Historical Deal Review - M&A Division (Fall 2022)

Deal Review Mergers & Acquisitions Division

Executive Board

Ariel Dasgupta

Co-President and Co-Head of Mergers & Acquisitions

Boris Bukchin

Co-President and Co-Head of Mergers & Acquisitions

Abhishek Murli Editor-in-Chief

Luc Boesch-Powers Editor-in-Chief

ENERGY TRANSFER & ENABLE MIDSTREAM

By: Isaac Fox

Energy Transfer LP (NYSE:ET) is an American natural gas and propane pipeline owner and operator with a market cap of $37 billion

On February 17th, 2021, ET announced its plans to acquire Enable Midstream Partners LP (formerly NYSE:ENBL) Enable Midstream Partners is a leading gathering, processing, transporting, and storing pipeline company that primarily operates in Oklahoma. On December 2, 2021, the acquisition of Enable Midstream Partners was officially closed at a price of $7.2 billion. ET bought out 100% of Enable Midstream Partners in an all equity deal Enable common unitholders received 8595 ET common units for each Enable unit ET’s financial advisors were RBC Capital Markets and Citi, and Enable Midstream Partners’ advisors were Goldman Sachs, Intrepid Partners LLC, and Morgan Stanley. ET had a share price of $6.89 when the deal was announced, and a price of $8.23 when the deal was completed Today, their share price sits around $12 Enable Midstream Partners had a share price of $6.11 at the announcement and a price of $7.05 at the completion of the deal. At the announcement of the Enable Midstream Partners acquisition, ET had a negative price to earnings ratio and once the deal closed, the price to earnings ratio was 8.23x. Before the price to earnings ratio went negative in November 2020, the ratio sat around 12x and has not returned to that level since

The acquisition of Enable Midstream Partners saved $100 million in annual run rate and increased efficiency. Before the merger, ET and Enable Midstream Partners had almost overlapping pipelines running through central Oklahoma Now, ET does not have to pay Enable Midstream Partners to pump natural gas through their pipelines. This transaction also furthers ET’s goal of deleveraging the business by increasing post distribution free cash flows. Enable Midstream Partners has a large, diverse, and safe customer base which will improve the credit quality of ET ET now has significantly stronger NGL infrastructure through the addition of natural gas gathering and processing assets in central Oklahoma which will integrate well with ET’s existing NGL transportation and fractionation assets on the Gulf Coast.

These synergies were realized immediately after the merger, and we can see that in the financials. In Q421 ET had operating expenses of $1.35 billion and in Q122 they had reduced the operating expenses to $1.26 billion. This is almost exactly the $100 million in cost synergies mentioned earlier.

In my opinion, the scale of this deal did not have a strong effect on the stock price of ET, but it certainly was a smart strategic decision. Enable Midstream Partners fits perfectly into ET’s current operations of more than 120,000 miles of pipeline. The geography of Enable Midstream Partners is what mattered the most.

Oklahoma is the 5th largest natural gas producing state and is situated close to the Gulf of Mexico which ships natural gas worldwide. In summary, this is an incredible acquisition for ET’s operations but it will not have a meaningful impact on the financial statements of ET due to its smaller size

CROCS & HEYDUDE

By: Brian Lewis Jr.

In February 2022, Crocs acquired HEYDUDE, a casual footwear brand, that originated in Italy but generate approximately 95% of its revenue from American markets The privately-owned company will be acquired for $25 billion in a cash-and-stock deal, where $450mm in shares will be issued to founder and CEO, Alessandro Rosano. Rosano will continue to take part in the company’s business affairs by serving as the head of product development but will report to newly-hired Executive Vice-President Rick Blackshaw, who brings in over 25 years of industry experience working with CCM Hockey, Sperry, and Chuck Taylor

From an advising standpoint, Citi is serving as financial advisors to Crocs, with Perkins Coie LLP and Bird & Bird as legal advisors. LVC Asia Pacific Ltd is serving as financial advisor to HEYDUDE, with Chiomenti, Deacons, Cozen O'Connor, Sullivan & Cromwell, and Croon Law Group LLC as legal advisors

While this transaction is expected to generate a substantial amount of free cash flow, deliver long-term shareholder value, and diversify the company’s product portfolio, Croc's share price plummeted 12%. Investors were quite pessimistic about the deal given the $642mm premium, the lack of knowledge about the Italian brand, and its ability to provide a sustainable stream of revenue growth. However, Piper Sandler refuted these claims by ranking it as the No6 shoe brand among teens and

claiming this deal would provide a $1 increase in shareholder value. Since this announcement, Croc’s share price has recovered and gained 35% to $123.52 from $80 at the announcement

From a projection standpoint, Crocs representatives flagged that they plan to use their global presence, marketing efforts, and supply-chain expertise to grow HEYDUDE into a billion-dollar brand by 2024 With a more bullish outlook, CEO, Andrew Rees set a $5 billion dollar sales goal for 2026. With HEYDUDE’s current revenue in excess of $700mm, it is imperative that Crocs utilizes its wholesaling efforts and global partners to expand HEYDUDE’s customer base, brand awareness, and ultimately drive revenue growth to meet its goals

