Investment Banking: M&A and Initial Public Offerings

This module begins with describing the different types of M&A projects and roles investment banks play in them. It then moves on to the motivations and strategies which drive M&A transactions, the different approaches to selling a business, and the process steps to running a sell-side auction process. Finally, the module explores how buyers finance, structure, and analyze M&A transactions.

Most of the M&A deals that take place in today’s market are completed by private equity firms. The vast majority of these transactions are classified as “leveraged buyouts (LBOs)”, as the consideration is a mix of equity and debt (leverage). This module will explore how a private equity firm determines the price that it can pay for a specific target company in an LBO transaction given an assumed return threshold, financial forecast and capital structure.

When a corporation acquires a business, in addition to assessing the target’s standalone valuation, it will also assess whether the completion of the transaction will have a positive impact on its prospective earnings per share (EPS). This module will explore how an acquirer analyzes whether the acquisition has an accretive (positive) or dilutive (negative) impact on its EPS, given assumptions of the target’s valuation, expected transaction synergies, a proposed financing structure, and the impact of both financial and accounting transaction adjustments. This module will also demonstrate how to prepare a pro forma balance sheet for the buyer given the specifics of the M&A transaction.