FOREWORD

PREFACE AND ACKNOWLEDGMENTS

Chapter 1 Getting Started in Mergers and Acquisition
Introduction . Key Terms . About Our Question-and-Answer Format . Concluding Comments . Exhibit 1-1: Global M&A Transaction Value (1988 vs. 2018) . Exhibit 1-2: The M&A Process . Notes

Chapter 2 Strategy
Introduction . Strategic Planning . The Role of M&A in Strategic
Planning . Alternatives to M&A . SWOT Analysis . Disclosure of
Strategy . Levels of Strategy . Four Types of M&A Strategy . The Search
Process . Brokers and Finders . Bankers . Initial Regulatory and Legal
Considerations . Concluding Comments . Exhibit 2-1: Outline for a Typical
Strategic Plan . Exhibit 2-2: M&A in a Strategic Decision Tree . Exhibit 2-3:
Range of Structure for Business Collaboration . Exhibit 2-4: Sample SWOT
Analysis Questions . Exhibit 2-5: Sample Checklist of Assets for Use in
Complement/Supplement Analysis . Exhibit 2-6: Sample Checklist of Risks for
Use in Seeking Complementary Acquisitions . Exhibit 2-7: Sample Strategy
Statements . Exhibit 2-8: What Is Alphabet? . Exhibit 2-9: Examples of
Options Embedded in Strategic Acquisitions . Exhibit 2-10: The AI Acquisition
Race . Exhibit 2-11: Sherwin-Williams-Vertical Strategy Leads to Horizontal
Move . Exhibit 2-12: A Guide to M&A Decisions . Exhibit 2-13: Opportunity
Prioritization . Exhibit 2-14: Premerger Notification Thresholds Under Hart-
Scott-Rodino . Appendix 2A: Types of Organizational Structure . Appendix 2B: Checklist of Assets . Appendix 2C: Horizontal Merger Guidelines . Appendix 2D: Tesoro Strikes Gold in California . Notes

Chapter 3 Valuation and Modeling
Introduction . Valuation Fundamentals . Choosing a Valuation Approach . Comparable Companies and Transactions . Comparable Transactions Analysis . DCF Analysis . Forecasting Free Cash Flow . Calculating the Discount Rate . Ascribing a Terminal Value . Conducting Sensitivity
Analyses . The IVS Framework . Concluding Comments . Exhibit 3-1: Valuation Approaches . Exhibit 3-2: Advantages and Disadvantages of Valuation Multiples . Exhibit 3-3: Common Multiples Used in Selected Sectors . Exhibit 3-4: Comparable Companies Checklist . Exhibit 3-5: Variations in Accounting May Affect Valuation Multiples . Exhibit 3-6: Comparable Transactions Checklist . Exhibit 3-7: Summary of Precedent Transactions . Exhibit 3-8: Overview of the DCF Analysis Process . Exhibit 3-9: Advantages of DCF Analysis . Exhibit 3-10: Disadvanatges of DCF Analysis . Exhibit 3-11: Defining Free Cash Flow-Top-down Approach . Exhibit 3-12: Calculating Free Cash Flow-Example of Top-down Approach . Exhibit 3-13: Defining Free Cash Flow-Bottom-up Approach . Exhibit 3-14: Calculating Free Cash Flow-Example of Bottom-up Approach . Exhibit 3-15: Present Value Formula . Exhibit 3-16: WACC Formula . Exhibit 3-17: Cost of Common Equity Formula . Exhibit 3-18: Chart Showing Size Premiums by Quartile and Decile . Exhibit 3-19: Chart Showing Size Premiums by Decile . Exhibit 3-20: Exit Multiple Approach to Estimating Terminal Value . Exhibit 3-21: Terminal Value Model Assuming Constant Growth . Exhibit 3-22: Perpetuity Value Assuming No Growth in Cash Flows . Exhibit 3-23: Perpetuity Value Assuming 2 Percent Growth . Exhibit 3-24: DCF for a Business Already in Constant Growth Mode . Exhibit 3-25: DCF for a No. 2 Pencil Manufacturer . Notes

Chapter 4 Financing and Refinancing
Introduction . Financing Overview . Financing Instruments: Equity vs. Debt vs. Hybrids . Financing Sources . Highly Leveraged Transactions . Minimizing Borrowing . Determining Structure in Debt Financing . Senior Debt . Sale-Leasebacks . Pros and Cons of Preserving Debt and Lease Obligations . Seller Takeback Financing . Warrants . Working Capital Debt of the Seller . The Bank Book and Commitment Letter . Other Principal Issues in Senior Loan Agreements . High-Yield (a.k.a. "Junk") Bonds . Bridge Loans . Equity Investment Funds . Registration Rights . Intercreditor Issues . Subordination Issues . Intercreditor Agreements . Fraudulent Conveyance and Other Litigation Concerns . Refinancing Issues . Concluding Comments . Exhibit 4-1: The LBO of Beatrice and Its Aftermath . Exhibit 4-2: Sample Company's Cash Flow and Debt Service Requirements . Exhibit 4-3: Sample Covenant . Exhibit 4-4: Subordination and Corporate Structure . Appendix 4A: Typical Subordination Provisions of Publicly Issued Notes . Appendix 4B: Typical Subordination Provisions of Privately Placed Institutional Notes . Appendix 4C: Typical Subordination Provisions of Seller Notes . Notes

