In 2024, as the prospect of Fed rate cuts begins to attract buyers back into the market after a period of caution in 2022 and 2023, the importance of thorough due diligence cannot be overstated. Family businesses, in particular, should pay close attention to the crucial role that a Quality of Earnings (“QofE”) report can play in their acquisition decisions. From uncovering sustainable earnings and identifying cost-saving potentials to understanding revenue synergies and assessing capital needs, a comprehensive QofE report emerges as an indispensable tool for business directors aiming to navigate the complexities of acquisitions with confidence and strategic insight.
Another tough call for the merger arb community – acquirer and target sue each other in Delaware Court of Chancery to respectively terminate the merger agreement or force consummation of the merger.
Earlier this year we reviewed the fairness opinions issued by Morgan Stanley and Barclays for the still pending JetBlue-Spirit merger. In an updated look at the deal, the adage that time is the enemy of all deals comes to mind while pondering Frew’s question from the earlier post of whether JetBlue could close.
The role of the financial advisor becomes tougher when markets are depressed. Questions of value and fair dealing may be subjected to more scrutiny. Declining or depressed markets in the context of negotiating and opining on a transaction will raise the reasonable question: How do current market conditions impact fairness? In this article we discuss some of the issues that may weigh on the decision process and the rendering of a fairness opinion in a depressed market.
A tough call for the merger arbitrage community: $25 per share cash deal closes; regulators reject the deal, causing First Horizon National to trade freely in a tough market for bank stocks; or the parties extend the merger agreement again, but does the price get renegotiated?
The tussle involving Frontier Group Holdings, Inc. and JetBlue Airways Corporation over Spirit Airlines has been decided in favor of JetBlue. In this article we take a look at the fairness opinions rendered by Morgan Stanley and Barclays, then concludes by asking a pertinent question the market seems to have answered even if the board answered in a nuanced way.
In this article we provide a broad overview of PPAs and then a deeper look into the pitfalls and best practices related to them.
Not only is a solvency opinion a prudent tool for board members and other stakeholders, but the framework of solvency analysis is ready made to score strategic alternatives and facilitate capital deployment.
Directors are periodically asked to make tough decisions about the strategic direction of a company. Major acquisitions are usually one of the toughest calls boards are required to make. Buy-side fairness opinions have a unique place in corporate affairs because the corporate acquirer has to live with the transaction. What seems fair today but is deemed foul tomorrow, may create a liability for directors and executive officers. This can be especially true if the economy and/or industry conditions deteriorate after consummation of a transaction.
In March of 2016 Elon Musk was laying the ground work for the merger of Telsa, Inc. and SolarCity Corporation. This presentation looks at the issues raised by plaintiffs who alleged Musk orchestrated the deal to bail-out SolarCity, and how the Delaware Court of Chancery ruled on the issues on April 27, 2022 under the entire fairness standard rather than deferential business judgment rule.
Contingent consideration is a common feature of M&A when both parties are private, or the acquirer is public, and the target is private. There are many forms of contingent consideration in M&A. These include post closing purchase price adjustments that can alter total transaction value or that can alter the payment and realization of net proceeds through the recovery of transaction set-asides such as escrow balances or the payment of holdbacks and deferrals.
This is the sixth article in a series on buy-side considerations. Our focus in this article is on understanding how and why net working capital targets are crucial for buyers looking to negotiate deals that look good at closing and pass the test as the buyer takes over the operation of the newly acquired business.
In this series of articles, we cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Read the articles in this series.
This is the fifth article in a series on buy-side considerations. In this series, we will cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Our focus in this article is on how the quality of earnings (QoE) analysis can help acquirers better analyze possible acquisition targets.
Many acquirers buy businesses at a value higher than this intrinsic value, paying what is referred to as a strategic premium. In this post we discuss the theory behind strategic premiums, and how they can be advantageous or detrimental to acquirers.
When considering a buy-side transaction to expand, many middle market companies may not consider a merger transaction as an option compared to an outright acquisition. Mergers are often seen as transactions for big conglomerate-type companies on Wall Street, but they can be effective for middle-market businesses as well. In this article we discuss the key questions that must be addressed when considering a merger transaction, including, corporate governance, social issues and economic questions.
This is the second article in a series on buy-side considerations. In this series, we will cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Our focus in this article is to summarize some practical considerations for approaching and vetting an identified target.
With aggregate M&A activity setting records in 2021 and continuing a strong pace in 2022, many businesses are exhibiting a thirst for growth or conversely their shareholders are eyeing an exit at favorable valuations. This article provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.
It may seem an odd time for some publicly traded companies to consider cash-out merger transactions because broad equity market indices are at or near record levels. Nonetheless, the changing market structure means some boards may want to consider it.
As with anything in this world, favorable transaction processes and outcomes require an investment. Fee structures for transaction advisory services can vary widely based on the type and/or size of the business, the specific transaction situation, and the varying roles and responsibilities of the advisor in the transaction process.
While many business owners have a general sense of what their business may be worth and a threshold selling price in mind, going at it alone in a transaction process involves more than a notion on pricing – it involves procedural awareness, attention to detail, as well as a good measure of patience despite the desire for an immediate outcome.
Ownership transitions, whether internal among family and other shareholders or external with third parties, require effective planning and a team of qualified advisors to achieve the desired outcome. In this article, we examine some “typical” timelines involved in various types of transactions.
In this article, we discuss some exit options and summarize some of the specifics of certain types of buyers and what that could mean for transaction structure and economic outcomes.
Our experience is that some if not most members of a board weighing an acquisition proposal do not have the background to thoroughly evaluate the buyer’s shares. Even when financial advisors are involved there still may not be a thorough vetting of the buyer’s shares because there is too much focus on “price” instead of, or in addition to, “value.”
A fairness opinion is more than a three or four page letter that opines as to the fairness from a financial point of a contemplated transaction; it should be backed by a robust analysis of all of the relevant factors considered in rendering the opinion, including an evaluation of the shares to be issued to the selling company’s shareholders. The intent is not to express an opinion about where the shares may trade in the future, but rather to evaluate the investment merits of the shares before and after a transaction is consummated. This article lists key questions that should be asked as part of every financial analysis.