Because the economic recovery we’ve all been told is happening never really arrived, dollar stores across the United States are doing big business these days. Because of that, there’s a huge takeover battle going on between the nation’s three largest dollar store retailers. Apparently, there’s billions to be made, one dollar at a time. Family Dollar Stores (FDS) originally rebuffed an unsolicited $9.1 billion offer from its larger competitor, Dollar General Corp. (DGC), citing anti-trust risks. Ironically, it already had a deal to sell to Dollar Tree Inc. (DTI) for $8.5 billion. DGC is now taking hostile action in its…
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Netflix is the latest company to join a petition asking the Federal Communications Commission (FCC) to deny the pending $45 billion Comcast / Time Warner merger. In a 256-page report, Netflix details how the merger will give the new entity too much control over the internet, and that this new power will enable it to stifle online video distributors that it sees as competition. Comcast continues to argue that because it does not overlap geographically with Time Warner, there are no major anti-trust concerns. Netflix was quick to point out that in 2000, the FCC required AT&T and MediaOne…
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Analyze early and avoid earnings surprises The purchase price allocation (PPA) process is often treated as an afterthought in mergers and acquisitions (M&A). Thinking about PPA can help guide a deal to a more predictable conclusion. In the most rewarding deals, a prompt PPA process helps acquirers analyze, from a financial reporting point of view, the primary drivers or intangible values associated with the transactions.
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CPAs can increase billings by catering to exiting baby boomer business owners. Baby boomer businesses may represent a material percentage of a CPA firm’s clientele. As a record number of these business owners begin the succession/exit process, hidden opportunities exist for firms to increase billing, if you know how to spot them.
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As if the general public hadn’t lost enough faith in the stock market with recent revelations of rigged deal-making that benefits only a few, a new study shows that 25 percent of all M&A deals between public companies involve some kind of insider trading. The study, conducted by McGill University and New York University, looked at informed trading activity in equity options prior to the announcement of corporate deals. The study’s abstract states: For the target companies, we document pervasive directional options activity, consistent with strategies that would yield abnormal returns to investors with private information. This is demonstrated…
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Capitalizing on the trend The need for transition planning services has grown over the years and will continue, representing a lucrative and successful practice area for financial professionals. Harry Haigley, CVA, MBA, explains what practitioners can start doing to build their practice today.
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You know how it goes. Some billionaire or corporate conglomerate throws out a huge bid for a business acquisition that everyone is certain is way over the top. It’s impossible such an outlandish offer could be profitable or even justified based on the subject entity. From the LA Clippers $2 billion sale to the next windfall for a teenage phenom who creates a gimmicky phone app; it seems as if one of these big-dollar offers hits the press every week. Regardless of how outlandish the offer might be, sometimes overkill does pay off. Inc.com looks at five huge deals that…
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Benchmarking the firm’s performance We all know financial ratios are a barometer of the health of a company. Now, let’s help our client’s unleash the power of these ratios to improve their businesses. Here’s how.
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Up until now, all the corporate M&A talk for 2014 has surrounded the $45 billion deal Comcast has made for Time-Warner Cable. That’s not just because of the price tag. If approved by regulators, Comcast would end up as the internet gatekeeper for one out of every three homes and businesses in the country. That’s also a lot of power and control over internet access, quality and service for one third of the country. As media titans continue to consolidate, many are asking whether it’s wise to put so much power into so few hands. The latest questions surround an…
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New changes to the law could mean new client service opportunities The Securities and Exchange Commission (SEC) has issued a No Action Letter that allows unlicensed professionals to receive commissions for the sale of privately held securities in a sales transaction.
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Comcast recently filed its public interest statement with the Federal Communications Commission (FCC) explaining how the American public will benefit from its $45 billion planned merger with Time Warner Cable. Comcast claims the merger is necessary because it can’t compete with the likes of Google, Apple, Verizon and Netflix–companies with a national footprint. On the flipside, over 50 public interest groups, including MoveOn.org and Daily Kos, have signed a petition stating that a merger would give Comcast unprecedented power to raise broadband rates for a significant portion of the country and gatekeeper power over too much commercial and private activity.…
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Can private companies really increase their value 80-100 percent by limiting unsystematic (controllable) risks? The November/December 2013 issue of The Value Examiner featured Ken Sanginario’s article entitled, “The Valuation Business: A Strategic Road Map for Success.” In this article, Sanginario answers questions raised by skeptics to make the case that value doubling for private companies is possible.
