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By Alexandra Reed-Lajoux, J. Fred Weston

ISBN-10: 0070383030

ISBN-13: 9780070383036

"M&A financing and refinancing could be a route to progressÑstarting this present day, as you learn the information during this publication and dream up your own." --Alex Sheshunoff, From the Foreword. the growth of a enterprise via merger or acquisition consists of event. knowledge. the power to examine how or extra mixed businesses can equivalent excess of the sum in their components. It additionally contains, usually, using "other people's money." THE paintings OF M&A FINANCING AND REFINANCING tells you the way to acquire and pay off that cash, taking the complicated, technical features of M&A finance and making them transparent, comprehensible, and acceptable for your scenario. This accomplished reference instruction manual issues you to the entire proof, figures, names, and areas you must finance your subsequent deal. detailed in that it concentrates completely at the such a lot basic section of the M&A transactionÑmoneyÑ THE artwork OF M&A FINANCING AND REFINANCING offers clear-headed recommendation and assistance on: the most important monetary assets and tools you could useÑfor any type of deal; easy methods to decide on the main applicable form of financingÑdebt, fairness, or a mixture of the 2; Financing through debtÑloans, bonds, and leasesÑand the almost countless how one can borrow or lend; strategies to contemplate in contracts, together with contingent funds, earn-outs, and fairness kickers; tips to confirm whilst refinancing is necessaryÑand plan for it as a likelihood; How risky worldwide occasions have an effect on financial systemsÑand the influence this has on M&A financing and refinancing; Debt/equity hybrids and the automobiles by which they travelÑincluding mezzanine financing and vendor takeback financing. the facility of 1 corporation to obtain one other has helped businesses all through heritage develop better, extra vivid, and extra aggressive. simply as what you are promoting needs to identify pleasing relationships with exterior owners and providers for its part elements and prone, it should also turn into familiar with utilizing exterior financing for development. permit THE artwork OF M&A FINANCING AND REFINANCING help you mix the "Main highway" of industrial banking with the "Wall road" of funding banking, and assist you remain at the ecocnomic facet of the M&A luck ledger.

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It is obtained by discounting the future sum or sums back to the starting point, which is the present. Thus, finding present values (or discounting, as it is commonly called) is simply the reverse of finding the future value. You can calculate the present value by multiplying the future value by 1/(1 + r)—where r is the market rate—or alternatively dividing by 1+ r. This also gives you two numbers to compare: a present value of $1,100 for the transactional investment discounting back from the future versus $1,000 "in hand" today.

In any industry, stable management offers an important element of reassurance. A team that works well together and has been through several busi- CHAPTER 2 Assessing Financing Needs 37 ness cycles can provide the stable, conservative projections necessary to evaluate whether the debt can be paid off. What are the first s t e p s in structuring a highly leveraged deal? The art of structuring a debt financing involves allocating the revenues and assets of the acquired company to lenders in a manner that does the following: • Maximizes the amount loaned by the most senior and highly secured and, thus, lowest interest rate lenders • Leaves sufficient cash flow to support, if needed, a layer of subordinated, higher interest rate "mezzanine" debt, as well as any seller takeback financing • Provides for adequate working capital and is consistent with seasonal variations and foreseeable one-time bulges or dips in cash flow • Permits the separate leveraging of distinct assets that can be more advantageously set aside for specialized lenders, such as sale/leasebacks of office buildings or manufacturing facilities • Accommodates both good news and bad—that is, permits debt prepayment without penalty if revenues are sufficient and permits nonpayment and nonenforcement of subordinated debt if revenues are insufficient • Avoids and, where necessary, resolves conflicts between lenders Customarily, these results are achieved through layering of debt, discussed in great detail in Chapter 7.

But many investors still rely on the "efficient market theory," which says that the investing public sees through the accounting facade and properly values most securities, even when attempts have been m a d e to manipulate prices in anticipation of a sale. The market value method remained the method of choice in the M&A area until the advent of the discounted cash flow (DCF) method, described below, which has largely displaced it. ) 6. The Comparable Net Worth to Market Value Method. Net worth is not a good measure of the present value of anything unless it's all in cash and can be immediately withdrawn, which is never the case.

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Art of M&A: Financing and Refinancing by Alexandra Reed-Lajoux, J. Fred Weston

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