Mergers and Acquisitions

Steven M. Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Mr. Bragg resides in Centennial, Colorado. He is also the author of Accounting Best Practices and Accounting Policies and Procedures Manual (both published by Wiley).

"Bragg takes readers through the M&A process by giving an overview of why a company might want to buy or sell to another company. He covers strategies that might be taken by either the buyer or the seller, risks for both sides, and parties involved in the transaction. The book could be helpful to new attorneys who have not studied corporate mergers. It also gives experienced attorneys a view of the M&A process from the client's perspective, as the excerpt above illustrates." (Legal Information Alert, Vol 28, No. 4)

• Preface. About the Author.Free On-Line Resources by Steve Bragg.1. The Acquisition Process.Why We Acquire.Why a Target Sells.Acquisition Strategy.The Basic Acquisition Process Flow.The Auction Process Flow.Locating and Culling Acquisition Targets.The Optimal Target Size.Evaluate Acquisition Targets with Alliances.Acquisition Risks for the Buyer—Valuation.Acquisition Risks for the Buyer—Legal.Acquisition Risks for the Seller.Acquisition Follow-Up Activities.The Hostile Takeover.Defending Against a Hostile Takeover.Summary.2. Key Participants.The Acquisition Team.Attorneys.Board of Directors.Brokers.The Chief Executive Officer.Investment Bankers.Investor and Public Relations.Lenders.Line Managers.Specialist Consultants.Players in Hostile Takeovers.Integration Team.Summary.3. Valuing an Acquisition Target.Alternative Valuation Methods.The Control Premium.Synergy Gains.The Discounted Cash Flow (DCF) Model.Constructing Cash Flow Scenarios.Cash Flow Adjusting Factors.The Earnout.Qualitative Factors.Which Valuation Method is Best?The Method of Payment.Summary.4. The Term Sheet.Reasons for Using a Term Sheet.Components of a Term Sheet.Summary.5. Due Diligence.Due Diligence Team Staffing.Due Diligence Interviews.Due Diligence—Overview.Due Diligence—Market Overview.Due Diligence—Culture.Due Diligence—Personnel.Due Diligence—Intellectual Property.Due Diligence—Brands.Due Diligence—Risk Management.Due Diligence—Capacity.Due Diligence—Assets.Due Diligence—Liabilities.Due Diligence—Equity.Due Diligence—Profitability.Due Diligence—Cash Flow.Due Diligence—Customers.Due Diligence—Product Development.Due Diligence—Production Process.Due Diligence—Information Technology.Due Diligence—Legal Issues.Due Diligence for a Business Segment.Due Diligence—Forecasts.Due Diligence—Missing Information.Complexity Analysis.Due Diligence—Red Flags.Due Diligence—Seller's Perspective.Due Diligence—Documentation.Summary.6. The Purchase Agreement.Components of a Purchase Agreement.The Merger Section.The Letter of Transmittal Section.The Representations and Warranties Section—Seller.The Representations and Warranties Section—Buyer.The Survival of Representations and Warranties Section.The Conduct of Business Section.The Additional Agreements Section.The Closing Section.The Termination Prior to Closing Section.The Supporting Documents Section.Exhibits.The Seller Disclosure Schedule.The Closing Memorandum.Special Clauses.Post-Closing Activities.Negotiating the Purchase Agreement.Mechanics of the Close.Summary.7. The Acquisition Integration Process.Integration Timing.Integration Planning.Synergy Realization.The Integration Manager.The Integration Team.Integration Communications—Internal.Integration Communications—External.Anger Management.Progress Reporting—External.Culture Issues.Employee Integration—Qualification Assessment.Employee Integration—Job Positioning.Employee Integration—Relocations.Employee Integration—Key Employees.Employee Integration—Founders.Employee Integration—Unions.Layoffs.Compensation Integration.Sales Integration.Process Integration.Technology Integration.Controls Integration.Board Integration.Integration Metrics.Integration Pacing.Summary.8. Accounting for Acquisitions.Purchase Price Allocation.Fair Value Determination.Intangibles Identification.Duplicative Assets and Assets Targeted for Disposition.Example of the Accounting for an Acquisition (with Goodwill).Example of the Accounting for an Acquisition (with no Goodwill).Initial Goodwill Impairment Testing.Ongoing Goodwill Impairment Testing.Example of Goodwill Impairment Testing.Timing of Annual Goodwill Impairment Testing.Push-Down Accounting.Summary.9. Types of Acquisitions.The Tax Implications of a Acquisition.The Asset Acquisition.The Type “A” Reorganization.The Type “B” Reorganization.The Type “C” Reorganization.The Type “D” Reorganization.The Triangular Merger.The Reverse Triangular Merger.The All-Cash Acquisition.Appraisal Rights.Summary.10. Government Regulation.Anti-Trust Regulations.International Anti-Trust Regulations.Environmental Regulations.Summary.Appendix A: Due Diligence Checklist.Index.