	p. 253
The Type "A" Reorganization	p. 255
The Type "B" Reorganization	p. 256
The Type "C" Reorganization	p. 257
The Type "D" Reorganization	p. 258
The Triangular Merger	p. 260
The Reverse Triangular Merger	p. 260
The All-Cash Acquisition	p. 261
Appraisal Rights	p. 261
Summary	p. 262
Government Regulation	p. 265
Anti-Trust Regulations	p. 265
International Anti-Trust Regulations	p. 268
Environmental Regulations	p. 269
Summary	p. 271
Due Diligence Checklist	p. 273
Index	p. 291
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