In Crocs' most recent 10-Q, they noted that the current economic state with global inflation, rising rates, and fluctuations in the foreign exchange market has taken a toll on the business, but at the current share price of $123.52, EPS of $2.65, and revenue of $945mm, Crocs is still cash flow positive despite completing a major acquisition and navigating the current economic turmoil

In addition to the upward trend in demand for HEYDUDE’s comfort wear, their biodegradable packing is a positive externality and an excellent selling point to climate-conscious consumers. I believe that this transaction was an excellent utilization of capital and displayed their management team’s ability to identify on-the-rise companies, take risks, and continue to provide shareholder value by expanding. Since the inception of the deal, HEYDUDE has brought in $986mm and accounts for nearly 25% of Crocs' total revenue This growth can be attributed to HEYDUDE’s integration into Crocs' wholesale distribution channels and revamping its brand identity by spending 4x on marketing as the previous year. Despite these early-on signs of growth, I recommend that Crocs utilize HEYDUDE’s well-established online presence With HEYDUDE’s online presence accounting for 43% of its revenues before the acquisition, Crocs will generate more revenue for its clog shoe line.

KRAFT & HEINZ

By: Matthew Penrose

The target company in the Heinz-Kraft Merger was Kraft Foods Group Inc, with H.J. Heinz Co being the acquiring company. Berkshire Hathaway and Brazilian investment firm 3G Capital bought Heinz in 2013 Kraft Foods stock was trading around $62 per share prior to the announcement of a merger with Heinz Post announcement, Kraft was trading at about $84 per share, which is a nearly 37% increase in share value because of the announcement. The rationale behind the merger is that Heinz had a massive global reach, with 60% of sales coming from non-North American markets. Kraft did not have as extensive of a worldwide outreach. Thus, by bringing Kraft’s products to market overseas, the combined revenues of both companies were expected to increase. Furthermore, Berkshire Hathaway and 3G Capital believed that their leadership team could significantly assist Kraft Foods in becoming more profitable, as the majority of executives at Kraft Heinz were originally from Heinz

The synergies expected from this deal were international growth and economies of scale

Emerging markets are 25% of Heinz’s sales, and Kraft Foods derived 98% of its sales in North America Thus, the combined entity would have higher revenue by bringing Kraft Food’s products to international markets. However, this synergy would be limited by Kraft Foods former deal with Mondelez International in which Kraft Foods agreed to allow Mondelez to sell many of its shared brands in international markets. However, some brands did not fall under these stipulations, which would provide a massive revenue opportunity for Kraft Heinz.

This synergy would be realized within 6-12 months after the finalization of the deal because of the amount of mobilization and supply chain setup needed to move Kraft Foods products to international markets.

The other synergy is economies of scale Since Kraft Heinz will have larger numbers of production in North America it can negotiate better deals with retail outlets and specialty stores, which will increase profits This will improve the operating margins and increase Kraft Heinz's shelf space in stores. In addition, there will be cost savings because of changes to operational strategy. Some examples of these can be reducing unnecessary employment, shutting down less efficient manufacturing facilities, and implementing zero-based budgeting. Zero-based budgeting is where managers have to explain every forecast expense from scratch for the entire year This will help management enforce a stricter cost control structure. Lastly, the larger company will allow Heinz to refinance its high-yielding

debt because Kraft has a higher credit rating. Overall, this will reduce costs for Kraft Heinz. The deal is estimated at a value of $45 billion, with $10 billion being paid by Berkshire Hathaway and 3G Capital to Kraft shareholders in a form of a dividend of $1650 per share Shareholders will get that divided, along with a new share of Kraft Heinz company. Berkshire Hathaway and 3G Capital will get a 51% stake in the new company, and Kraft Foods shareholders will get a 49% stake. Centerview partners was the lone advisor to Kraft and Lazard was the lone advisor to Heinz. The current price of Kraft Heinz is around $38 per share.

This is a massive decline from the near $77 per share trading price since Kraft-Heinz went public post-merger in 2015. The EPS is .98 and PE ratio of 3864 The deal has not been successful, as the share price has dropped over 50% since 2015 Some reasons as to why the deal has not been successful are failure of cost cutting strategies, failure to capitalize on new markets, and changing consumer preferences. The merger had big anticipations for cost cutting capabilities, but Kraft-Heinz went too far and instead alienated its consumers. By overcutting costs Kraft-Heinz limited growth and output capabilities rather than experiencing the natural growth that they would have. Thus, this limited revenue and profits to shareholders, which ultimately led to share value depreciation. Healthier alternatives have been on a massive rise since 2015, with products such as SkinnyPop rising in popularity Consumer preferences in regards to healthier alternatives changed far quicker than backers of Kraft-Heinz predicted, including Warren Buffet. Thus, Kraft-Heinz less healthy products underperformed the market compared to healthier alternatives. Thus, profits were lower than expected. My recommendation to better utilize this merger moving forward is to vastly invest in healthier alternatives and new production methods. Kraft-Heinz should start either acquiring healthier alternatives foods companies or developing new products That is because in the near future this market will only rise in popularity Additionally, Kraft-Heinz should reinvest in supply chain management by developing new methods to more cost efficiently deliver products to consumers and between factories. This would organically cut costs and increase profits. Overall, the merger was a fail, but still has opportunity for growth in the future.

