Mergers, Acquisitions, Divestitures, and Other Restructurings

Available in our e-library on M&A at IMAA!

Authors: Paul Pignataro

Publisher: John Wiley

Year: 2015 (March)

ISBN: 978-1-118-90871-6

Content

Paul Pignataro reveals the secrets behind growth through M&A in his new book, Mergers, Acquisitions, Divestitures, and Other Restructurings + Website. Through market shifts and regulatory changes, M&A has served as a solid approach to growth. Creating value through mergers and acquisitions is a highly coveted strategy, and Wall Street has long sought a clear technical understanding of the components of M&A as a key driver of growth. In this book, the author provides that understanding, covering all essential aspects of accounting and modeling for the M&A process.

With over a decade of experience aiding billion-dollar restructuring deals, Paul Pignataro is in an excellent position to break down M&A from a finance standpoint. Mergers, Acquisitions, Divestitures, and Other Restructurings covers the financial accounting and modeling behind several M&A structures. Using the merger of Office Depot and Office Max, Mr. Pignataro fully addresses the entire integration, explains EBITDA, and other crucial performance measures. This text is for finance practitioners who want to explore every corner of the M&A process.

• Learn accounting for asset acquisitions, asset divestitures, and corporate mergers
• Explore modeling methods including mini-merger modeling and fully consolidated merger modeling
• Read case studies demonstrating the practical success of theoretical models
• Understand EBITDA, cash flow, capital structure, and their impact on M&A success and value creation

This new text from the CEO and founder of the New York School of Finance is key for understanding how restructuring leads to growth and value creation. The importance of M&A shows no signs of slowing, meaning that finance professionals need to be able to accurately analyze the prospects and impacts of restructuring moves. Mergers, Acquisitions, Divestitures, and Other Restructurings + Website is the authoritative resource for doing just that.

Table of Contents

Preface xi

PART ONE Introduction 1

CHAPTER 1 Merger and Acquisitions Overview 3

The M&A Process 5

Office Depot and OfficeMax 7

CHAPTER 2 Financial Statements Refresher 13

The Income Statement 13

The Cash Flow Statement 22

The Balance Sheet 27

Depreciation 32

Working Capital 42

Debt Schedule 44

Financial Statement Flows Example 45

PART TWO M&A Analyses 53

CHAPTER 3 Raising Debt and Equity 55

Raising Debt 55

Raising Equity 60

CHAPTER 4 Asset Acquisitions and Asset Divestitures 71

Asset Acquisitions 72

Asset Divestitures 83

CHAPTER 5 Accretion/Dilution Analysis 87

Step 1: Obtaining a Purchase Price 88

Step 2: Estimating Sources and Uses of Funds 89

Step 3: Creating a Pro-Forma Analysis 94

Summary 105

Drivers 106

PART THREE Office Depot/OfficeMax Merger 109

CHAPTER 6 Assumptions 111

Uses of Funds 119

Sources of Funds 122

CHAPTER 7 Income Statement 129

Pro-Forma Income Statement 130

CHAPTER 8 Cash Flow Statement 171

Cash Flow from Operating Activities 171

CHAPTER 9 Balance Sheet Adjustments 191

The Buyer Is Paying For 191

The Buyer Is Receiving 192

Additional Adjustments 192

Office Depot and OfficeMax Balance Sheet Adjustments 198

CHAPTER 10 Depreciation Schedule 217

Straight-Line Depreciation 218

CHAPTER 11 Operating Working Capital 229

Receivables 231

Inventories 233

Prepaid Expenses and Other Current Assets 235

Deferred Income Taxes and Receivables 236

Trade Accounts Payable, Accrued Expenses, and Other

Accrued Liabilities 238

Income Tax Payable 240

Other Current Liabilities 241

Projecting Operating Working Capital 242

Operating Working Capital and the Cash Flow Statement 251

CHAPTER 12 Balance Sheet Projections 261

Cash Flow Drives Balance Sheet versus Balance Sheet Drives

Cash Flow 265

Balancing an Unbalanced Balance Sheet 278

CHAPTER 13 Debt Schedule and Circular References 289

Debt Schedule Structure 289

Modeling the Debt Schedule 290

Circular References 314

Automatic Debt Paydowns 320

Basic Switches 322

CHAPTER 14 Accretion/Dilution 323

Fairness Opinions 323

Preferred Shares 325

Contribution Analysis 327

Conclusion 328

Appendixes

Appendix 1: Model Quick Steps 331

Appendix 2: Financial Statement Flows 333

Appendix 3: Excel Hot Keys 335

About the Companion Website 337

About the Author 339

Index 341