In mergers and acquisitions, when calculating the value of the target company, should you use the acquirer's cost of capital or the target's cost of capital? Explain why.
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The odds seem to be clearly weighted against success in acquisitions. If you were to create a strategy to grow, based upon acquisitions, which of the following offers your best chance of success? Select one: a. Large, private target, pay with stock, and cost synergies b. Small, private target, pay with cash; and cost synergies c. Small, private target, pay with stock; and cost synergies d. Small, public target; pay with cash ; and growth synergies e. Large, public target, pay with cash, and growth synergies f. Large, private target, pay with cash, and growth synergies
Akash M.
On April 1st, 2014, AcquirerCo acquired 100% of TargetCo's shares. The M&A deal between TargetCo and AcquirerCo was based on a Fixed Exchange Ratio Structure using the number of basic shares outstanding. According to the terms of the agreement, AcquirerCo exchanged its 100 million shares for TargetCo's 100% basic shares. Assumptions: ($ in millions, except per share data; shares in millions) Offer Price Per Share: $25.00 Acquirer Share Price: $75.00 Acquirer Shares Exchanged: 100 Target Debt: $900 Target Preferred Stock: $150 Target Minority Interest: $350 Target Cash: $200 Target Sales (As of March 31, 2014 - YTD Financial Statement): $1500 Target Sales (As of December 31, 2013 - YTD Financial Statement): $3750 Target Sales (As of September 30, 2013 - YTD Financial Statement): $3000 Target Sales (As of June 30, 2013 - YTD Financial Statement): $2000 Target Sales (As of March 31, 2013 - YTD Financial Statement): $1250 Target Options and Warrants: Tranch 1: 100 shares, $30 Tranch 2: 150 shares, $28 Tranch 3: 250 shares, $27 a) What is the Enterprise Value of TargetCo? Show your work. b) What is the EV/LTM Sales multiple for TargetCo? Show your work.
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Horngren’s Cost Accounting
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Principles of Accounting Volume 1: Financial Accounting
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