MERGER AND ACQUISITIONS 1.

League tables:- Some of the most well-known league tables are those that track the
dealings of investment banks, such a tables that tally the ongoing deals done by various banks. For example, a league table put out by a financial information provider may show all of the merger and acquisition deals that each bank has managed during a yearly period, illustrating the date in terms of the combined dollar value of the deals as well as the share of the merger and acquisition deal market for the period. Read more: http://www.investopedia.com/terms/l/league_table.asp#ixzz22yYFWec3

2. Types of mna transactions n synergies in pdf doc 3. Types of buyers

Financial buyer:- The most common groups of financial buyers are Private Equity Groups
(PEGs). They raise their investment capital from College Endowment Funds, Pension Funds and High Net Worth Individuals, to name just a few. The companies they acquire must either be large enough to be considered a "Platform Company," or be a synergistic Add-On Company. A Platform Company is usually already a midsize or large firm that holds a dominant position within its industry. Once a Platform Company is acquired, they seek to purchase smaller companies within the same industry. The financial buyers will provide the capital that enables the Platform Company to grow internally as well by way of acquisitions of similar businesses. When the Platform Company becomes large enough to be an attractive target for either being acquired by a larger company or to take public, the financial buyer will sell the company, and in most cases, provide a substantial ROI to the investors which makes them willing to invest in the next acquisition. The financial buyer's seed capital usually comes from their pool of investors. Long term financing is usually arranged through banks and mortgage companies. Often mezzanine financing is needed to bridge the gap between the sales price and long term financing. Mezzanine financing is often unsecured or at least in a secondary position to the long-term lender. The mezzanine lender often receives stock in the company being acquired as an additional incentive to provide the needed funds. Often, the seller is asked to take back stock in the acquired company as part of the selling price.

Acquisition Criteria:

Target companies who are a dominant player in their industry and already have the infrastructure to support a regional or national operation. Generally, the Platform Company must have gross revenues in excess of $25 million.

Add-On Companies typically have gross revenue in excess of $5 million and are in the same industry as the financial buyer's Platform Company.

The target company must have key management personnel who are willing to stay on and manage the company.

Financial buyers generally have no interest in industries where the total market for the industry is small with little room for significant growth.

b. Synergistic Buyer
Synergistic buyers are U. S. companies and foreign companies who are already established within an industry. They are usually a dominant player within their geographic region or on a national basis and seek rapid growth through acquisition. These buyers will operate as a public corporation, private corporations or an established partnership. Often the target company is merged in with the acquiring company either immediately or over a period of time. The synergistic buyer's primary goal is to acquire a company or a group of companies within the same industry to gain economies of scale and business growth not otherwise available. These buyers are seeking long term growth rather than rapid growth and quick cash out sought by the financial buyers. Private companies may be looking for sufficient growth and size to go public; however, the principals in the acquiring firms typically plan on remaining in the operations on a long term basis. The synergistic buyers seed capital usually comes from their own equity funds. Long term financing is usually arranged through banks and mortgage companies. Sometimes mezzanine financing is needed to bridge the gap between the sales price and the long term financing. Sometimes, the principal in the target firm is given stock in the acquiring company as part of the selling price and hired to continue managing the acquired firm.

Acquisition Criteria:

Generally, target companies must have gross revenue in excess of $5 million and be in the same or similar industry as the synergistic buyer.

The target company must offer unique market share not readily available to the acquiring company, such as opening in a new market not previously served by the acquiring

company or obtaining product lines and/or services not previously provided, but synergistic to the acquiring firm customer base.

Target companies will be especially attractive in industries where economies of scale are possible whereby the acquiring company can obtain significant post-deal expense savings, such as elimination of dual facilities, support staff, or other overhead expenses.

c. The Individual Buyer

The individual buyer category encompasses a variety of buyer types that include wealthy individuals, corporate executives, engineers and salespeople working for large firms, and foreigners who have recently moved to the U.S. The individual buyer category represents the largest number of prospective buyers for small to midsize businesses. Wealthy individuals often are people who have taken early retirement from corporate America and after a brief period of rest decide to get into their own business. They tend to acquire smaller companies grossing in excess of $2 million. Corporate executives, engineers and salespeople make up a large portion of those who buy small to midsize businesses. They are often driven to buy their own business due to events in their corporate life such as being asked to move to another city, loss of their job due to corporate mergers or downsizing, being passed over for promotion or fed up with corporate bureaucracy. They tend to buy businesses that gross $2 million.

