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.
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
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