Merger Model question with Dual Class Shares
Hey everyone,
When attempting to make a bid on a potential acquisition target (Publicly traded, 5-year forecast in the model), and the target has two classes of common shares outstanding:
- Common Shares with all voting rights held by the controlling family (1.08% of total shares)
- Class B Shares with no-voting rights but are entitled to a dividend (98.92% of total shares)
There are no coat tail provisions, so you don't technically need to make a public bid for Class B shares. After determining the Equity value of the Target, would you break it down to share price by dividing the total 100% of outstanding shares as in most cases?
When modelling the synergies and considering the up-front merger costs ($150mm), if they are tax deductible, what would be the best bet to incorporate this into the synergies assuming a standard tax rate?
- $150*0.40 = 60mm is the potential tax savings today
- Would the impact on share price be: Equity Value + Synergies (Margin Improvement and Cost reduction) - Merger Costs + Tax Savings?
This is a very simplified scenario.
Ea hic nisi dolor consequatur adipisci. Et reprehenderit aliquid cumque. Voluptates adipisci officia velit ratione quia id eligendi. Velit repellat perferendis facilis repellendus aut numquam iure.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...