Analysing deal structures in mergers and acquisitions: can you make the right match?

This case is available at The Case Centre with reference no. 114-034-1.

Merger and Acquisitions (M&As) offer an interesting setting to analyse corporate financial decisions. These transactions might create a sudden need for additional external financial resources, leading to fundamental changes in a company’s capital structure. Acquirers sacrifice some of their financial flexibility when they increase leverage following a deal. Stock swaps, on the other hand, might lead to significant dilution for current shareholders. This case provides an overview of six M&A transactions with their unique features.

The purpose of the case is to match these deals with six potential deal structures. Students are expected to explain their matching choice by referring to specific deal characteristics, the companies’ debt capacity and their recent stock price evolution. While academic studies as well as case studies to date especially focus on the type of payment offered, this case study goes one step further by also analysing the underlying financing source. A pure cash offer might, for example, be financed through a stock issue as well as different types of loans (eg, syndicated bank loans, convertible debt, bridge loans,…).

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Equis Association of MBAs AACSB Financial Times Economist Intelligence Unit