Please find attached the questions. This is an M&A problem questions and need to be solved according to guidelines by Wall Street Prep. The solutions needs to be done on EXCEL. M&A Modeling-Please answer the following questions on EXCEL 1. It is January 1, 2020. Glocabe Networks is contemplating the acquisition of competitor Jupiter Networks by issuing stock to purchase target shares (stock purchase). The following details are available: January 1, 2020 Glocabe Jupiter Current share price $30.00 $50.00 Offer price $60.00 Diluted shares outstanding (mm) 4.5 2.2 2019 GAAP earnings per share (EPS) forecast $3.12 $4.51 Glocabe and Jupiters diluted shares outstanding have not changed since January 1, 2019. What is the 2020 accretion/dilution in Glocabes GAAP EPS assuming the acquisition took place on January 1, 2020? USE BELOW INFORMATION FOR QUESTIONS 2-4 It is January 1, 2017 and Pegasus is contemplating the acquisition of competitor Chimera. The following details are available ($ in millions except per share data): January 1, 2017 ($ in millions) Pegasus Chimera GAAP revenue $150.4 $112.0 GAAP net income $14.04 $9.92 Tax rate 40% 35% Assume all activities below occur on January 1, 2017: Offer value $132.0 million in cash Sources of funds 50% of the offer value funded using Pegasuss cash reserve, currently generating a 1% annual return. Remainder of the funds needed to complete the deal raised via a new 5-year debt issuance at 5% annual interest rate. Refinanced debt Chimera has $5 million in debt outstanding at 4% annual interest which will be refinanced as part of the acquisition Transaction fees $2 million pretax Financing fees $1 million pretax Cost synergies $2 million pretax. Apply the acquirers tax rate on the cost synergies. Revenue synergies $1 million in additional revenue due to cross selling opportunities. Assume revenue synergies are subject to the acquirers standalone tax rate and profit margin. Goodwill $20 million Asset write ups None 2. What is the 2017 impact of financing and transaction fees on the combined companys 2020 pro forma GAAP pretax income? 3. What is the 2017 impact of cost and revenue synergies on the combined companys 2020 pro forma GAAP pretax income? 4. What is the 2017 pro forma (combined) GAAP net income? USE BELOW INFORMATION FOR QUESTIONS 5-6 On April 28, 2017, one week ahead of your deal teams pitch to GAPs management, you are an investment banking analyst tasked with modeling the potential acquisition of American Eagle Outfitters (AEO) by GAP. 4/28/2017 GAP share price 26.20 AEO share price 14.09 Assume AEO has 200 million diluted shares outstanding and are offered $15.00 per share, for a total offer value of $3.000b. You (the analyst) makes the following assumptions: Offer value (equity purchase price): o 60% in the form of GAP stock o 40% in cash o80% of the cash consideration will be funded by new GAP debt a 5-year note with an interest rate of 5% o 20% of the cash consideration will be funded by acquirer B/S cash GAP will pay for transaction and financing fees using GAPs B/S cash o Transaction fees will be 1.5% of the offer value o Financing fees will be 1% of the debt GAP issues to finance the deal 5. How much B/S cash will GAP use to fund the acquisition? 6. What is the aggregate total of funds (including debt, cash and equity) used by GAP in this transaction?
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