FIAT CHRYSLER & PEUGOT S.A.

By: Rohan Gadkari

Fiat Chrysler Automotive (FCA) is an Italian-American automaker that includes eleven brands, including well-known brands such as Jeep, Maserati, and Ram trucks. Peugeot S.A. (PSA) is a French automaker that includes brands such as Peugeot and Citroën On December 18th, 2019, both companies announced their intentions to undergo a $50 Billion merger FCA would be the surviving company of the merger, with FCA distributing $5.5 Billion in dividends and issuing 1.742 FCA stock for every PSA stock. The companies agreed to rename the surviving company “Stellantis”. After the merger, Stellantis was the fourth biggest car manufacturer, behind the likes of Volkswagen and Toyota Goldman Sachs, Morgan Stanley, d’Angelin & Co, and Messiers Maris & Associés were the investment banks present for this deal.

In a Stellantis press-conference on January 15, 2021, CEO Carlos Tavares stated that the merger was offensive. The horizontal merger was undergone to decrease research and development costs while increasing the amount of electric cars that Stellantis could produce. Furthermore, the move would allow PSA to have market share in the United States, which was a goal that the company aimed to achieve.

Stellantis expects €3.7 Billion in synergies to be realized from this merger, with a majority coming from hard synergies 40% of this is expected to come from technology, product,

and platform savings 40% is also expected to come from purchasing synergy. These synergies are to have positive net cash flows from year 1 of the merger, and 80% of them are to be realized by year 4 of the merger

This deal has been very successful for Stellantis. In the first year of the merger, the company reported a profit of $15.2 Billion. This is roughly triple the profit of both companies before the merger combined. The company was able to beat its target EBIT margin of 10% by posting an 118% margin Before the announcement, the FCA and PSA stock price was $1360 and $2211, respectively This grew to $1362 and $2241, with Stellantis currently at $1487 as of market close on November 11th, 2022.

This was a very effective deal for both companies and has proven results in the short time With the car industry going through drastic changes, legacy automakers must ensure their success as start-up electric brands aim to poach sales. By merging these two companies, Stellantis will be able to

minimize costs when developing and manufacturing new electric vehicles. However, this deal was very fortunate to happen, since FCA originally aimed to merge with RenaultNissan-Mitsubishi Alliance, another partnership of legacy automakers with numerous brands. FCA merged with PSA after FCA failed to reach a deal with Renault.

SALESFORCE & SLACK

By: Micaela Saenz

In December 2020, Salesforce, Inc. announced its plans to acquire Slack Technologies, a leading channel-based messaging platform Upon completion of the deal, Slack shareholders would receive $26.79 billion in cash and 0.0776 shares of the Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7 billion. Before the announcement, Salesforce’s share price was $264 and then dropped to $22078 due to the concern of investors about the organization overpaying for Slack

The rationale behind the deal on Salesforce’s end was to transform how people communicate, collaborate, and take action on customer information across Salesforce, as well as information from all of their other business apps and systems to be more productive. Salesforce would now have access to Slack Connect, allowing internal employees to communicate across their enterprise, and with vendors and customers in one single platform. This combination of Salesforce and Slack would create a business operating system for the new era of digital work.

With the acquisition of Slack, Salesforce estimated $21.1B in revenue synergies for FY21 with a revenue growth rate of 23% and for the

acquired company analysts estimated a 39% growth rate for FY21 with a revenue of $876 million. This demonstrated that both companies would benefit from the transaction

Merrill Lynch, Pierce, Fenner & Smith, Inc. served as the financial advisor for Salesforce, while Qatalyst Partners LP and Goldman Sachs & Co LLC served as financial advisors for Slack Technologies. Salesforce financed the transaction with a combination of available cash on hand, third-party debt financing, and stock. The firm entered into an underwriting agreement with Citigroup Global Markets Inc, BofA Securities, Inc, and JP Morgan Securities LLC, on behalf of several underwriters and received $8B in total.

Approaching 1 year and 6 months since the transaction, Salesforce has a share price of 139.77. Moreover, at the end of the fiscal year of 2021, the company outperformed analyst expectations, generating $26.5B in revenue. The company’s P/E ratio at the end of FY21 was 487x and is expected to decrease to 247x for FY24 Following the decrease in Salesforce’s stock price, it is important to take into account that overall, the stock market has been dropping in 2022 due to several factors such as high inflation, the aggressive monetary policy of the Federal Reserve, and the effects of the Russia/Ukraine war, making market indexes like S&P 500 drop 21.3% as of June 2022.

