Washington University in St Louis Mergers and Acquisitions Spreadsheet

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skl701020

Business Finance

Washington University in St Louis

Description

You only need to finish the inputs sheet in the template spreadsheet for this assignments and you might need to use capital IQ to search for the related information of this deal.

here is the instruction:

Merger Model Project

Deliverable: Download the spreadsheet Merger Model Template.xlsx. Fill out all the yellow shaded areas with the appropriate formulas and submit the completed spreadsheet.

In this project you will develop a merger model for analyzing the following recent M&A transaction:

  • AbbVie acquisition of Allergan plc ($61.9B on June 2019) – Pharmaceutical industry

Your analysis should be based on information available before the deal announcement date, except for deal documents such as the proxy statement and the merger agreement, which were available soon after the deal announcement.

In order to obtain the acquirer and target financials, key merger documents, and other relevant information related to the deal, I recommend that you use S&P Capital IQ.

The proxy statement and the merger agreement contain key deal information: offer price, form of transaction, cash/stock/debt, treatment of options, restricted stock units (RSUs), deal announcement date, estimated synergies, etc.

Please feel free to make reasonable assumptions, if important model information, such as deal fees, write-ups, etc., are not available. For example, if the write-up of intangible assets is not available, you can evaluate how intangibles changed around the closing for similar deals: e.g., for the quarterly financials before and after the closing of similar deals estimate the average %write-up:

(Int_Assetsacq-after– Int_Assetsacq+tgt-before)/Int_Assetstgt-before

Please explain in the comments column of the worksheets any relevant assumptions you may have made in your analysis.

Our S&P Capital IQ subscription contains only limited information about analysts’ earnings estimates. In the file IBES Forecasts ABBV AGN.xlsx , you will find the analysts’ forecasts, available at the deal announcement date, for the acquirer and target net income and EPS for the next three fiscal years. The data comes from the I/B/E/S database which is available at WRDS.

Please make sure you complete the following:

  • Sources and uses of funds table
  • Pro-forma combined pro-forma financial statements with deal adjustments
  • Accretion/dilution analysis
  • Credit Analysis
  • Contribution Analysis

