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M&A Model Sample Template

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M&A Model
In millions, except per share data

Transaction Assumptions

General information
Current date 9/8/2014

Acquirer
Name Apple
Ticker AAPL
Latest filing date 6/28/2014
Filing type (10K or 10Q) 10-Q
Current share price $98.76

Target
Name Disney
Ticker DIS
Latest filing date 6/28/2014
Filing type (10K or 10Q) 10Q
Current share price $90.40
% Offer premium 25%
Offer price per share $113.00
Diluted shares outstanding (MM) 1,763.4
Offer value 199,259.3

Deal structure
% Stock 60%
% Cash 40%
Tax structure Stock sale
Acquirer shares issued in transaction 1,211
Nominal exchange ratio (offer price/acq share price) 1.144x
Actual exchange ratio (% stock x offer price/acq share price) 0.687x

Other assumptions
Deal fees as % of offer value 0.50%
Deal fees 996.3
Assumed annual pretax cost synergies 100.0
Apple calendar year ending 2014 EBITDA 61,615
Disney calendar year ending 2014 EBITDA 14,307
Acquirer tax rate 26.10%
Target tax rate 34.80%

Transaction financing
% Cash consideration financed with debt 80%
% Cash consideration financed with excess cash 20%
Acquirer new borrowing 63,763.0
Acquirer excess cash used 15,940.7
% of total acquirer cash balance 9.7%

Treatment of target debt Refinanced


Debt to be refinanced 16,136.0
Total acquisition financing 79,899.0

Acquirer available cash 164,490.0


Target debt outstanding 16,136.0

Term of loan 5 years


Financing fees as % of acquisition financing 0.50%
Financing fees 399.5
Annual financing fee amortization 79.9

Interest rate on new debt 4.0%


Interest earned on cash 1.0%
Sources & Uses of Funds

Sources of Funds
New borrowing to acquire target 63,763.0
New borrowing to refinance target debt 16,136.0
Cash used to acquire target 15,940.7
Value of stock issued to acquire target 119,555.6
Cash for fees 1,395.8
Total sources 216,791.1

Uses of Funds
Stock to target 119,556
Cash to target 79,704
Target debt refinanced 16,136.0
Deal fees (advisory, legal, and accounting) 996.3
Financing fees (related to acq debt) 399.5
Total Uses 216,791.1
Do sources equal uses? Yes

Write-Ups and Purchase Price Allocation

Asset write-ups
Tangible assets
Book value of target PP&E 23,013.0
% Write-up 20%
Asset write-up 4,602.6
Useful life 20 years
Incremental depreciation expense 230.1
Incremental deferred tax liabilities 1,201.3

Intangible assets
Book value of target intangible assets 7,268.0
% Write-up 150.0%
Asset write-up 10,902
Useful life 15 years
Incremental amortization expense 726.8
Incremental deferred tax liabilities 2,845.4

Purchase Price Allocation


Target assets - book value 83,723.0
Plus: PP&E write ups 4,602.6
Plus: Intangible asset write ups 10,902
Less: Write off of target goodwill (27,924.0)
Less: Write off of target deferred tax assets (480.0)
Target assets - fair market value 70,823.6

Target liabilities - book value 38,203.0


Less: Write off of target deferred tax liabilities 0.0
Plus: New deferred tax liabilities created 4,046.7
Target liabilities - fair market value 42,249.7

Target net book value - fair market value 28,573.9


Offer value 199,259.3
Goodwill created in transaction 170,685.4
Pro Forma Balance Sheet
Standalone Adjustments
Acquirer Target
AAPL DIS
6/28/14 6/28/14 Increase
Cash and equivalents 164,490.0 6,948.0
Accounts receivable 10,788.0 7,543.0
Inventory 1,594.0 1,425.0
Deferred tax assets (current and long term) 3,884.0 480.0
Other current assets 13,878.0 1,667.0
PP&E 17,585.0 23,013.0 4,602.6
Intangible assets 3,767.0 7,268.0 11,301.5
Goodwill 2,374.0 27,924.0 170,685.4
Other assets 4,160.0 7,455.0
Total assets 222,520.0 83,723.0
Accounts payable 20,535.0 6,379.0
Accrued expenses & def rev. (current & non-current) 26,718.0 3,756.0
Revolver and current debt 2,010.0 3,216.0
Long term debt 29,030.0 12,920.0 79,899.0
Convertible debt 0.0 0.0
Deferred tax liabilities 0.0 4,360.0 4,046.7
Other liabilities 23,287.0 4,480.0
Preferred stock 0.0 0.0
Noncontrolling interests 0.0 3,092.0
Shareholders' equity 120,940.0 45,520.0 119,556
Total liabilities + shareholder equity $222,520.0 $83,723.0
Balance check 0.0 0.0

