Merger takeover calcs

[rexthedog]

Hi guys,
Can anyone explain how the merger calculations work?
I understand say if we buy company B for 200 and company B is worth 150 and we are worth say 150 with synergies of 100 then calc would be:
150+150+100-200(cash)
But whta about shares? How does that work and when for example we offer cash and say 0.5 shares in a multi transaction. If you could provide an example I would be really greatful.
Thanks

 

[Yayyywork]

The value of the company is still A + B - Cash its just a matter of how the new company is split up amongst existing shareholders at that point

 

[olajideanuoluwa001]

Value of Acquirer + Value of Target + Synergy - Cost
150+150+100-50 = 350
The difference between the benefit of acquisition and the cost of acquiring the firm must be reflected as well..
Hope that helps.
On shares, there will be a conversion factor, thus say the conversion factor is 0.8, you do this. (0.8*target share outstanding) so as to get the portion of the acquirer’s share to the target shareholder.
Then you will calculate the combine value of the firm, i.e., 150+150+100, here we are assuming you did not pay cash at all, and you only gave out stock, so that is why we dont have any cost to subtract from the solution.
Once you get the combined value of the new company, you divide it by the new shares outstanding (Acquirer’s shares outstanding + converted target shares number of the acquirer’s share).
The above will give you the value per share, which is used to multiply the portion of the target’s ownership in Acquirer.
This will give you the value of the target shareholding in the acquirer.

 

[Flashback]

Yayyywork wrote:
The value of the company is still A + B - Cash its just a matter of how the new company is split up amongst existing shareholders at that point

The value of new AB company is higher for goodwill amount, and you may consider it as quantification value of synergy given acquisition.