8K ReleaseMergers & Acquisitions

Kevin M BrettApril 30, 2013

1,896 mergers or acquisitions $471.5 billion Hewlett Packard/Compaq Disney/ABC ABC/ESPN AOL/ Time Warner Time/Warner Brothers Daimler Benz/Chrysler Budweiser/Corona

Let’s Make a DealFriendly or Hostile

Gain new technology and talent

Grow Revenue

Strategic Assets

Market Share

Synergies

Why M&A?

“I'm all for progress. It's change I object to.” – Mark Twain

Change Resistant?

Approximately 70 percent of deals fail

Inadequate “Due Diligence”

Acquiring companies blow integration

Acquired employees head for the exits

Need to welcome acquired employees

Why NOT M&A

Size of Deal?

Financing?

How many are going to be laid off?

Is the deal accretive or dilutive to EPS?

Is there any product or customer overlap?

How will you integrate the two companies?

Anti-Trust Issues?

Will you report the deal on a Pro Forma basis?

Common Questions on Deals

Cash from Balance Sheet

Stock (1 for 1 or Ratio)

S4 (Issue More Stock)

LBO (Leveraged Buyout): Combo of Cash/Stock and Debt

Financing the Deal?Paying a “Premium?”

GAAP Greater or Equal Prominence to Pro Forma – SEC Reg. G

GAAP: Generally Accepted Accounting Principles

Pro Forma, Non-GAAP or Earnings Before Special Items

Pro Forma: “For The Sake of Form”

Pro Forma: Results from Continuing Operations

GAAP vs. Pro Forma

Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Amortization: $1 million Operating Margin: ($500,000) Taxes: $200,000 Net Loss: ($700,000)

GAAP: Q1 Income StatementMallard.com (DUCK: NASDAQ)

Revenues: $2 million COGS: $1 million Gross Margin: $1 million SG&A: $250,000 R&D: $250,000 Operating Margin: $500,000 Taxes: $200,000 Net Income (Loss): $300,000

Pro Forma: Q1 Income StatementMallard.com (DUCK: NASDAQ)

Writing the M&A Release (8K)

Anheuser Busch, 39%

Miller Coors, 26%

Grupo Modelo, 7%

Heineken USA, 6%

Others, 22%

DOJ Sues to Block $20.1 Billion BUD/Corona Merger

M&A (8K) Class Assignment

M&A (8K) Class Assignment

M&A (8K) Class Assignment

M&A (8K) Class Assignment

“Class Assignment: Do Not Trade” Both companies announce definitive merger

agreement Establish the price of the deal Announce cash and/or stock financing (1 for 1) Accretive to acquiring company’s EPS in one year Subject to successful completion of Hart-Scott-

Rodino and other closing conditions Quotes from both CEOs Both Boilerplates/One Safe Harbor

M&A News Release Guidelines