Although the stock price of Salesforce has decreased from 2020 to today, I believe that overall, the acquisition of Slack has been a good decision for the company. As can be seen with the projected numbers mentioned above, the transaction is bringing good financial results to the company Moreover, with the new digital era and persistence of remote work, Salesforce’s long-term offering as a CRM provider is being significantly strengthened by the acquisition of Slack as it now has the tools for improving Salesforce Customer 360 and give its company customers a single platform for connecting employees, customers, and partners with each other and the apps they use every day within their existing workflows. In this way, Salesforce continues offering the best experience with Slack’s digital platform for business communication enabling entire organizations to work more efficiently and effortlessly Additionally, the acquisition helped Salesforce enter the enterprise collaboration software platform and overall to compete with Microsoft and its Teams product.

APOLLO & VENTIAN RESORT

By: Luc Boesch-Powers

On March 3rd, 2021, Apollo Global Management agreed to buy the Venetian Resort, as well as its adjacent conference center, from Las Vegas Sands for $2.25 billion. The transaction consisted of $105 billion in cash and $12 billion in seller financing that Apollo deemed “attractively priced” Separately, VICI Properties, a gaming-focused real estate investment trust, agreed to acquire the Venetian resort’s underlying real estate for $4 billion. Simultaneous to the latter deal, VICI and Apollo agreed to a long-term lease of the property, with rent of $250 million per year and rent increases of 2-3% per year. Goldman Sachs and Co. acted as financial advisor to Las Vegas Sands, Morgan Stanley and Deutsche Bank acted as financial advisors to Vici Properties, and Eastdil Secured acted as real estate advisor to Apollo The deal represented one of several corporate carveout transactions Apollo executed in 2021. The transaction also gave Apollo its first foothold in Las Vegas since its ill-fated leveraged buyout of Caesar’s Entertainment (p.k.a. Harrah’s Entertainment) in 2006 alongside Texas Pacific Group (TPG). After the great financial crisis crippled the gaming company’s cash flows, its private equity owners desperately attempted to shift assets out of the reach of creditors but were rebuked after a series of court battles. In the end, the Apollo, TPG and their co-investors lost about 60% of their $6 billion in equity put into the deal, according to the New York Post. The sale of the Venetian also marked a significant milestone for Las Vegas Sands, as it was the casino juggernaut’s first major action

since the passing of its founder, chairman and CEO Sheldon Adelson in January 2021. Las Vegas Sands said they intended to use the proceeds of the sale to focus more on their operations in Macau and Singapore, which made up 90% of the company’s adjusted EBITDA in 2019

Following the deal’s close in February 2022, Apollo Co-Head of Private Equity David Sambur was very upbeat, saying “with [pandemic] restrictions lifting and travel indicators all trending higher, we believe the future for this property and the entire Las Vegas consumer and business tourism market is brighter than ever.” Still, according to Sambur, Apollo stood to profit even under a much dimmer outlook: “in our model, we assumed it would take until 2024/2025 for the

property to come back,” he told Nevada gaming regulators, adding that this deal consequently has “much less leverage than almost any investment you've probably seen.”

One of Apollo’s first actions after acquiring the property was hiring Patrick Nichols, who previously served as General Manager and Chief Strategy Officer of the Cosmopolitan in Las Vegas, as CEO During much of his 12-year tenure at the Cosmopolitan, Nichols worked alongside Blackstone, who sold the property in 2021, to pour $500 million into renovations and consequently shape the property into a prime fixture of the Las Vegas Strip. In an October 2022 interview with Travel & Leisure, Nichols said Apollo similarly plans to invest $1 billion to embellish the Venetian resort, aiming to position it as a top destination for bigticket, VIP gamblers.

Apollo is also betting on the success of the brand-new MSG Sphere, a $1.85 billion state-of-the-art concert venue built on the land behind the Venetian resort by MSG Entertainment. The arena, set to open in the second half of 2023, will seat nearly 18,000 concertgoers

Furthermore, Apollo instituted an ‘equity-like’ profit-sharing program to give Venetian employees a windfall of as much as $10,000 each if the firm exits successfully, expected to occur in four to seven years. This approach has been fine tuned to great success by KKR & Co., who have granted equity to over 45,000 non-management employees in 25 portfolio companies since 2011. Equity grants incentivize employees to adopt an “ownership mindset,” meaning they are more willing to buy into value-creating operational changes and even suggest initiatives themselves

In November 2022, just nine months after the deal’s close, Nevada gambling regulators approved a $620 million dividend to be paid to Apollo and to Venetian employees related to their equity grant program. In his testimony, Venetian CFO Robert Brimmer said “the financial performance has been remarkable since closing.” He added that the company’s $600 million-plus in run-rate EBITDAR is 27% higher than the same period in 2019, and that October 2022 represented “the best single month the Venetian has had in the last 10 years.” Hence, with Las Vegas rebounding far quicker than expected, and the Venetian’s business firing on all cylinders, it might not take much longer to declare Apollo’s return to Sin City a successful one.

