Čsob acquisition finance Československá obchodní banka, a. s. prague, kampa, march 3, 2008
TRANSCRIPT
ČSOB Acquisition Finance
Československá obchodní banka, a. s. Prague, Kampa, March 3, 2008
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Acquisition Finance Models
Financing of Transactions
1. Direct M&A2. LBOs
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AD 1. Direct M&A Model
Elements and Characteristics:
• Direct purchase of a Target and held directly by Investor in its books;
• Investor directly bears 100% risk of potential failure and all liabilities resulting from an acquisition loan;
• This model is typical for industry (strategic) Investors;
• Bank provides the financing within the framework of the whole group;
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AD 1. Direct M&A Model
Elements and Characteristics:
• Investor may not valuate the acquisition based on a direct capital gain, but rather prefer other positive impacts;
• Positive impacts – synergy resulting in increase in sales, decrease in costs, or buying new markets;
• Bank evaluates the risk of the whole corporation;
• The financing model typically includes existing financing, acquisition financing and operational loans provided to the Target;
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AD 1. Direct M&A Model
Scheme of a direct acquisition:
Investor
Target
BankCustomers
Market
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3
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Explanation:
1 – bank loans
2 – payment of P. Price
3 – ownership
4 – sales
5 – loan repayments
Seller
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AD 2. Leveraged Buy-outs
Elements and Characteristics:
• Using an SPV;
• Financing of the purchase price is based on future CF generated by the Target;
• Investor is secluded from direct transaction and financing risks;
• Bank evaluates the risk of the Target;
• LBO is typically used by:
• Financial Investors
• Corporations already leveraged
• Intra-shareholders settlements
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AD 2. Leveraged Buy-outs
Elements and Characteristics:
• Low equity ratios = high leverage;
• Positive impacts on the tax cost and on WACC;
• Significantly reduced risk of Investor (limited to equity contribution);
• Well-proven, and well-developed transaction structuring;
• Tested according to the LMA standards;
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AD 2. Leveraged Buy-outs
Scheme of LBO:
Investor (Buyer)
Seller SPV
Target
Bank
Explanation
1 – forming SPV and equity
2 – bank loan
3 – payment of Purch. Price
4 – ownership
5 – loan repayments
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Post Merger
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Acquisition Finance Models
Financing of Transactions
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Financing of Transactions
M&A LBO
• Corporate risk
• Capital gain is often indirect (purchase of market, synergy effects)
• Financed typically via several tranches, combining LT amortized and ST bullet term loans, bonds, and operating overdrafts, etc.
• The security includes assets of Investor inclusive the acquired shares
•Repayments are generated by the operations of the Investor corporation
• Corporate reputation of Investor
• Equity contribution in cash approximately 30% of the transaction
• Borrower is to be restructured via a merger (upside) enabling the access to the asset collateral and C/F for repayment
• The security includes the acquired shares and assets of the target post merger
• Repayments are generated by the future C/F of the Target post merger
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Financing of Transactions
M&A LBO
• Pricing is derived from the corporate rating of Investor
• The advantages for Investor:
• Lower tax cost
• No Investor´s liability
• Leverage providing better IRR
Are compensated by higher price rewarding bank for increased risk
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Contact
Dalibor Jeřábek Acquisition Finance
phone +420 224 114 391
mob. +420 603 151 561
e-mail [email protected]