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Additional Resources | |
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About the Authors | |
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Foreword | |
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Acknowledgments | |
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Introduction | |
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Structure of the Book | |
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Valuation (Chapters 1-3) | |
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Leveraged Buyouts (Chapters 4 & 5) | |
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Mergers & Acquisitions (Chapters 6 & 7) | |
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ValueCo Summary Financial Information | |
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Valuation | |
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Comparable Companies Analysis | |
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Summary of Comparable Companies Analysis Steps | |
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Select The Universe of Comparable Companies | |
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Study the Target | |
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Identify Key Characteristics of the Target for Comparison Purposes | |
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Screen for Comparable Companies | |
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Locate The Necessary Financial Information | |
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SEC Filings: 10-K, 10-Q, 8-K, and Proxy Statements | |
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Equity Research | |
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Press Releases and News Runs | |
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Financial Information Services | |
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Summary of Financial Data Primary Sources | |
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Spread Key Statistics, Ratios, and Trading Multiples | |
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Calculation of Key Financial Statistics and Ratios | |
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Supplemental Financial Concepts and Calculations | |
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Calculation of Key Trading Multiples | |
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Benchmark the Comparable Companies | |
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Benchmark the Financial Statistics and Ratios | |
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Benchmark the Trading Multiples | |
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Determine Valuation | |
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Valuation Implied by EV/EBITDA | |
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Valuation Implied by P/E | |
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Key Pros and Cons | |
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Illustrative Comparable Companies Analysis for ValueCo | |
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Select the Universe of Comparable Companies | |
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Locate the Necessary Financial Information | |
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Spread Key Statistics, Ratios, and Trading Multiples | |
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Benchmark the Comparable Companies | |
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Determine Valuation | |
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Bloomberg Appendix | |
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Precedent Transactions Analysis | |
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Summary of Precedent Transactions Analysis Steps | |
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Select the Universe of Comparable Acquisitions | |
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Screen for Comparable Acquisitions | |
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Examine Other Considerations | |
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Locate the Necessary Deal-Related and Financial Information | |
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Public Targets | |
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Private Targets | |
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Summary of Primary SEC Filings in M&A Transactions | |
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Spread Key Statistics, Ratios, and Transaction Multiples | |
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Calculation of Key Financial Statistics and Ratios | |
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Calculation of Key Transaction Multiples | |
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Benchmark the Comparable Acquisitions | |
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Determine Valuation | |
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Key Pros And Cons | |
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Illustrative Precedent Transaction Analysis for ValueCo | |
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Select the Universe of Comparable Acquisitions | |
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Locate the Necessary Deal-Related and Financial Information | |
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Spread Key Statistics, Ratios, and Transaction Multiples | |
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Benchmark the Comparable Acquisitions | |
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Determine Valuation | |
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Bloomberg Appendix | |
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Discounted Cash How Analysis | |
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Summary of Discounted Cash Flow Analysis Steps | |
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Study the Target and Determine Key Performance Drivers | |
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Study the Target | |
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Determine Key Performance Drivers | |
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Project Free Cash Flow | |
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Considerations for Projecting Free Cash Flow | |
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Projection of Sales, EBITDA, and EBIT | |
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Projection of Free Cash Flow | |
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Calculate Weighted Average Cost of Capital | |
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Determine Target Capital Structure | |
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Estimate Cost of Debt (r<sub>d</sub>) | |
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Estimate Cost of Equity (r<sub>e</sub>) | |
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Calculate WACC | |
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Determine Terminal Value | |
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Exit Multiple Method | |
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Perpetuity Growth Method | |
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Calculate Present Value and Determine Valuation | |
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Calculate Present Value | |
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Determine Valuation | |
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Perform Sensitivity Analysis | |
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Key Pros and Cons | |
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Illustrative Discounted Cash Flow Analysis for ValueCo | |
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Study the Target and Determine Key Performance Drivers | |
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Project Free Cash Flow | |
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Calculate Weighted Average Cost of Capital | |
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Determine Terminal Value | |
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Calculate Present Value and Determine Valuation | |
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Bloomberg Appendix | |
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Leveraged Buyouts | |
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Leveraged Buyouts | |
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Key Participants | |
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Financial Sponsors | |
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Investment Banks | |
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Bank and Institutional Lenders | |
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Bond Investors | |
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Target Management | |
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Characteristics of a Strong LBO Candidate | |
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Strong Cash Flow Generation | |
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Leading and Defensible Market Positions | |
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Growth Opportunities | |
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Efficiency Enhancement Opportunities | |
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Low Capex Requirements | |
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Strong Asset Base | |
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Proven Management Team | |
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Economics of LBOs | |
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Returns Analysis-Internal Rate of Return | |
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Returns Analysis-Cash Return | |
