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M & A Example: Single Issue Analysis

M & A Example: Single Issue Analysis. Client was negotiating a joint venture with a “counterparty”. Issue: The value to be attributed to the Client’s contribution to the joint venture, expressed as the percentage share of the joint venture it would own. Client wanted 60%.

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M & A Example: Single Issue Analysis

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  1. M & A Example: Single Issue Analysis • Client was negotiating a joint venture with a “counterparty”. • Issue: The value to be attributed to the Client’s contribution to the joint venture, expressed as the percentage share of the joint venture it would own. • Client wanted 60%. • Client feared the counterparty would agree to only 45%. • At the counterparty, there were three partners. Two of the partners would need to be in agreement for the deal to proceed. The deal was very important to these partners.

  2. Data Collection: Stakeholders List of Stakeholders Partner 1 at Counterparty Partner 2 at Counterparty Partner 3 at Counterparty Client CFO Client Line Manager Client’s Bank Advisor

  3. Data Collection: Potential Influence List of StakeholdersPotential Influence Partner 1 at Counterparty 80 Partner 2 at Counterparty 100 Partner 3 at Counterparty 25 Client CFO 100 Client Line Manager 20 Client’s Bank Advisor 40

  4. Data Collection: Salience List of StakeholdersPotentialSalience Influence Partner 1 at Counterparty 80 70 Partner 2 at Counterparty 100 90 Partner 3 at Counterparty 25 50 Client CFO 100 30-40 Client Line Manager 20 75 Client’s Bank Advisor 40 70

  5. Position as to Client’s % Ownership List of StakeholdersPotentialSalience Negotiating Influence Position Partner 1 at Counterparty 80 70 30% Partner 2 at Counterparty 100 90 50% Partner 3 at Counterparty 25 50 30% Client CFO 100 30-40 70% Client Line Manager 20 75 75% Client’s Bank Advisor 40 70 85%

  6. Base Assessment • “Base Assessment” suggests agreement will be reached after 3 rounds of negotiation at 50% ownership. • The partners of the Counterparty and the Client CFO are willing to reach a compromise in the third round. The Client line manager is unhappy with the chosen outcome.

  7. Negotiation Opportunities Identified • The model indicates that Client’s Bank Advisor has more influence than he realizes with Partners 1 and 2 of the Counterparty. • In the third round, when the Client’s CFO believes that 50% is the best outcome available, the Advisor has the opportunity to intercede and persuade Partners 1 and 2 to accept a more favorable outcome (up to 75%). • Partner 3 is unlikely to move as far as 75%, but will not veto the result.

  8. Impact of New Data Following the initial analysis, the Client became aware of a new stakeholder (a Counterparty Board member) who was actively advocating only 30%. Potential Salience Negotiating Influence Position Partner 1 at Counterparty 80 70 30% Partner 2 at Counterparty 100 90 50% Partner 3 at Counterparty 25 50 30% Board Member 85 60 30% Client CFO 100 30-40 70% Client Line Manager 20 75 75% Client’s Bank Advisor 40 70 85%

  9. Revised Conclusions • Base Assessment: The model identifies that this new stakeholder poses a real risk to completing the deal. He, Partner 1, and Partner 3 will likely come together to kill the transaction.

  10. Revised Conclusions • Opportunities: The Bank Advisor still has influence with Partners 1 and 2. If the Bank Advisor talks to them in Round 1. This results in a coalition at 60%. • The Client achieved this 60% target.

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