Small Business Administration 7A Loan as a Finance Option

Long term financing is usually arranged through banks and mortgage companies in the form of the Small Business Administration's 7A loan guarantee program. The SBA loan guarantee programs enable financial institutions to make loans to individuals or companies with individual guarantees up to $1,600,000 wherein the buyer must put up 25% to 35% equity on non-real estate type loans and 15% to 25% where real estate is part of the transaction. The assets being acquired and the personal guarantee of the borrower typically secures these loans. Owner financing is considered by the SBA as equity funds, but seller financing cannot exceed the buyer's equity contribution limiting seller financing to no more than 15% to 20% of the transaction price. For a target business to qualify for a buyer being able to obtain a SBA guaranteed loan to finance the tangible and intangible assets of a business, it must have been in business for at least three years and be able to provide three years of tax returns showing sufficient profits to repay the

buyers loan and provide the buyer with a livable salary. Adjustments to the reported earnings are allowed for provable expenses that are either non-reoccurring or personal in nature.

Owner Financing
A significant portion of transactions involving small to midsize target firms are seller financed. This is usually due to the target company's poor financial record keeping or when the business has been in business for less than three years. Most every business owner has heard of a transaction where an owner provided financing for the buyer and the buyer destroyed the business and defaulted on the loan. In most cases, the terms of the financing would have predicted the failure. A high price, low down payment, and/or short-term payout often contribute to note failures. Transactions properly structured are usually successful. In fact, after a seller-financed note has matured for six months to one year, there are several national companies who buy owner financed notes. Typical owner financing includes a reasonable selling price, a down payment of 30% to 45% and a payout of 5 to 7 years, with interest rates starting at prime plus 2%. The assets of the business being acquired and the personal guarantee of the buyer typically secure the note. A lien showing the note security is filed with the Secretary of State or required public records. Furthermore, the terms of the note should allow for the note holder to invoke rapid foreclosure proceeding in the event of default.

Acquisition Criteria:

Target companies typically have gross revenues up to $5 million. Buyers tend to seek businesses that provide products and/or services that are easy to learn without long periods of training and high costs of entry. Many retail, service businesses and wholesale/distribution, meet these criteria. Businesses requiring professional licensing are usually limited to buyers who either have the license or can get one without incurring major costs or time delays.

Most individual buyers seek businesses that have current earnings at least similar to their most recent salaries, and upside potential for earnings growth. Buyers look for business that have good growth potential, but they are not willing to pay a price based on future potential.

While financial results are important, other lifestyle considerations can be equally important.

Location of the business in proximity to the buyer's home is often a significant consideration.

The business must have "curb appeal." The condition and appearance of the equipment and facilities must be appealing or at least not unappealing. A little paint and attention to cleanliness goes a long way towards making a business attractive.

Businesses with full time employees give buyers confidence that the business has continuity and stability. Having employees who can run the daily operations is more appealing than those businesses that are highly reliant on the owner to make daily operating decisions or have personal relationships with the company's customers.

Businesses that have verifiable and current financial records enable a buyer to quickly do their due diligence and obtain sources of financing. Most lenders require copies of the last three years of tax returns and a year to date financial statement within 60 days of the acquisition.

While buyers may not always know the latest techniques for valuing businesses, they are capable of determining if the business makes sufficient earnings to earn a livable salary, pay the new debt service and provide a reasonable return on the investment. Ultimately, these factors are the test to see if the price and terms of any deal are reasonable.

Stock Purchase Initially, it should be noted that when we discuss a Stock Purchase we are really referring to the purchase of the entire entity which most often involves a corporation's stock. To the extent that the transaction involves another type of entity such as a Partnership or a Limited Liability Company, the term that is used will be slightly different. In a Stock Purchase, all of the outstanding shares of stock of the business are transferred from the seller to the buyer. Although there may be cases where a party to a contract with the business has a right to object, the buyer in effect steps into the shoes of the seller, and the operation of the business continues in an uninterrupted manner. Unless specifically agreed to, the seller has no continuing interest in, or obligation with respect to, the assets, liabilities or operations of the business. From an accounting perspective, the business's assets and liabilities are not adjusted, they continue to be carried and/or depreciated in the same manner as before the transaction. From a tax perspective, the seller recognizes a gain or loss based on the difference between the sales price and his or her current basis in the stock. Asset Purchase In an Asset Purchase, the seller retains ownership of the shares of stock of the business. The buyer must either create a new entity or use another existing entity for the transaction. Only assets and liabilities which are specifically identified in the purchase agreement are transferred to the buyer. All of the other assets and liabilities remain with the existing business and thereby the seller. Asset Purchase transactions are generally more complicated because ownership of the assets and liabilities and any related contracts must actually be transferred, sometimes through the filing of documents with governmental offices. This may also involve additional fees. In addition, a transaction involving the sale of substantially all of the assets of a business may be impacted by state "Bulk Sales" rules which can require notification of all of the creditors of a business. Other considerations include the possible transfer of the corporate name, and the rehiring of employees by the buying entity. From an accounting perspective, the buyer records the assets and liabilities at the fair market value assigned to them as part of the transaction. This may increase or decrease the carrying value and/or amount of annual depreciation with respect to individual assets and liabilities. From a tax perspective, the existing business recognizes a gain or loss based on the difference between the sales price and the carrying value of the assets and liabilities.