By: Steven Papadatos

On June 13, 2016, Microsoft (NASDAQ:MSFT), a multinational computer software vendor and cloud computing provider, announced their plans to acquire LinkedIn, the world’s largest social network for professionals, in an all-cash purchase of $26.2 billion. Microsoft paid $196 per share at a 50% premium over LinkedIn’s closing price of $131.08. Post-announcement, LinkedIn’s share price surged to $193, a 47% increase overnight. Morgan Stanley was the sole buy side advisor for Microsoft and Qatalyst Partners and Allen & Co advised LinkedIn Microsoft’s rationale behind this acquisition was to bolster growth for their Office 365 and Dynamics 365 product lines that target the professionals and enterprises that LinkedIn’s social network reaches Connecting LinkedIn profile details with Windows and Office applications would offer mutual growth for the companies and provide features that would promote LinkedIn’s services to Microsoft's consumers. LinkedIn’s platform could be used for efficient cross-marketing of Microsoft’s product and service lines as both companies have target markets guided towards businessdriven professionals and enterprises.

As of market close November 11, 2022, Microsoft is trading at $24711 per share with a P/E ratio

of 26.60 and EPS of $9.29. Despite Microsoft’s 11% increase in revenue growth to $50.1 billion in Q3 2022, this is the slowest growth in the last 5 years. Their sales of the Windows operating system declined by 15% in Q3, but LinkedIn’s revenue has grown

from $2.3 billion in 2017 to $13.8 billion in 2022 since the acquisition. With supply chain problems, discretionary spending down, and harsh macroeconomic conditions, PC sales are expected to be weak Microsoft’s diversification of their revenue streams from LinkedIn, Azure’s cloud computing services, and advertisements ensure Microsoft maintains their revenue growth. Drastic growth in LinkedIn’s revenue, the gaining of over 450 million new LinkedIn members from 2016 to 2022, and Microsoft’s EPS growth from $2.38 in 2016 to $9.29 in 2022 all point towards Microsoft’s decision to acquire LinkedIn being a success.

To maximize Microsoft’s acquisition of LinkedIn, developments in AI through Azure could augment LinkedIn Learning’s content recommendation to their users and better match recruiters with qualified candidates best fit for a job’s requirements. Continued growth of content creation on LinkedIn’s platform will help professionals develop personal brands, create opportunities for increased ad revenue, and evolve this network into the social media of the business world.

MERCK & ACCELERON PHARMA

By: Jack Kalnicki

In September 2021, Merck announced its intention to acquire biopharmaceutical company Acceleron Pharma for $180 per share in a deal worth around $11.5 billion. Prior to the announcement, Merck’s share price was hovering around $74 After the September 30th announcement, Merck’s share price reached a 52-week high of $8456 on October 4th, 2021 In the coming months, significant concerns about the deal were raised by large Acceleron investors who believed the 38% premium that Merck was paying relative to the 3-month average closing price severely undervalued the stock. The deal officially closed on November 22nd, 2021, at the originally agreed-upon price of $180 per share

In the following week, Merck’s share price tumbled from $8164 to $7489, marking an 83% decline Merck’s main financial advisors included Goldman Sachs and Credit Suisse, while Centerview Partners and JP Morgan acted as Acceleron’s financial advisors. The deal was financed with a mix of Merck’s cash on hand and debt.

The rationale behind the deal for Merck was that they wanted to reduce their reliance on Keytruda, an immunotherapy that blocks the PD-1 pathway to prevent cancer cells from evading the immune system. Prior to the deal, Keytruda made up 50% of Merck’s sales, which concerned investors With the acquisition of Acceleron, Merck obtained the rights to the FDA-approved Anemia drug Rebozyl which would help with the diversification of sales. Beyond Rebozyl, Merck also acquired the rights to Sotatercept, which is a revolutionary drug that uses TGF-Beta proteins to improve short and long-term outcomes for individuals suffering from Pulmonary Arterial

The deal’s synergies were expected to be a mix of hard and soft due to the expected reduction in research and production costs due to the combination of the two entities Merck was expected to be able to significantly reduce overhead due to taking over Acceleron’s program teams. Merck is also expected to see significant gains in revenue with the additions of Rebozyl and Sotatercept to its drug portfolio. Merck also stands to gain due to the addition of Acceleron’s research team which has consistently brought groundbreaking developments to the healthcare sector.