Chapter 5 Structuring Transactions: General, Tax, and Accounting Considerations
Introduction . General Considerations . Structuring Asset Transactions . Structuring Stock Transactions . Structuring Merger Transactions . General Accounting Considerations . Allocating the Price of a Transaction for Accounting Purposes . Difference Between Accounting and Tax Treatments . Tax Considerations . Basic Tax Concepts and Definitions . Basic Tax Structure: Taxable Transactions . Basic Tax Structure: Tax-Deferred Transactions . Choice of Entity . Tax Consequences in Structuring Acquisition
Debt Financing . Management Buyout Tax Basics . Postacquisition Tax Issues . Other Tax Issues . Concluding Comments . Transaction Diagrams . Exhibit 5-1: A Guide to US (Federal) and State Codes . Exhibit 5-2: Forward Subsidiary Merger (FSM) vs. Reverse Subsidiary Merger (RSM) . Exhibit 5-3: Anatomy of a Merger, Acquisition, and Buyout Transaction . Exhibit 5-4: Description of Acquisition Allocation from Emcor Group, Inc. . Exhibit 5-5: Differences in the Purchase Price Computation . Exhibit 5-6: Section 368: Types of Reorganization . Exhibit 5-7: Stock Purchase . Exhibit 5-8: Asset Purchase . Exhibit 5-9: Taxable Forward Merger . Exhibit 5-10: Taxable Reverse Merger . Exhibit 5-11: Taxable Forward Subsidiary Merger . Exhibit 5-12: Tax-Free Forward Merger (A Reorganization) . Exhibit 5-13: Tax-Free Forward Triangular Merger . Exhibit 5-14: Tax-Free Acquisition of Stock for Voting Stock (B Reorganization) . Exhibit 5-15: Acquisition of Property for Voting Stock (C Reorganization) . Exhibit 5-16: Acquisition of Property for Voting Stock (D Reorganization) . Exhibit 5-17: National Starch Transaction (Section 351 Acquisition) . Appendix 5A: Meeting the Reorganization Test: US Examples from the Internal Revenue Service . Notes

Chapter 6 The Due Diligence Inquiry
Introduction . Getting Started . Duration of Due Diligence . Due Diligence Levels . Securities Laws and Due Diligence . Red Flags . Relations with the Seller . Location of Due Diligence Research . Evaluating Assets . Litigation Analysis . Emerging Legal Issues . Due Diligence After Closing . Concluding Comments . Exhibit 6-1: VDR Menu Screen Shot . Exhibit 6-2: A Representative List of Virtual Data Room Providers . Exhibit 6-3: Some Typical Plaintiff Claims in M&A Litigation . Exhibit 6-4: Venn Diagram Showing Interrelationship of M&A, Due Diligence Standards, and Securities Law . Appendix 6A: Sample Confidentiality Agreement . Appendix 6B: Due Diligence Checklist . Appendix 6C: An Annotated Initial Document and Information Request List . Appendix 6D: Sample Index of VDR Documents . Notes

Chapter 7 Negotiating the Letter of Intent and Acquisition Agreement
Introduction . Letter of Intent . The Acquisition Agreement . Components of the Agreement . Introductory Material . Representations and Warranties . Covenants . Conditions to Closing . Indemnity Section . Acquisitions from an Affiliated Group . Transactions Involving Public Companies . Negotiating and Documenting an MBO . Employment Agreements . Stockholders' Agreements . Concluding Comments . Exhibit 7-1: Seller vs. Buyer Key Goals . Exhibit 7-2: The Safeguards-Price Negotiating Matrix . Exhibit 7-3: The FASB on Materiality . Appendix 7A: Sample Letter of Intent . Appendix 7B:Typical Merger Agreement and Commentary . Notes

Chapter 8 Closing
Introduction . The Basics of Closing . Planning the Closing . Preclosing . Closing . Wire Transfers . Postclosing . Concluding
Comments . Appendix 8A: Sample Closing Memorandum (Including a Detailed Schedule of Closing Documents) . Notes

Chapter 9 Postmerger Integration and Divestitures
Introduction . Basic Concepts of Integration . The Postmerger Plan . Communicating the Integration Plan . Combining Company Names . Integrating Cultures . Integrating Mission, Policy, Ethics, and Vision Statements . Integrating Key Resources, Processes, and Responsibilities . Integrating Resources . Integrating Processes . Integrating Responsibilities . Commitments to Employees . Postmerger Compensation: A Complex Issue . Planning Pay Integration: A Strategic Overview . Merging Benefits Plans . Some General Postmerger Technology Considerations . Divestitures . Concluding Comments . Exhibit 9-1: Audience Media Communications Matrix . Exhibit 9-2: Steps for Naming a Newly Combined Company . Exhibit 9-3: A Matrix for Planning Cultural Integration . Exhibit 9-4: Acquisition Integration Plan for Human Resources Operation . Exhibit 9-5: Three Brand Approaches . Exhibit 9-6: Sample Plan for 30-, 60-, and 90+-Day Milestones . Exhibit 9-7: Old Line Bank and Bay Bank Merger FAQ (Excerpts) . Exhibit 9-8: Marathon Patent Press Release Addressing the Dilution Issue . Exhibit 9-9: Sample Matrix for Postmerger Compensation Planning . Exhibit 9-10: Valuing the Divestiture Option . Exhibit 9-11: The WARN Act: Basic Provisions/Requirements . Appendix 9A: Sample Postmerger Press Release Highlighting Strategic Motivation . Appendix 9B: Sample "Assets" Checklist of Resources, Processes, and Responsibilities . Appendix 9C: Integration Planning Worksheet . Appendix 9D: Integration Timeline from a Midsized Acquirer . Appendix 9E: Pairwise Comparison . Appendix 9F: Principles for Responsible...