Brief Advisory Flashcards

1
Q

What are the <b>TWO</b> main advisory services?

A

<b>1️⃣ M&A</b>

<b>2️⃣ Debt restructuring</b>

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2
Q

Why do investment banks provide advisory like M&A service?

A

Can be <b>profitable</b> because M&A deal <b>occur multiple times</b> while IPO is a one off event.

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3
Q

An Acquisition

A

When a company buys another company’s shares or assets

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4
Q

A Merger

A

When the <b>buying company</b> absorbs the <b>target company</b>. The target company ceases to 停止 exist after the transaction. It is <b>merged into</b> the buying company.

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5
Q

Consideration

A

Buyer company can offer a compensation to the target company shareholders in several ways:

<b>1️⃣ Cash compensation</b>

<b>2️⃣ Stock package of the new entity</b>

<b>3️⃣ Combination of both</b>

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6
Q

The importance of M&A deals for a company

A

Sometimes it is cheaper to acquire something that has been already created rather than trying to generate it internally.

Savings, efficiencies, opportunities.

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7
Q

Why do companies need help when acquiring other companies?

A

1️⃣ Investment bankers have <b>deep industry knowledge</b>. Provide valuable M&A insights to their clients.

2️⃣ Companies do not have the expertise. Help with <b>finding bidders or targets</b>.

3️⃣ M&A specific know-how: <b>Communication</b> with bidders/targets, acquisition of <b>financial information</b>.

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8
Q

What are the <b>TWO</b> possible roles that investment bankers can have?

A

<b>1️⃣ Buy-side</b> - hired by buying company

<b>2️⃣ Sell-side</b> - hired by selling company.

All banks <b>prefer</b> to be on the <b>sell side</b> as a transaction is likely and commissions are almost guaranteed.

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9
Q

Tasks for Sell-side bankers

A

1️⃣ Find a large number <b>bidders</b>.

2️⃣ Prepare the company for all <b>questions asked by buyers</b>.

3️⃣ Make a <b>valuation of the business</b> and suggest a <b>minimum bidding price</b>.

4️⃣ <b>Coordinate the entire sales process</b>

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10
Q

Tasks for Buy-side bankers

A

1️⃣ Provide <b>strategic advice</b> on whether the target company is attractive and would fit nicely with the buyers existing business.

2️⃣ Provide <b>valuation of the target business</b>.

3️⃣ <b>Estimate synergies</b>

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11
Q

Restructuring services

A

These services are necessary when a <b>firm cannot serve its debt</b> and is in danger of going bankrupt.

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12
Q

What are the <b>TWO</b> main alternatives if a firm cannot serve its debt?

A

<b>1️⃣ Private workout</b>: bankers <b>negotiate with lenders</b> and prepare a <b>recovery business plan</b>. Ensure the company will <b>have sufficient cash</b> in the <b>first 12 months</b> of the restructuring plan.

Most lenders prefer a Private Workout because:
<b>✅ Faster results</b>
<b>✅ Higher recovery rate</b>

<b>2️⃣ Bankruptcy procedure</b>

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13
Q

Definition of a Distressed Company

A

A company that doesn’t have sufficient cash for its operating activities.

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