Ashley B
Location Customer Support at New York Institute of Finance in New York, NY.
Activity
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Ashley B replied to Milingo Nanguzgambo
Per Jeff Hooke: The outlier problem is very common in comparable analysis and precedent merger analysis. Usually, the outlier ratio is ignored. Other times, the practice is for the value analysis to use a median of the various ratios. With a median ratio, you reduce the influence of an outlier, but you do not totally ignore it. By using a median, the M&A...
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Ashley B replied to Viren Sharma
Per Jeff Hooke: In the US, the target company must pay a corporate income tax, if the tax basis (or tax value) of the sold asset was lower than the purchase price. In the US, large companies do not have a special capital gain tax. All profits -- capital and regular income -- pay the same corporate tax rate. Ok, so after the sale of its major asset, the...
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Ashley B replied to Viren Sharma
Per Jeff Hooke (Continued) In the event of any such termination of this Agreement, the parties shall have no further rights and obligations under this Agreement except for those which are expressly stated to survive such termination and such termination will be treated as a termination of this Agreement pursuant to this Section 21 (d). (Signature page to...
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Ashley B replied to Viren Sharma
Per Jeff Hooke: Collar. In the event that the closing price of the Common Stock, as published by the NYSE MKT (the “Exchange”) on any day that the Exchange is open for trading prior to Closing is higher than $11.36, the Buyer may terminate this Agreement by written notice to the Seller and be entitled to the Earnest Money regardless of anything to the contrary...
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Ashley B replied to Sabrina Sadat
Per Jeff Hooke: In an M&A context, a large buyer has an enterprise value (EV) of 10x, for example. In many situations, when the buyer acquires smaller, similar firms, it will pay a lower EV/EBITDA ratio, of say 7x, because smaller firms trade at lower EV/EBITDA multiples than big firms. The reasoning is that small firms are riskier than big firms, so they are...
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Ashley B replied to Tommaso Ugolino
Per Jeff Hooke: We talk about the consideration that the buyer offers the sellers in an M&A deal. The buyer can offer cash to seller stockholders, it can offer its own buyer shares. Alternatively, it can raise the cash by selling its own buyer shares to the public market (or to a PE firm), or it can raise the cash by selling buyer bonds or borrowing bank debt....
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Ashley B replied to Tommaso Ugolino
Per Jeff Hooke: Sure. The shell company had 1 million shares trading at a nominal price. Silverco was a private firm with an estimated value of $50 million. The owners of the shell company agreed to merge with Silverco, as long as the shell company owners retained a 5% ownership of the merged company. So, when you do the math, the shell company stockholders...
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Per Jeff Hooke: I was just estimating if the cost of debt was 5% and the cost of equity 15%, the WACC might be around 11% if the D/E ratio was roughly 40/60. Your formula is correct, but I did not get into such detail.
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Ashley B replied to IRFAN MANGKUNEGARA
Per Jeff Hooke: The course just uses a hypothetical example. It is oversimplified, but the basic premise is 100% accurate. 13% is just an invented number to demonstrate the principal of 2a. But consider this. If a low growth, boring packaged food company buys a high growth exciting internet-based organic food business, don’t you think the buyer's P/E ratio...
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Ashley B replied to Ronaldo Onosaki
Per Jeff Hooke: If the buyer does not have the target's info, then it is near impossible to value the target. By using third party databases, you might be able to estimate the target's annual revenue, basic balance sheet, and number of employees. You can then apply a few of our value methods.
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Ashley B replied to Montserrat Peidro
Per Jeff Hooke: Most deals are competitor buying competitor, so the P/E ratio is defined more by what industry therein, and there is no reason for a big P/E ratio increase. In a few cases, a low growth firm might be diversifying into a hot industry, like marijuana, and you might see a big P/E jump. So, yes, more pressure on buyer mgt. No such standard factor...
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Per Jeff Hooke: Fees are perhaps 1-2% of the deal, so I ignore them. In reality, the buyer might capitalize and then amortize the fees. Yes, we assume a seamless integration, in the belief that most deals -- horizontal -- have little integration problems. Sometimes, buyers take a one-time charge for write-offs that they expect at the seller.