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Maximizing value by minimizing risk Most private company owners are not aware of the impact of company-specific risk on the value of their businesses. When they are faced with a need to increase the value of their businesses in order to close a value gap, they typically only focus on growing sales, reducing costs, or making an acquisition. None of those strategies are the most effective initial way to increase value. Adopting measures to reduce company-specific risk is the best initial way to maximize value.
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Pharmaceutical companies that have remained among the world’s top 20 largest have all gone through a megamerger with a $10+ billion target company between 1995 and 2005. That sounds like good news, and it is—for the shareholders. On the flipside, such gargantuan couplings tend to wreak havoc on internal management systems, as well as organizational and critical programs; even research and development suffers. It’s because of this regularly negative outcome that most believe mergers within Big Pharma destroy value within the industry. McKinsey & Co. don’t see it that way. In their analysis of 17 deals between 2005 and 2011,…
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In a Q&A by Inc.com, former Vice President of Finance for Yahoo, Dennis Morgan, discusses the most important points of handling an acquisition, based on his $5 billion worth of deals while with the internet giant. In the article, Morgan discuss why deals go wrong, how to close the gap with a proper operating plan, where deals fall through on the operations level, the need for a strategic roadmap and the blind spots of bankers and other intermediaries during the process. [button color=”blue” link=”http://www.inc.com/ilan-mochari/dennis-morgan-yahoo-acquisition-tips.html” target=”_blank” font=”arial” align=”left”]Read Full Article[/button]
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In an optimistic prediction from Reuters, middle market M&A activity should carry lots of opportunities throughout 2014. The positive outlook comes after a combination of more certainty with respect to Fed tapering and fewer concerns about government stalemates. The prediction also relies heavily on the observation that companies previously focused on cost savings have begun to shift their attention to strategic growth opportunities. This transition is taking place at a time when there is a large amount of capital in the pockets of both debt and equity investors. At the same time, demand for floating-rate credit assets is at record…
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The next generation Pursuing an acquisition for the sake of improving the top line is risky. A company can focus on creating value by reducing their cost of capital and thereby improving their risk profile. Business valuation analysts are uniquely positioned to offer advice on risk and devise strategies for corporate clients to reduce risk exposure. These measures usually lead to improved sales, profitability and value creation. A solid foundation enables the firm to pursue strategic acquisitions with more confidence.
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Spinoff deemed an attempt to hinder and delay debtor’s creditors In December 2012, Tronox Inc. creditors concluded their case to recover at least $14 billion in damages from Anadarko Petroleum Corp’s Kerr-McGee unit over a spin off they claimed drove Tronox into bankruptcy. In 2006, Kerr-McGee spun off part of its business as Tronox before selling itself to Anadarko for $18.4 billion. Tronox, which was previously under bankruptcy protection, alleged that Anadarko’s Kerr-McGee unit made the company insolvent by stripping away valuable oil and natural-gas assets and saddling it with legacy costs for environmental remediation. Kerr-McGee alleged the suit was…
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In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed. According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed. This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”. Interestingly, economic uncertainty and a lack of capital were far less influential than they had been in years past. If there is plenty of cash available, then why are so many deals failing to close? Ilan Mochari shares the answers…
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Everyone knows that in a merger or acquisition deal, time is not a friend. The longer transfer negotiations drag on without an agreement, the less likely a deal is going to be signed. This is mostly because over time, both parties are more likely to adopt adversarial positions. When things slow down, firms begin to assume the successor isn’t making the transaction a priority and may not the right candidate for their offer. Do they even have the capacity to handle such a venture? With each contract revision, the involved parties continue to reread the documents, often finding new problems…