I have created a few basic acquisition and merger model exercises if you are just starting out. As with other subjects, I have included videos along with the exercise files.
Overview of Acquisition Model Structure
The file and video below provides a general overview of how you can set-up acquisition models.
The first two exercises are designed so that you become comfortable with the general structure of an acquisition model where you can input the acquisition price and the debt used in the acquisition and then assess the equity IRR. The general structure of an acquisition model is described in Chapter 2 of the text. The second model is a little more complex in that you account for goodwill, asset write-ups and other factors in developing a pro-forma balance sheet that becomes the launching point for the model.
The second file and video provide an overview of an integrated merger model where you put two companies together and you set-up a transaction assumption page.
The file below is in introductory set of slides that reviews general issues associated with mergers and acquisitions including the economic theory of synergies and premiums.
Timing Issues in Acquisition Models
The second set of exercises demonstrates how to create a model in which there are different holding periods before which the acquisition is sold. The first model is computed on an annual basis and assumes the sale also occurs at the end of the period. The second model includes more flexible dates and the third exercise (exercise number 5) includes a set of fairly complex functions that allow you to incorporate flexible dates for the transaction date and the sale date as well as growth rates in EBITDA and Capital Expenditures that account for the flexible dates.
I am in the process of uploading these files. If you would like to get access before they are uploaded, send me an e-mail to email@example.com.
Exercise 3 – Acquisition from Corporate Model with History.xlsm
Exercise 4 – Acquisition Timing and Cash Flow Construction.xlsm
Exercise 3 – Holding Period Exercise – Basic.xls
Exercise 4 – Holding Period Exercise – Including Dates.xls
Exercise 5 – Holding Period Exercise Complex.xls
Structuring Transaction Inputs in Acquisition Models
Presentation of Outputs in Acquisition Model
Exercise 5 – Acquisition Model Analysis and Outputs.xlsm