Credit statistics AAPL DIS


Total debt 31,040.0 16,136.0
+ Noncontrolling interests 0.0 3,092.0
+ Preferred stock 0.0 0.0
- Cash & equivalents (164,490.0) (6,948.0)
Net debt (133,450.0) 12,280.0

Equity value (share price x shares out.) 592,362.2 199,259.3


Enterprise value 458,912.2 211,539.3
EBITDA for the calendar year ending 2014 61,615.0 14,307.0
Gross Debt / EBITDA 0.5x 1.3x
Enterprise value / EBITDA 7.4x 14.8x
Debt / Equity 5.2% 9.6%
Accretion / Dilution Analysis

EPS Accounting: Cash EPS FY 2014


9/28/2014
Acquirer
Net income 38,973.0
Cash EPS 6.31
Diluted shares outstanding (weighted avg.) 6,176.4
Target
Net income 7,530.0
Cash EPS 4.27
Diluted shares outstanding (weighted avg.) 1,763.5

Transaction related expenses/income(1)


Less: Interest expense from new deal debt (2,550.5)
Less: Interest income on cash forgone (173.4)
Plus: Synergies 100.0
Less: Incremental D&A expense 0.0
Less: Financing fee amortization 0.0
Taxes (assumed at acquirer's rate) 684.8
Total after tax transaction related income/ (expenses) (1,939.1)

Pro Forma Cash EPS 44,563.9


Pro Forma Shares Outstanding 7,387.0

Pro forma Cash EPS $6.03


Acquirer standalone EPS $6.31
Accretion / Dilution per share ($0.28)
Accretion / Dilution % (4.4%)
Additional pretax synergies required to breakeven 2,770.9
(1)
One-time charges are excluded from both cash and GAAP EPS calculations in this model

Sensitivity Analysis

Accretion Dilution - Year 1


Relevant assumptions % Stock Offer price
Current offer price ($0.28) $95.00 $105.00
$113.00 100% (0.39) (0.53)
Current % stock 75% (0.20) (0.32)
60.0% 50% 0.02 (0.09)
% Cash consideration financed with debt 25% 0.27 0.17
80.0% 0% 0.55 0.48
Accretion Dilution - Year 2
Relevant assumptions % Stock Offer price
Current offer price ($0.34) $95.00 $105.00
$113.00 100% (0.50) (0.65)
Current % stock 75% (0.26) (0.40)
40.0% 50% 0.01 (0.12)
% Cash consideration financed with debt 25% 0.31 0.20
20.0% 0% 0.65 0.58

Accretion Dilution - Year 3


Relevant assumptions % Stock Offer price
Current offer price ($0.33) $95.00 $105.00
$113.00 100% (0.54) (0.71)
Current % stock 75% (0.26) (0.42)
60.0% 50% 0.06 (0.08)
% Cash consideration financed with debt 25% 0.43 0.31
80.0% 0% 0.85 0.77

Accretion Dilution - Year 1


Relevant assumptions % Stock % Cash consideration financed with debt
Current offer price ($0.28) 0% 25%
$113.00 100% (0.63) (0.63)
Current % stock 75% (0.30) (0.34)
60.0% 50% 0.07 (0.01)
% Cash consideration financed with debt 25% 0.50 0.37
80.0% 0% 0.99 0.81

Debt / LTM EBITDA multiple


Relevant assumptions % Stock Offer price
Current offer price 1.502x $95.00 $105.00
$113.00 100% 0.662x 0.662x
Current % stock 75% 1.103x 1.150x
60.0% 50% 1.544x 1.637x
% Cash consideration financed with debt 25% 1.984x 2.125x
80.0% 0% 2.425x 2.612x
Do not change
10-K
Adjustments Pro Forma 10-Q

(Decrease) 6/28/14
(17,337) 154,101.5
18,331.0
3,019.0
(480.0) 3,884.0
15,545.0
45,200.6
22,336.5
(27,924.0) 173,059.4
11,615.0
$447,091.9
26,914.0
30,474.0
(3,216.0) 2,010.0
(12,920.0) 108,929.0
0.0 0.0
0.0 8,406.7
27,767.0
0.0
3,092.0
(46,516.3) 239,499.3
$447,091.9
0.0

Pro Forma
110,939.0
3,092.0
0.0
(154,101.5)
(40,070.5)