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How LBOs Generate Returns | |
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How Leverage Is Used to Enhance Returns | |
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Primary Exit/Monetization Strategies | |
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Sale of Business | |
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Initial Public Offering | |
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Dividend Recapitalization | |
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Below Par Debt Repurchase | |
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LBO Financing: Structure | |
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LBO Financing: Primary Sources | |
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Bank Debt | |
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High Yield Bonds | |
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Mezzanine Debt | |
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Equity Contribution | |
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LBO Financing: Selected Key Terms | |
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Security | |
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Seniority | |
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Maturity | |
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Coupon | |
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Call Protection | |
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Covenants | |
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Term Sheets | |
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LBO Financing: Determining Financing Structure | |
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Bloomberg Appendix | |
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LBO Analysis | |
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Financing Structure | |
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Valuation | |
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Locate and Analyze the Necessary Information | |
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Build the Pre-LBO Model | |
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Build Historical and Projected Income Statement through EBIT | |
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Input Opening Balance Sheet and Project Balance Sheet Items | |
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Build Cash Flow Statement through Investing Activities | |
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Input Transaction Structure | |
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Enter Purchase Price Assumptions | |
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Enter Financing Structure into Sources and Uses | |
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Link Sources and Uses to Balance Sheet Adjustments Columns | |
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Complete the Post-LBO Model | |
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Build Debt Schedule | |
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Complete Pro Forma Income Statement from EBLT to Net Income | |
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Complete Pro Forma Balance Sheet | |
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Complete Pro Forma Cash Flow Statement | |
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Perform LBO Analysis | |
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Analyze Financing Structure | |
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Perform Returns Analysis | |
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Determine Valuation | |
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Create Transaction Summary Page | |
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Illustrative LBO Analysis for ValueCo | |
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Bloomberg Appendix | |
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Mergers & Acquisitions | |
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Sell-Side M&A | |
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Auctions | |
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Auction Structure | |
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Organization and Preparation | |
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Identify Seller Objectives and Determine Appropriate Sale Process | |
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Perform Sell-Side Advisor Due Diligence and Preliminary Valuation Analysis | |
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Select Buyer Universe | |
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Prepare Marketing Materials | |
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Prepare Confidentiality Agreement | |
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First Round | |
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Contact Prospective Buyers | |
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Negotiate and Execute Confidentiality Agreement with Interested Parties | |
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Distribute Confidential Information Memorandum and Initial Bid Procedures Letter | |
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Prepare Management Presentation | |
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Set up Data Room | |
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Prepare Stapled Financing Package | |
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Receive Initial Bids and Select Buyers to Proceed to Second Round | |
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Valuation Perspectives-Strategic Buyers vs. Finacial Sponsors | |
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Second Round | |
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Conduct Management Presentations | |
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Facilitate Site Visits | |
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Provide Data Room Access | |
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Distribute Final Bid Procedures Letter and Draft Definitive Agreement | |
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Receive Final Bids | |
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Negotiations | |
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Evaluate Final Bids | |
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Negotiate with Preferred Buyer(s) | |
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Select Winning Bidder | |
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Render Fairness Opinion | |
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Receive Board Approval and Execute Definitive Agreement | |
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Closing | |
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Obtain Necessary Approvals | |
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Shareholder Approval | |
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Financing and Closing | |
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Negotiated Sale | |
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Bloomberg Appendix | |
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Buy-Side M&A | |
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Buyer Motivation | |
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Synergies | |
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Cost Synergies | |
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Revenue Synergies | |
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Acquisition Strategies | |
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Horizontal Integration | |
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Vertical Integration | |
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Conglomeration | |
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Form of Financing | |
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Cash on Hand | |
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Debt Financing | |
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Equity Financing | |
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Debt vs. Equity Financing Summary-Acquirer Perspective | |
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Deal Structure | |
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Stock Sale | |
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Asset Sale | |
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Stock Sales Treated as Asset Sales for Tax Purposes | |
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Section 338 Election | |
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338(h)(10) Election | |
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Buy-Side Valuation | |
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Football Field | |
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Analysis at Various Prices | |
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Contribution Analysis | |
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Merger Consequences Analysis | |
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Purchase Price Assumptions | |
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Balance Sheet Effects | |
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Accretion/(Dilution) Analysis | |
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Acquisition Scenarios-I) 50% Stock / 50% Cash; II) 100% Cash; and III) 100% Stock | |
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Illustrative Merger Consequences Analysis for the BuyerCo / ValueCo Transaction | |
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Bloomberg Appendix | |
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Afterword | |
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Bibliography and Recommended Reading | |
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Index | |