Currently, Merck is trading at $101 per share which marks a 25% increase since the deal closed back in 2021 Merck is trading at a P/E ratio of 169 and is expected to have an EPS of $738 for FY2022, which marks an increase of 22.6% year-over-year. Although Merck has materially improved its financial position since the closure of the deal, this improvement is not indicative of the deal. In the most recent year, Keytruda’s sales have increased, and Merck’s overall outlook has improved. It’ll be hard to assess the success of this acquisition until the FDA gives the green light to Sotatercept to be sold to the general public

I believe that Merck needs to mainly focus on getting Sotatercept to market and marketing it in a way that maximizes its sales Sotatercept is one of the most anticipated drugs seeking FDA approval and is likely to be sold to consumers at a price of over $100,000 per year Sotatercept provides a strong opportunity for Merck to expand their position in the healthcare industry while also paving the way for a large revenue increase Although Rebozyl does provide a revenue bump for Merck, they only get a percentage of royalties as Bristol Myers Squibb is the main producer. If Merck can get Sotatercept to market as soon as possible with high consumer confidence, this acquisition has the potential to be a large success However, since Sotatercept has to pass through FDA approval, a lot of this deal is riding on factors that Merck can’t necessarily control.

TD & FIRST HORIZON BANK

By: Adrian Nunez

TD Bank Group has announced that it will acquire First Horizon Corporation in an all-cash transaction valued at $13.4 billion. The acquisition, subject to regulatory approval, will enable TD to accelerate its growth strategy in the United States by acquiring a premier regional bank with an aligned culture and risk-management framework TD will gain around 280 TA sites, spanning 44 US states, to its portfolio, which will complement TD's predominantly off-highway convenience and mobility business, allowing the companies to offer fleets a seamless nationwide service.

The deal is financially compelling and will enable TD to deliver the legendary customer experiences that differentiate TD in every market across its footprint, said Bharat Masrani, Group President and Chief Executive Officer of TD. First Horizon has a strong regional presence, including leadership positions in Tennessee and Louisiana, additional density in Florida, the Carolinas and Virginia, and important footholds in the attractive Atlanta, Georgia, and Dallas and Houston, Texas markets.

The acquisition will make TD's US franchise a top-six US bank, with approximately $614 billion in assets and a network of 1,560 stores, serving over 10.7 million U.S. customers across 22 states. TD will benefit from First Horizon's commercial and specialty banking

capabilities, which will position it as a leading national player in commercial banking Collectively, populations in First Horizon's markets are expected to grow approximately 50% faster than the U.S. national average, offering important future growth opportunities as TD invests in the region.

The transaction is expected to close in the first quarter of TD's 2023 fiscal year and is subject to customary closing conditions, including approvals from First Horizon's shareholders and US and Canadian regulatory authorities If the transaction does not close before November 27, 2022, First Horizon shareholders will receive, at closing, an additional $065 per share on an

annualized basis for the period from November 27, 2022, through the day immediately prior to the closing. The transaction will terminate unless otherwise extended if it does not close by February 27, 2023

TD expects the acquisition to be immediately accretive at closing to its adjusted EPS and to be over 10% accretive to 2023E adjusted EPS on a fully-synergized basis. The transaction is expected to result in a fully-synergized return on invested capital of 10% in 2023. The purchase price represents a 9.8 times multiple of First Horizon's 2023E fully-synergized earnings and a 2.1 times multiple to First Horizon's estimated tangible book value at close.

The transaction is expected to support TD's convenience and EV charging growth engine target of more than $1.5 billion EBITDA in 2025 and aim for more than $4 billion in 2030. TD also announced plans to invest $1 billion in EV charging across the US by 2030.

Once the transaction is completed, Memphis, First Horizon's current headquarters, will be an important regional hub for TD in the U.S. Southeast, supporting customers and operations and contributing to local communities and economies. TD is also committed to retaining First Horizon's client-facing bankers, with no planned branch closures as a result of the transaction In addition, upon closing, $40 million will be contributed to a First Horizon foundation

In conclusion, the acquisition of First Horizon is a financially compelling transaction that accelerates TD's long-term growth strategy in the US. The acquisition complements TD's existing US business, TD Bank, and adds density in the southern and western regions where First Horizon is dominant. The deal is expected to deliver significant cost synergies and be immediately accretive to TD's adjusted EPS at closing, demonstrating the bank's commitment to diversified earnings growth.

By: Ben Sharabi

Mondelez International Inc. (NASDAQ: MDLZ) is an American multinational confectionery, food holding, and beverage and snack food company based in Chicago. In June 2022, it was announced that Mondelez had agreed to buy Clif Bar & Co, an American company that produces energy bars and drinks, as part of its plant to boost its snacks segment in the company. Saee Muzumdar of Gibson Dunn acted as legal advisor to Mondelez, while Morgan Stanley (NYSE: MS) acted as a financial advisor to Clif Bar & Company. The acquisition, which took place on August 1, 2022, consisted of a $2.9 billion purchase of Clif On June 22nd, soon after the announcement of the acquisition, Mondelez stock rose as much as 0.9% after falling 11% this year. Mondelez believes that the purchase will be “top-line accretive in year two,” meaning that they believe the purchase will be catalytical to the company’s growth down the line.

