Mergers, Acquisitions, Divestitures, and Other Restructurings

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