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Ashley B replied to Montserrat Peidro
Per Jeff Hooke: No, many of the M&A deals are public companies, so all the data is available on the SEC website. Second, you can google an 'industry' and something like M&A comparables, or merger precedent analysis, and you will see info on deals. Lastly, you can purchase M&A data from Capital IQ or SDC Platinum.
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Ashley B replied to Govinda Raju Dhotre
Per Jeff Hooke: No, many of the M&A deals are public companies, so all the data is available on the SEC website. Second, you can google an 'industry' and something like M&A comparables, or merger precedent analysis, and you will see info on deals. Lastly, you can purchase M&A data from Capital IQ or SDC Platinum.
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Ashley B replied to Folajimi Oluremi, FCA
@FolajimiOluremi,FCA - Thank you for your feedback. Have you enrolled in Course 1: Mergers and Acquisitions: Concepts and Theories? A lot of your questions and concerns will be addressed in this course. This program is currently available for free with the option to upgrade to receive access to the quizzes and final...
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Per Jeff Hooke: Post merger, the buyer has to deal with such unfavorable situations, like the buyer would deal with them in its regular business. Of course, most acquisitions are in the buyer's regular business anyway. Before making an acquisition, the buyer tries to anticipate problems, and price the target appropriately. No one is a fortune teller in business.
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Ashley B replied to Ricardo A. VanEgas
Per Jeff Hooke: Scalability is an attribute that describes the ability of a process, network, software or organization to grow and manage increased demand. A system, business or software that is described as scalable has an advantage because it is more adaptable to the changing needs or demands of its users or clients. This idea is mostly used in VC...
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Ashley B replied to Tom Stewart
Per Jeff Hooke:
1. Yes, I agree that identifying lousy public deals is a good exercise. However, sometimes, analysts have a hard time segmenting the negative impact of an M&A deal from other problems of the buyer.
2. Agreed, often the buyer may not know for 1 or 2 years if an M&A deal was a failure. They may need a full year of experience before making...
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Per Jeff Hooke: The 'market value' of the assets and liabilities (as stated in the historical accounting data) is reflected in the enterprise value calculation; therefore, M&A players do not need a separate metric that involves historical accounting values. What concerns buyers and sellers are market value -- what someone will pay for the assets and liabilities.
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Per Jeff Hooke: Many hi-tech firms in 2020 lose money, yet these firms still have large stock market values. To provide one numerical metric, many investors value such firms at EV/Revenues (EV=enterprise value). So, a hi-tech discussion might be, I like Snapchat since it trades at 5 x revenues and Spotify trades at 10x. This is a common practice and is...
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Ashley B replied to Ricardo A. VanEgas
@RicardoA.VanEgas Per Jeff Hooke: The buyer completes extensive study prior to the deal to estimate taxes and future capital expenses. If it foresees unusual costs in this regard, it will cancel the deal. If there are unforeseen tax and capex costs, after the closing, then the buyer was not doing proper study prior to the deal. Many transnational and US...
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@RicardoA.VanEgas Per Jeff Hooke: No, usually not. The buyer is making the M&A deal to increase its share value, not decrease it. The buyer examines the pro forma post-deal EPS, with its investment banker, to determine if the issuance of new shares will harm the stock price. If the conclusion is that the deal will harm the stock price, the buyer will cancel...
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@GrahamGarfieldGallop Hi!
Thank you for your feedback. It’s unfortunate to hear your learning preference didn't suit our digital classroom experience. If you have any specific clarifications regarding the course material or calculations that we can assist with, please let us know and we'll submit your questions to Jeff. We appreciate your feedback and take student... -
Ashley B replied to Graham Garfield Gallop
Hi @GrahamGarfieldGallop please contact support@futurelearn.com
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Per Jeff Hooke: The shares issued by the buyer have a value in the public market, if the buyer is publicly traded. For a private buyer, the buyer and seller negotiate what they think is the fair price.
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Ashley B replied to Ricardo A. VanEgas
Per Jeff Hooke: No, tax avoidance is not a major reason for M&A. Buying a competitor and cutting costs to obtain synergies is the main reason.