Mondelez, which rode the pandemic snacking boom to boost online sales of cookies and candy, believe the trend will continue to grow. Consumers who were stuck at home began using e-commerce methods to satisfy their snack cravings, which provided a source of comfort and a “lifeline during the pandemic,” according to Maurizio Brusadelli, executive vice president and president of Asia Pacific, Middle East, and Africa.

E-commerce sales for Mondelez – which produces Oreo cookies, Ritz crackers, and

Cadbury chocolate – jumped about 30% in Asia, the Middle East, and Africa in 2021, and this acquisition is an example of them continuing this to give consumers wider online access to more products. At the time, growth in digital sales was expected to continue at higher levels, even after the pandemic ceases, as it is a resemblance of the shifting nature of at-home consumption, according to Brusadelli. “People were forced to buy online during the pandemic, and then they continued to buy online,” according to him. There are many different synergies that can occur when it comes to a deal within the food industry, especially with a conglomerate as big as Mondelez International. One of the greatest effects will simply be an increase in Mondelez’s product offerings and expansion into new markets and consumer segments. By combining the new line of products that comes with the acquisition of Clif with Mondelez’s distribution networks, we can expect Mondelez to continue growth.

Another potential synergy is an increase in economies of scale for Mondelez which can occur when an acquiring company (Mondelez) takes advantage of the production and distribution capabilities of the acquired company (Clif). This can lead to increased cost savings which can either be passed on to consumers in the form of lower prices or reinvested into other

products or services. However, it is important to realize that not all synergies are realized. Over the upcoming months and years, Mondelez will have to utilize an efficient execution plan for these synergies to take full effect. For example, Mondelez International will continue to operate the Clif Bar & Company business from its headquarters in Emeryville, California, with manufacturing operations in its facilities in Twin Falls, Idaho, and Indianapolis, Indiana This could prevent a synergy such as an increase in economies of scale occurring since no changes may occur in the way they produce, manufacture, or distribute Clif Bar & Company’s offerings in the coming years.

So far, I would say that the deal has been successful In the past six months since the announcement of the acquisition, there has been an 8% increase in Mondelez’s stock price, currently sitting at $67.27. In my opinion, this currently sitting at $6727 In my opinion, this acquisition will not lead to substantial changes in Mondelez, as they are already a huge conglomerate with many product offerings, with Clif Bar now being a small percentage of it. I believe that the sole purpose of the acquisition was for Mondelez to tap into the health food segment, which is a quickly growing industry, with Clif Bar being a leader in the energy bar category. Clif Bar’s reputation for sustainability will also support Mondelez’s potential plan to improve their image in the industry. As stated earlier, it is believed that the deal will really display its benefits in year two, and I support the notion that this acquisition will lead to incremental and substantial growth for Mondelez and will only take time to see the full effects of the acquisition and see if Mondelez continues to tap into this new consumer segment that they are now a part of.

CUMMINS & MERITOR

By: Austin Sigman

On February 22nd, 2022 the multinational industrials behemoth Cummins announced that they had reached an agreement to acquire Meritor, a global leader of drivetrain and electric powertrain solutions Cumins financed the deal with a mix of debt and cash and agreed to pay $3650 per Meritor share, valuing the deal at approximately $37 billion This would be approximately a 48% premium of Meritor’s share price prior to the announcement ($24.76). Meritor’s stock rose 46% to a new share price of $35.93, after the announcement. Cummins’ rationale for the deal was that Meritor would help them expand their range of engine offerings and add new product technology to their repertoire Meritor is an industry leader in axle and braking technologies and has many electric power applications. This positions Cummins to pursue rising demand for decarbonized power solutions.

Over the last four years, EV sales have skyrocketed by over 23% and are expected to quickly keep growing New legislation and clean vehicle tax credits are expected to even further drive the demand for electric vehicles. Meritor’s eAxle technology will give Cummins an advantage against competitors in hybrid and electric drivetrains as they look to convert their diesel engines into electric.

Meritor’s revenue grew by 26% in its 2021 fiscal year. This was driven by Meritor more than tripling the value of new electric vehicle wins and further diversifying their customer base. The board of Meritor unanimously voted to approve the agreement with Cummins and shareholders have since approved the

acquisition. Morgan Stanley & Co. is serving as the financial representative for Cummins and Mayer Brown is serving as the legal advisor. J.P. Morgan is the financial representative for Meritor and Wachtell, Lipton, Rosen & Katz is serving as the legal advisor

A strategic synergy of the deal is the expansion into the EV space Meritor will provide Cummins. Meritor’s technology and existing customer base in EV will give Cummins a large advantage over competitors and help them achieve their long-term goals of decarbonization.

