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      Mergers, Acquisitions, Divestitures, and Other Restructurings

      Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers' professional and personal knowledge and understanding.

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      Cover image: Wiley

      Cover design: © iStockphoto.com/powerofforever

      Copyright © 2015 by Paul Pignataro. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      Published simultaneously in Canada.

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       Library of Congress Cataloging-in-Publication Data:

      Pignataro, Paul.

      Mergers, acquisitions, divestitures, and other restructurings: a practical guide to investment banking and private equity / Paul Pignataro.

      pages cm. – (Wiley finance series)

      Includes index.

      ISBN 978-1-118-90871-6 (cloth/website); ISBN 978-1-118-90867-9 (ebk); ISBN 978-1-118-90869-3 (ebk)

      1. Consolidation and merger of corporations. 2. Leveraged buyouts. 3. Investment banking. 4. Private equity. I. Title.

      HG4028.M4P55 2015

      338.8′3–dc23

      2014030319

      Preface

      Mergers, acquisitions, divestitures, and other restructurings (M&A) have arguably existed as long as the history of business. The processes of merging, purchasing, divesting entities or assets, and restructuring businesses are all major methods of providing growth and value to both large and small corporations alike. The Wall Street–coveted analysis of understanding the drivers leading to growth through M&A has remained somewhat of a mystery to the public, until now.

      Although M&A activity has its origins arguably with the dawn of commerce, M&A as a greater business strategic phenomenon began in the nineteenth century in a period known as “The Great Merger Movement.” It was at this time that very small businesses were consolidated into large public entities that dominated the markets. Companies like U.S. Steel, International Paper, and Standard Oil created near-monopolistic entities. Today M&A has evolved and changed with regulation, market, and industry. Despite the details of its evolution and progress, M&A still proves to be a key driver for business growth.

      A merger or acquisition is the purchase of or combination of at least one business asset or entity into another. The definition of mergers and acquisitions, although not directly stated, often incorporates divestitures and other restructurings as well, which is why I've expanded the title of the book to Mergers, Acquisitions, Restructurings, and Other Divestitures. Although the core focus of the book from a technical perspective will be on mergers, it is important to note the other aspects of M&A, which we will define in Chapter 1. This is a book in a series, and subsequent books will dive into cases that reflect the other areas, including divestitures and restructurings. Mergers and acquisitions come in varying forms, the analysis of which helps determine the impact of said purchase, combination, divestiture, or other restructurings on the financial entities involved. Such analyses are important for establishing posttransaction value and helping to determine if the transaction is potentially worth the efforts.

      This book seeks to give an investor the fundamental tools to help analyze such transactions and determine and interpret the results. These fundamental tools are used by investment banks and private equity funds worldwide. We will evaluate the potential merger of Office Depot and OfficeMax, utilizing the exact same methods used by the bulge bracket investment banks and top private equity firms. We will also step through the framework behind various types of M&A transactions and give you a conceptual understanding of the analyses. Using the model, you will learn how such transactions are implemented. We will have you step into the role of an analyst on Wall Street to give you a firsthand perspective and understanding of how the modeling process works, and to give you the tools to create your own analyses. This book is ideal for both those wanting to create their own analyses and those wanting to enter the investment banking or private equity field. This is also a guide designed for investment banking or private equity professionals if they need a thorough review or simply an M&A modeling refresher.

      The Office Depot and OfficeMax Merger Case Study

      Naperville, Ill. and Boca Raton, Fla. – OfficeMax Incorporated (NYSE: OMX) and Office Depot, Inc. (NYSE: ODP) today announced the signing of a definitive merger agreement under which the companies would combine in an all-stock merger of equals transaction intended to qualify as a tax-free reorganization. The transaction, which was unanimously approved by the Board of Directors of both companies, will create a stronger, more efficient

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