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Ashley B replied to Jordan Lawoko
@JordanLawoko Per Jeff Hooke: The legal difference between a letter of intent and a term sheet is minimal. The vast majority of the provisions in the two documents are not legally enforceable in the US. In a triangular merger, the buyer forms a new subsidiary. The sole purpose of the subsidiary is to merge into the seller. By doing this, there is a corporate...
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Ashley B replied to Jordan Lawoko
Hi @JordanLawoko can you specify which calculation you are referring to?
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Hi @JordanLawoko can you be more specific on what you need more clarification on?
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Ashley B replied to Colin Miranda
We are pleased to hear you are enjoying the course and look forward to seeing you in Week 2.
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Ashley B replied to Kristian Kolding
@KristianKolding we have uploaded a revised version of the excel. We apologize for any inconvenience this may have caused you.
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Ashley B replied to Kristian Kolding
Per Jeff Hooke: EV is calculated before the impact of debt and cash. You pretend the target, private or public is sold debt free and cash free. This is usually the case with private deals. If you buy a company with the company's debt and cash in place (most public targets), then the buyer assumes the obligation to repay the target's debt. The buyer also keeps...
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Ashley B replied to Kristian Kolding
Hi Kristian, We are looking into it and will get back to you shortly. Thanks!
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Ashley B replied to Nicky Wennemer
Welcome, Nicky!
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Ashley B replied to Ana Sniazhko
Per Jeff Hooke: Only publicly traded firms can be the subjects of a hostile takeover. Private firms do not have to worry. In the 1980s, in the US, there were many hostile takeovers. Since that time, the public companies convinced the states where the companies are incorporated (mostly Delaware) to change the laws so that hostile takeovers are almost impossible...
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Ashley B replied to Huy Truong Cong
Per Jeff Hooke: Yes.
However, please recognize that M&A is in its infancy in Vietnam and most other Asian countries. Very little M&A volume, compared to the size of the economies. So, you may not have an opportunity to use M&A skills until you leave this area.
The idea of a course is to build your knowledge base, for when you have the opportunity to...
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Ashley B replied to Pedro Baute
Per Jeff Hooke: EBITDA is easy to determine. All the numbers are on the target's income statement. Add net income to income taxes. Then add interest charges on debt. You then have EBIT. After you have EBIT, add the depreciation and amortization expense to EBIT, and you now have EBITDA. M&A professionals began to use EBITDA as a substitute for net earnings 30...
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Ashley B replied to Pedro Baute
Per Jeff Hooke: Sure. First, when the buyer considers a distressed company as a target, the buyer evaluates the target firm initially without the target's debt. So, the buyer estimates the target's "enterprise value," with the use of the valuation techniques covered in the course. So, assume the target has revenue of $100 million, and the proper multiple to...
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Ashley B replied to Wilhelm Bedzrah
Per Jeff Hooke: Yes, the more the M&A and the financial markets become global, the more that local emerging market risks will decline. Emerging market financial participants will gradually conform to developing country forms of behavior. However, this process takes many years.
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Ashley B replied to Pedro Baute
Hi Pedro, can you please provide more context on what you need clarification on regarding the rate of acquisition and the EBITDA concept? Thank you!
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Per Jeff Hooke: I know this is complex. When the buyer acquires assets from the seller corporation, the buyer is allowed to write up the tax basis of those assets to the fair market value of the price paid for them. So, if Buyer A bought, for $100 million, assets from Seller B, then the Buyer's tax basis is now $100 million. Note that the tax basis when those...
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Ashley B replied to Pedro Baute
Per Jeff Hooke: After the buyer and seller agree to the basic terms of the M&A deal, the buyer has 60-75 days to close the acquisition. Usually, the buyer will ask to examine the seller's books and records in the first 15 days. Of course, the seller has provided to the buyer some general accounting data before this time, in order for the buyer to evaluate the...
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Thanks for your feedback. We're always eager to hear our student's feedback and improve our course delivery to better cater to their needs. We'll keep a note of this when we run the next version of the course. In the meantime, please note that the spreadsheet is available on the page for your reference. Kindly download the same and refer to it while going...