Meritor also offers a wide range of new products for Cummins to offer in the axle and braking technologies space. In addition, a potential cost synergy exists between the two companies from a reduction in headcount and an increase in efficiency

Cummins’ stock price is currently at $252.87 with a P/E ratio of 16.73. The deal has been a terrific success so far for Cummins, helping the company's share price jump over 30% since the closing date In addition to this, the core benefits from the acquisition have not even been recognized to their full potential. The integrated powertrain solutions across combustion and electric power applications that Meritor provided Cummins are still not completely rolled out into production, providing an additional boost in revenue in the future. Going forward if Cummins is able to maximize the value from this technology and capitalize on the industry switch to EV they will be positioned as a dominant leader for years to come in the space

SALESFORCE & SLACK

By: Matthew Su

Salesforce is an American cloud-based software company designed to help businesses streamline data and provide data analysis. In December 2020, Salesorce agreed to buy Slack, a professional and organizational communications application for $277 billion Slack's platform allows for large amounts of people to partake in an ecosystem that efficiently allows messaging across an organization, potentially decreasing the use of emails and response time.

Acquiring Slack allowed Salesforce to compete against Microsoft in the same market of Microsoft Teams

The trend of a remote approach to work was further favored by the Covid-19 pandemic. Acquiring Slack provided an alternative space for employees to access a friendly workplace right from their pocket.

Bank of America Securities Inc, served as the exclusive financial advisor to Salesforce

Wachtell, Lipton, Rosen & Katz, and Morrison & Foerster LLP served as legal counsels to Salesforce. Qatalyst Partners LP and Goldman Sachs acted as financial advisors to Slack, and Latham & Watkins LLP and Goodwin Procter LLP served as legal counsels to Slack. The deal closed where Slack shareholders would receive $2679 in cash and 00776 shares of Salesforce

common stock for each Slack share, ultimately representing an enterprise value of approximately $277 billion Since Slack was and still is in a high growth phase, the EV/EBITDA was negative. Ultimately the

median of the EV/Sales multiple was used to find an enterprise value of $21.46 billion, whereas the transaction implied a 29% premium

The acquisition by Salesforce was undoubtedly a strategic and clever one Slack has now been integrated into Salesforce Customer 360 platform which helps business owners to perform analytics and gives companies a rounded base.

Ultimately the acquisition was a success as it created a revenue synergy Both Slack and Salesforce increased their revenue by 21% and increased their loyal customer base for Slack. Though the acquisition was a success, Salesforce did pay a hefty price for it, committing $10B in 364-day senior unsecured loans, and using the company's $95 billion cash balance This in turn was met with a negative reaction by Salesforce investors, causing Salesforce stock to plunge 89% in December 2020 However, in the long run, the benefits of this acquisition outweigh the harms in a magnitude of ways. Slack provides a long-term solution to the Covid-19 remote working phase, while also giving Salesforce an edge over Microsoft as they compete with their Linkedin and Microsoft Teams platforms

FACEBOOK & WHATSAPP

By: Hung Chang Chen

Meta is a technology company that strives to connect people through its services such as personal computers, mobile devices, virtual reality headsets, wearables, and in-home devices worldwide, with a market cap of 310.60 B. On February 19, 2014, Meta (then known as Facebook) announced that it had reached an agreement with WhatsApp founders Jan Koum (38) and Brian Acton (42) for $16 billion. This deal was composed of 183,865,778 shares of Class A common stock and $4 billion in cash The deal also allowed WhatsApp to allocate

$3 billion in restricted stock to WhatsApp's founders and employees to be granted over the next four years

Sequoia Capital (the venture capital firm backing WhatsApp), made approximately 5000% ROI, and the deal was known as the last acquisition of a venture capital-backed company in history. In this deal, Facebook was advised by Allen & Co, while WhatsApp was advised by Morgan Stanley. Facebook’s legal counsel was the law firm Weil Gotshal & Manges, while WhatsApp was advised by the law firm Fenwick & West.

Facebook’s share price increased from $68 to $7756 after regulatory approval was granted in October. This increase in share price added

an additional $17 billion dollars to the final sale price for WhatsApp In the end, the acquisition was worth $21.8 billion.

At the time of acquisition, WhatsApp revenue for the first half of 2014 was $15.9 million and they had a net loss of $2325 million. The decision to acquire was a smart one, during the time of acquisition in 2014, WhatsApp had over 450 million users while adding more than 1 million users per day. With 70% of WhatsApp users being active daily, the app was expected to quickly reach one billion users. By the end of 2014, WhatsApp had amassed 600 million users. WhatsApp now has 2 billion users.

The acquisition was a success, as it allowed Facebook to access developing markets, where WhatsApp is widely used. WhatsApp had a very powerful revenue model, charging users $1 dollar a year after the user’s first year. WhatsApp also had very low operating costs, with only 55 employees working there at the time. The financial statements for WhatsApp aren’t publicly available, but Forbes estimated potential revenue to be $87 billion in 2021 The resulting synergies include operating synergies, allowing Facebook to have access to economies of scale while allowing Facebook access to developing markets. WhatsApp also contributed to financial synergies, adding an estimated $87 billion in revenue in 2021.