Unformatted Attachment Preview

Mergers and Acquisitions Prof. Armando Gomes Assignment #3 Merger Model In millions, except per share data Company Assumptions Company Name Ticker symbol Current share price Diluted shares outstanding (MM) Fiscal Year End LTM Sales (USD) LTM EBITDA (USD) LTM EBIT (USD) LTM Net income (USD) EPS Fiscal year + 1E EPS Fiscal year + 2E EPS Fiscal year + 3E Tax rate Interest rate/yield on debt Interest earned on cash Acquirer Target Deal 1 Comments Deal 2 In millions, except per share data Deal Annoucement date Transaction Assumptions Target share price Offer price premium Offer price per share Target diluted shares Offer Value Deal Structure (Equity Purchase) % Cash* % Stock Exchange ratio calculation Offer price per share Acquirer share price Nominal Exchange ratio (offer price/acq price) Actual Exchange ratio (%stock x offer price/acq price) Transaction financing Acquirer new borrowing Acquirer excess cash used Target debt to be refinanced Transaction/deal fees as % offer value Transaction expenses ($) Term of loan Financing fees as % of acquisition financing Financing fees Annual financing fee amortization Estimated synergies First year Second year Third year Write-Ups and Purchase Price Allocation Tangible assets Book value of target PP&E % PPE Write-up Tangible asset write-up Useful life (years) Incremental depreciation expense Intangible assets Book value of target intangible assets % Intangibles Write-up Intangible asset write-up Useful life (years) Incremental amortization expense Incremental Deferred tax liabilities (DTL) Target assets - book value Less: Write-off of target goodwill Net identifiable assets of target Purchase Price Allocation Offer Value Less: Net identifiable assets of target = Excess purchase price for allocation Less: Tangible asset write-up Less: Intangibles asset write-up Plus: Incremental Deferred tax liability = Goodwill created Comments In millions, except per share data Sources Cash New debt issued Stock issued Total Sources Amount Uses Purchase of equity Target debt refinanced Deal Fees Financing Fees Total Uses Amount Transaction Multiples Transaction Value / LTM Sales Transaction Value / LTM EBITDA Transaction Value / LTM EBIT Offer Price/ FY+1 EPS Offer Value + Debt + Preferred + Minority interest + / - Other - Cash & equivalents Transaction Value Comments In millions, except per share data Acquirer Cash and equivalents Accounts receivables Inventory Other current assets PP&E Goodwill Intangible assets Other long-term assets Total Assets Current liabilities Debt Deferred tax liabilities Other liabilities Preferred stock Minority interest Common equity Total Liabilities & Equity Balance Check Total debt Total capitalization (D+E) LTM EBITDA Total debt / Total capitalization Total debt / LTM EBITDA Credit Statistics Debt/EBITDA Offer Price % Stock 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Debt/Cap Target Adjustment (Decrease) Increase Pro Forma Combined Comments Use either balance sheet values based on the Fiscal year ending before deal annoucement or the quarter before the deal announcement date In millions, except per share data FY 1E FY 2E FY 3E FY 1E FY 2E FY 3E Target Net Income Acquirer Net Income Combined Net Income (before adjustments) Pre-tax Adjustments Less: Additional interest expense + / ( - ): Synergies + / ( - ): D&A from write-up + / ( - ): Amortization Financing fees Less: Forgone interest income + / ( - ): Other pre-tax adjustment Total Pre-tax Adjustments Less: taxes Total After-tax Adjustments Pro Forma Combined Net Income Acquirer shares outstanding New shares Issued by acquirer Pro Forma Shares Outstanding Pro Forma EPS Acquirer Standalone EPS Accretion / (Dilution) EPS Accretion / (Dilution) - $ EPS Accretion / (Dilution) - % Additional pre-tax synergies (cushion) to breakeven EPS Accretion / (Dilution) - % Offer Price % Stock 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Comments In millions, except per share data Market value Acquirer Price per share Diluted shares outstanding Equity value Net debt Enterprise Value (current) Enterprise Value (premium offered) Target Pro Forma Contribution $ in MM Revenue (LTM) EBITDA (LTM) Net Income (LTM) Contribution % Revenue (LTM) EBITDA (LTM) Net Income (LTM) EV (current) EV (@ premium offered) 100% 100% 100% 100% 100% Add here the Contribution Analysis chart (see sample below) Sample Contribution analysis Chart Enterprise value 68.4% Net Income (FY+1) 83.8% EBITDA (FY+1) Revenue (FY+1) 50% 31.6% 16.2% 80.6% 19.4% 78.7% 60% Apple 21.3% 70% Disney 80% 90% 100% Ticker Symbol Company Name I/B/E/S Statistical Period (SAS Format) ABBV ABBV ABBV BMY BMY BMY CELG CELG CELG AGN AGN AGN ABBVIE ABBVIE ABBVIE BRISTOLMYERS BRISTOLMYERS BRISTOLMYERS CELGENE CELGENE CELGENE ALLERGAN ALLERGAN ALLERGAN 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 01/17/2019 Number of EPS Mean Number of Estimates Estimate Estimates FY+ 1 2 3 1 2 3 1 2 3 1 2 3 17 17 14 16 16 13 24 25 20 20 20 17 $ $ $ $ $ $ $ $ $ $ $ $ 7,95 8,74 9,59 3,87 4,13 4,42 8,80 10,40 12,41 16,54 16,35 17,84 15 14 11 13 11 11 21 22 19 16 16 14 Net Income Mean Estimate (Millions) $ $ $ $ $ $ $ $ $ $ $ $ 12.332,58 13.061,05 14.165,81 6.354,63 6.693,17 7.112,54 6.500,00 7.491,36 8.779,47 5.680,85 5.515,42 5.984,98 1.551 1.494 1.477 1.642 1.621 1.609 739 720 707 343 337 335
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Explanation & Answer

Attached. Please let me know if you have any questions or need revisions.

Mergers and Acquisitions
Prof. Armando Gomes

Assignment #3
Merger Model

In millions, except per share data
Company Assumptions
Company Name
Ticker symbol
Current share price
Diluted shares outstanding (MM)
Fiscal Year End
LTM Sales (USD)
LTM EBITDA (USD)
LTM EBIT (USD)
LTM Net income (USD)

Acquirer
AbbVie Inc.
ABBV
$108.62
7.828B
30-Dec
32.65 B
3.434B
2.931B
2.456B

EPS Fiscal year + 1E
EPS Fiscal year + 2E
EPS Fiscal year + 3E

$7.95
$8.74
$9.59

Tax rate
Interest rate/yield on debt
Interest earned on cash

7.9%
2.5%
5.2%

Target
Allergan PLC
AGN
$193.02
332.61M
31-Dec
16.06B
7.5B
7.3B
1.6B
$16.54
$16.35
$17.84
12.8%
2.0%
6.3%

Deal 1
Comments

Deal 2

In millions, except per share data
Deal Annoucement date
Transaction Assumptions
Target share price
Offer price premium
Offer price per share
Target diluted shares
Offer Value
Deal Structure (Equity Purchase)
% Cash*
% Stock
Exchange ratio calculation
Offer price per share
Acquirer share price
Nominal Exchange ratio (offer price/acq price)
Actual Exchange ratio (%stock x offer price/acq price)

Transaction...


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