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Ashley B replied to Luc Lafrance
Hi Luc, You are correct. The correct answer is the Corporate Seller. Thank you for catching the error. We are working to change the incorrect answer to the correct answer.
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Ashley B replied to Lijana Stariene
Per Jeff Hooke: A multiple is another word for ‘ratio.’
The price-earnings multiple is often called the PE ratio.
Stock price divided by earnings per share p/e.
M&A business uses many multiples or ratios. -
Ashley B replied to Lijana Stariene
Per Jeff Hooke:
1. Yes, both firms receive a control premium.2. Not sure I understand the question. I think the example indicates that a minority holder of a private company values his/her stock at a 30% discount to public companies because he does not have the power to sell the company. Only a 51% holder can force that. 2% ownership times $100 MM...
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Ashley B replied to Lijana Stariene
In step 1.3 of the course we provide a link to the NYIF dictionary as an additional resource: https://www.nyif.com/dictionary/main
However, the word 'multiple' isn't included in the NYIF dictionary.
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Ashley B replied to Lijana Stariene
@LijanaStariene I have checked with the team at FutureLearn and the Step 2.1 is an 'article' step (as opposed to a 'video', 'quiz', 'discussion' step etc.) However, we're not referring to file attachments when the word article is used. We can confirm there is nothing missing on this step.
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Ashley B replied to Lijana Stariene
Hi @LijanaStariene what article are you referring to?
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Ashley B replied to Keith Pierce
Per Jeff Hooke: Investors compare Spotify to similar streaming companies, like Netflix. Since Spotify loses money, like many hi-tech firms, investors measure it by looking at stock price to sales ratio. Netflix is around 6x; so Spotify is around 4x, so people say, buy Spotify because it is cheaper than Netflix. After day 1, Spotify trades like most stocks....
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Ashley B replied to SIMON QUACH
@SIMONQUACH There's no time limit on either quizzes or tests. However, with tests, learners have up to three attempts per question, and their score will decrease with each attempt.
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Ashley B replied to Keith Pierce
Per Jeff Hooke: With no prior experience in M&A, start talking to lawyers, accountants, commercial bankers, local private equity firms, local VC firms, angel groups, and wealthy families to help get your foot in the door.
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Ashley B replied to SIMON QUACH
Hi @SIMONQUACH is there a specific quiz question or module we can help you with?
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Per Jeff Hooke: Most M&A experts use the net working + fixed assets - accounting liabilities + reserves market value approach. That net value = market value of common stock, not EV. DCF is sometimes used as a backup method.
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Ashley B replied to Kevin Pierce
Per Jeff Hooke: If the buyer is acquiring a competitor, yes, the first thing is to fire duplicative employees. But, most goodwill results from customer relationships, brand name, technology, low-cost leases, real estate and so on, only a few employees have lots of goodwill, and the buyer will usually retain those employees with an employment contract.
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Ashley B replied to Keith Pierce
Per Jeff Hooke: This is a complex question. To begin, in the US, for example, only 300 - 400 companies go public every year. Most successful businesses are (i) not sufficiently attractive or (ii) large enough to complete an IPO. Therefore 99% of owners should realize that their companies cannot go public. For the small number of eligible firms, the owners have...
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Ashley B replied to Kevin Pierce
Per Jeff Hooke: Yes, if a stockholder anticipates bad news for a stock, he/she should sell the stock. If the bad news is temporary in nature, the investor should then repurchase the stock if the investor's security analysis still indicates good value.
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Ashley B replied to Kevin Pierce
Per Jeff Hooke: Most long-only equity mutual funds/managers have provided better returns than hedge funds over the last 10 years. Yes, more regulation reduces the attractiveness of hedging.
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Ashley B replied to Keith Pierce
Hi Keith, We recommend completing the entire M&A professional certificate program on FutureLearn. If you haven't already make sure to enroll in the next course in the program - Mergers & Acquisitions: Advanced Theory https://www.futurelearn.com/courses/mergers-acquisitions-advanced-theory/2
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Ashley B replied to Keith Pierce
Per Jeff Hooke: Two reasons, Keith.
1. It is inexpensive to implement since there is less human involvement required to perform a task. and 2. It makes profits for some of the sophisticated investors.