711,917.8
671,847.3
75,922.0
1.5x
8.8x
16.0%
FY 2015 FY 2016
9/30/2015 9/30/2016

41,465.0 43,889.0
7.00 7.70
5,923.6 5,699.9

8,013.0 8,958.0
4.70 5.42
1,704.9 1,652.8

(2,550.5) (2,550.5)
(173.4) (173.4)
100.0 100.0
0.0 0.0
0.0 0.0
684.8 684.8
(1,939.1) (1,939.1)

47,538.9 50,907.9
7,134.1 6,910.4

$6.66 $7.37
$7.00 $7.70
($0.34) ($0.33)
(4.8%) (4.3%)
3,247.7 3,115.6

Offer price
$115.00 $125.00
(0.65) (0.77)
(0.44) (0.56)
(0.20) (0.31)
0.08 (0.01)
0.40 0.33
Offer price
$115.00 $125.00
(0.79) (0.93)
(0.53) (0.66)
(0.24) (0.36)
0.10 0.00
0.50 0.43

Offer price
$115.00 $125.00
(0.88) (1.03)
(0.57) (0.71)
(0.21) (0.34)
0.20 0.09
0.69 0.61

onsideration financed with debt


50% 100%
(0.63) (0.63)
(0.37) (0.45)
(0.09) (0.24)
0.25 (0.00)
0.63 0.27

Offer price
$115.00 $125.00
0.662x 0.662x
1.196x 1.243x
1.731x 1.824x
2.265x 2.405x
2.799x 2.986x
Shares
In millions, except per share data

Target
Disney
Current share price
Basic shares outstanding (most recent filing)
+ Additional shares from options
- Shares repurchased under treasury stock method
+ Unvested RSUs
+ Additional shares from convertible debt
+ Additional shares from convertible stock
Diluted shares outstanding

Options # outstanding strike price Include?


Tranche 1 1 18.90 1.0
Tranche 2 3 21.70 3.0
Tranche 3 6 28.84 6.0
Tranche 4 5 32.38 5.0
Tranche 5 3 39.6 3.0
Tranche 6 1 27.84 1.0
Tranche 7 2 31.19 2.0
Tranche 8 10 39.11 10.0
Tranche 9 7 51.17 7.0
Tranche 10 0.0
Tranche 11 0.0
Tranche 12 0.0
38.000 38.0
get Acquirer
ney Apple
$113.00 $98.76
1,716.54 5,987.867
38.0 13.100
(12.2) (2.970)
21.0 0.000
0.0 0.000
0.0 0.000
1,763.356 5,997.997

Proceeds # exercisable strike price Include? Proceeds


18.9 13.100 22.390 13.1 293.3
65.1 0.0 -
173.0 0.0 -
161.9 0.0 -
118.8 0.0 -
27.8 0.0 -
62.4 0.0 -
391.1 0.0 -
358.2 0.0 -
- 0.0 -
- 0.0 -
- 0.0 -
$1,377.3 13.100 13.1 $293.3
Calendarization
In millions, except per share data

Last actual FYE Calendarization


Apple FYE Sep-13 % of EPS used from prior period 0%
Disney FYE Sep-13 % of EPS used from current period 100%
% of EPS used from next period 0%

Apple Disney Disney adjusted to Apple FYE


Fiscal year end EPS forecast Fiscal year end EPS Forecast Fiscal year end
Sep-13 3.38
Sep-14 6.31 Sep-14 4.27 Sep-14
Sep-15 7.00 Sep-15 4.70 Sep-15
Sep-16 7.70 Sep-16 5.42 Sep-16
Sep-17 6.21
Net income forecast Net income forecast
Sep-13 6,136.0
Sep-14 38,973.0 Sep-14 7,530.0 Sep-14
Sep-15 41,465.0 Sep-15 8,013.0 Sep-15
Sep-16 43,889.0 Sep-16 8,958.0 Sep-16
Sep-17 10,256.9
EBITDA forecast EBITDA forecast
Sep-13 12,171.0
Sep-14 59,335.0 Sep-14 14,244.0 Sep-14
Sep-15 65,296.0 Sep-15 15,128.0 Sep-15
Sep-16 70,008.0 Sep-16 16,656.0 Sep-16
Sep-17 18,337.3
Revenue forecast Revenue forecast
Sep-13 45,041.0
Sep-14 180,385.0 Sep-14 48,749.0 Sep-14
Sep-15 197,228.0 Sep-15 51,692.0 Sep-15
Sep-16 206,157.0 Sep-16 55,735.0 Sep-16
Sep-17 60,093.2
Disney adjusted to Apple FYE
EPS forecast

