Question: Question 1. Valuing M&A - Example [Part 1] The buyer... The seller... . PV =$5 billion o PV =$2.8 billion . #shares=50 m. o #shares=40

Question 1.

Valuing M&A - Example [Part 1] The buyer... The seller... . PV =$5 billion o PV =$2.8 billion . #shares=50 m. o #shares=40 m. . share price=$100 o share price=$70 Assume these are all-equity firms and synergies are $1.7 b.Valuing M&A Example [Part2] If acquirer plans to pay a $30 premium/ share to the target shareholders 0 What will be value of combined rm? 0 How much value is created? 0 How much value goes to the seller? 0 How much value goes to the buyer? MV versus actual PV of FCF Note: I was careful in prior example to refer to PV of FCF minus debt rather than the market value of equity . This is because the target's market value will not necessary equal the stand alone PV of the target's FCF minus debt [Why? 2 reasons...] . Because of this, you need to be careful when trying to find the gains of M&AMV + PV(FCF) Example [Part 2] Inbev (buyer) ... BUD (seller) ... . MV=$70 billion . MV=$36 billion . #shares=1.2 b. o #shares=715 m. . share price=$58.33 o share price=$50.35 Assume all-cash acquisition, offer = $46 b. Gain from synergies = $13 b. If the true PV of BUD is $32b, what are the gains to each party in this deal?\f

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