Читать книгу Mergers, Acquisitions, and Corporate Restructurings - Gaughan Patrick А. - Страница 10

When a company decides it wants to acquire or merge with another firm, it typically does so using the services of attorneys, accountants, and valuation experts. For smaller deals involving closely held companies, the selling firm may employ a business broker who may represent the seller in marketing the company. In larger deals involving publicly held companies, the sellers and the buyers may employ investment bankers. Investment bankers may provide a variety of services, including helping to select the appropriate target, valuing the target, advising on strategy, and raising the requisite financing to complete the transaction. Table 1.5 is a list of leading investment bankers and advisors.

Table 1.5 U.S. Financial Advisor Rankings, 2013

Source: Mergerstat Review, 2014.

Investment Bankers

The work that investment bankers do for clients is somewhat different based upon whether they are on the sell side or the buy side of a transaction. On the buy side they can assist their clients in developing a proposal that, in turn, contemplates a specific deal structure. They may handle initial communications with the seller and/or its representatives. In addition, they do due diligence and valuation so that they have a good sense of what the market value of the business is. Investment bankers may have done some of this work in advance if they happened to bring the deal to the buyer.

On the sell side investment bankers consult with the client and develop an acquisition memorandum that may be distributed to qualified potential buyers. The banker screens potential buyers so as to deal only with those who both are truly interested and have the capability of completing a deal. Those who qualify then have to sign a confidentiality agreement prior to gaining access to key financial information about the seller. Once the field has been narrowed, the administrative details have to be worked out for who has access to the “data room” so the potential buyers can conduct their due diligence.

The investment banker often will handle communications with buyers and their investment bankers as buyers formulate offers. The bankers work with the seller to evaluate these proposals and select the most advantageous one.

Legal M&A Advisors

Given the complex legal environment that surrounds M&As, attorneys also play a key role in a successful acquisition process. Law firms may be even more important in hostile takeovers than in friendly acquisitions because part of the resistance of the target may come through legal maneuvering. Detailed filings with the Securities and Exchange Commission (SEC) may need to be completed under the guidance of legal experts. In both private and public M&As, there is a legal due diligence process that attorneys should be retained to perform. Table 1.6 shows the leading legal M&A advisors. Accountants also play an important role in M&As by conducting the accounting due diligence process. In addition, accountants perform various other functions, such as preparing pro forma financial statements based on scenarios put forward by management or other professionals. Still another group of professionals who provide important services in M&As are valuation experts. These individuals may be retained by either a bidder or a target to determine the value of a company. We will see in Chapter 14 that these values may vary, depending on the assumptions employed. Therefore, valuation experts may build a model that incorporates various assumptions, such as different revenue growth rates or costs, which may be eliminated after the deal. As these and other assumptions vary, the resulting value derived from the deal also may change.

Table 1.6 U.S. Legal Advisor Rankings, 2013

Source: Mergerstat Review, 2014.

Avis: A Very Acquired Company

Sometimes companies become targets of an M&A bid because the target seeks a company that is a good strategic fit. Other times the seller or its investment banker very effectively shops the company to buyers who did not necessarily have the target, or even a company like the target, in their plans. This is the history of the often-acquired rent-a-car company, Avis.

Avis was founded by Warren Avis in 1946. In 1962 the company was acquired by the M&A boutique investment bank Lazard Freres. Lazard then began a process where they sold and resold the company to multiple buyers. In 1965 they sold it to their conglomerate client ITT. When the conglomerate era came to an end, ITT sold Avis off to another conglomerate, Norton Simon. That company was then acquired by still another conglomerate, Esmark, which included different units, such as Swift & Co. Esmark was then taken over by Beatrice, which, in 1986, became a target of a leveraged buyout (LBO) by Kohlberg Kravis & Roberts (KKR).

KKR, burdened with LBO debt, then sold off Avis to Wesray, which was an investment firm that did some very successful private equity deals. Like the private equity firms of today, Wesray would acquire attractively priced targets and then sell them off for a profit – often shortly thereafter.

This deal was no exception. Wesray sold Avis to an employee stock ownership plan (ESOP) owned by the rent-a-car company's employees at a high profit just a little over a year after it took control of the company.

At one point General Motors (GM) took a stake in the company: For a period of time the major auto companies thought it was a good idea to vertically integrate by buying a car rental company. The combined employee-GM ownership lasted for about nine years until 1996, when the employees sold the company to HFS. Senior managers of Avis received in excess of $1 million each while the average employee received just under $30,000. One year later HFS took Avis public. However, Cendant, a company that was formed with the merger of HFS and CUC, initially owned one-third of Avis. It later acquired the remaining two-thirds of the company. Avis was then a subsidiary within Cendant – part of the Avis Budget group, as Cendant also had acquired Budget Rent A Car. Cendant was a diversified company that owned many other subsidiaries, such as Century 21 Real Estate, Howard Johnson, Super 8 Motels, and Coldwell Banker. The market began to question the wisdom of having all of these separate entities within one corporate umbrella without any good synergistic reasons for their being together. In 2006 Cendant did what many diversified companies do when the market lowers its stock valuation and, in effect, it does not like the conglomerate structure – it broke the company up; in this case, into four units.

The Avis Budget Group began trading on the New York Stock Exchange in 2006 as CAR. Avis's curious life as a company that has been regularly bought and sold underscores the great ability of investment bankers to sell the company and thereby generate fees for their services. However, despite its continuous changing of owners, the company still thrives in the marketplace.