Algorithmic trading is sometimes confused with automated trading. The former is used to facilitate processing large trading positions (such as selling a... -
Ashley B replied to Keith Pierce
Per Jeff Hooke: I think the work is very interesting. The work involves so many different areas of finance. Most of the time, the work is fast-paced, so people believe there is a lot of time pressure. It helps to work with friendly individuals who can make those challenging times a bit more fun.
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Ashley B replied to Keith Pierce
Per Jeff Hooke: Yes, the laws in many countries such as China, Mexico, and France, limit the number of employees from the target (or the buyer) that can be laid off (or fired) after an M&A deal.
The fewer layoffs the fewer synergies that the buyer can achieve.
The objective of these policies is to preserve jobs in the country. The governments believe...
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Ashley B replied to Alex Sohler
Welcome, Alex! We are looking forward to helping you achieve your goals. Feel free to ask questions and start discussions. We hope you enjoy the course!
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Ashley B replied to Jensen Tan
Welcome to Advanced Concepts and Theories, Jensen! We understand you are new to M&A and we’re excited to help you achieve your learning goals. Is there anything, in particular, you would like to learn about M&A? We would be happy to direct you to the appropriate module. If you haven’t done so yet, we recommend enrolling in the first module of the M&A...
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Ashley B replied to ali yaquob
Per Jeff Hooke: Yes, you still have to use this data in your analysis. Generally, we only include M&A deals less than two years old, so the market usually doesn't change dramatically. Your complementary analysis, of course, is public traded firms. Those pubic value multiples will be as of the day of your deal, so the market changes are very current.
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Ashley B replied to V. V. L. N. Sastry
Per Jeff Hooke: You have to look at P/E multiples in context, with other similar publicly traded firms or M&A deals. If all the similar firms have a high level of intangibles, then the P/E ratio of a company is not artificially inflated. However, if Company A has many intangible assets (which are not depreciated) and you compare it to Companies B, C, D, and E...
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Ashley B replied to V. V. L. N. Sastry
Per Jeff Hooke: Emerging Market M&A targets receive lower multiples because the buyers believe such targets have more risk than similar US or Western European targets. Thus, the buyers perform cash flow projections, and use a higher discount rate for EM targets, when compared to companies in Germany or the US. Thus, if you have two similar companies - with the...
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Per Jeff Hooke: In the context of M&A, financial arbitrage is buying small companies at a lower EV/EBITDA multiples than big companies. You then combine the small companies to form a big company. For example, you buy five small companies at 6x EV/EBITDA. After combining them, you now have one big company that is worth 8x EV/EBITDA. Why? Big companies trade at...
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Ashley B replied to Mary Nneoma Ezenta
Hi Mary, Please reference the video above on how to calculate EV/EBITDA.
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Ashley B made a comment
Welcome Fu'ad and Mary to the Mergers & Acquisitions: Concepts and Theories course! We look forward to helping you achieve your career goals and answer any questions you may have during the program. Happy Learning!
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It is pretty standard, of course, size or percentages of fees have variability, but this provision is quite common.
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Ashley B made a comment
Most M&A experts would agree. They would say the rise in debt, or risk, in this case, is not enough to offset the benefits from a growth-oriented M&A acquisition. At some level of debt, usually -- 60% of the total market cap, the risk becomes a very big factor.
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Correct, debt means only interest-bearing debt. Do not include accounts payable, accruals and similar non-interest-bearing liabilities.
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Ashley B replied to Diego Morales
As a general rule a buyer, or an investment banker working for a buyer, can contact 100 targets in the firm's industry. On average, 20, or 20% will want to engage in some information sharing. This may or may not lead to a productive discussion. You can't improve the 2% closing rate. Finding M&A deals requires patience. You might suggest possible EV/EBITDA...
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Ashley B replied to David Stuart
Hi David, Please contact customer support feedback@futurelearn.com to resolve the issue.
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Ashley B replied to David Stuart
Hi David, We're sorry to hear you are experiencing some technical difficulties. We assessed the issue and believe you may have muted yourself. Please check your system preference on your device to ensure your sound is turned on. If you are still experiencing issues please contact: feedback@futurelearn.com