4.27
4.70
5.42

Net income forecast

7,530.0
8,013.0
8,958.0

EBITDA forecast

14,244.0
15,128.0
16,656.0

Revenue forecast

48,749.0
51,692.0
55,735.0
Contribution & Valuation
In millions, except per share data

Market value Apple Disney


Price per share $98.76 $113.00
Diluted shares outstanding 5,998.0 1,763.4
Equity value 592,362.2 199,259.3
Net debt (133,450.0) 12,280.0
Enterprise value 458,912.2 211,539.3
Contribution $ in MM
Revenue (FY+1) 180,385.0 48,749.0
EBITDA (FY+1) 59,335.0 14,244.0
Net Income (FY+1) 38,973.0 7,530.0
Contribution %
Revenue (FY+1) 78.7% 21.3%
EBITDA (FY+1) 80.6% 19.4%
Net Income (FY+1) 83.8% 16.2%
Enterprise value 68.4% 31.6%
Multiples
Revenue (FY+1) 2.5x 4.3x
EBITDA (FY+1) 7.7x 14.9x
Net Income (FY+1) 15.2x 26.5x
(1)
Pro forma calculations exclude deal related synergies, accounting and financing adjustments

Contribution of
Implied target valuation based on: YR 1 Revenue
Apple enterprise value 458,912.2
Pro forma enterprise value 582,933.1
Implied Disney enterprise value 124,020.9
Disney Net debt 12,280.0
Implied Disney Equity value 111,740.9
Implied Disney share price $63.37
Offer price $113.00
Offer price premium / (discount) to target valuation 78.3%

Implied target valuation based on:


Apple equity value
Pro forma equity value
Implied Disney equity value
Implied Disney share price
Offer price
Offer price premium / (discount) to target valuation
Summary
Implied Disney share price based on:
Revenue contribution (FY+1)
EBITDA contribution (FY+1)
Net income contribution (FY+1)
Offer price
Pro forma(1)

Contribution analysis

Enterprise value 68.4% 31.6%

229,134.0
73,579.0
Net Income (FY+1) 83.8% 16.2%
46,503.0

100%
100% EBITDA (FY+1) 80.6% 19.4%
100%
100%

2.9x Revenue (FY+1) 78.7% 21.3%


9.1x
17.0x 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
g adjustments Apple Disney

Contribution of
YR 1 EBITDA
458,912.2
569,079.0
Implied target share price based
110,166.8 $120.00
12,280.0
97,886.8 $100.00
$55.51
$113.00
$80.00
103.6%

YR 1 Net income $60.00


592,362.2
706,812.9 $40.00
114,450.7 $63.37
$55.51
$64.91
$20.00
$113.00
74.1%
$0.00
Revenue contribution (FY+1) EBITDA contribution (FY+1) Net i
$20.00

$0.00
Revenue contribution (FY+1) EBITDA contribution (FY+1) Net i

$63.37
$55.51
$64.91
$113.00
Multiples
30.0x

25.0x 26.5x

20.0x
16.2%

17.0x
15.0x
14.9x 15.2x
.4%
10.0x
9.1x
7.7x
5.0x
% 4.3x
2.5x 2.9x
0.0x
0% 95% 100% Revenue (FY+1) EBITDA (FY+1) Net Income (FY+1)
Apple Disney Pro forma(1)

t share price based on contribution

$113.00

$64.91
$55.51

ontribution (FY+1) Net income contribution (FY+1) Offer price


ontribution (FY+1) Net income contribution (FY+1) Offer price
Fixed exchange vs floating exchange ratio
Share price Fixed exchange ratio
Pre-deal Announcement Acquirer Offer value
Apple 98.76 98.76 $82 165,444
Disney 90.40 113.00 $86 173,515
Exchange ratio 0.915x 1.144x $90 181,585
$94 189,655
Exchange ratio $98 197,726
Fixed Floating $102 205,796
Acquirer closing share price 90.00 90.00 $106 213,867
Target closing share price 102.98 113.00 $110 221,937
Exchange ratio 1.144x 1.256x
Target pre-deal shares out. 1,763.4 1,763.4
New acquirer shares issued 2,017.6 2,214.0 Fixed exchang
Deal value at announcement 199,259 199,259 250,000
Deal value at close 181,585 199,259
200,000

Walk-away 82.00 82.00 150,000


Floor 90.00 90.00 100,000
Cap 102.00 102.00
50,000

0
$82 $86 $90 $94 $

Fixed exchange w
210,000
205,000
200,000
195,000
190,000
185,000
180,000
175,000
170,000
165,000
$82 $86 $90 $94 $
d exchange ratio Floating exchange ratio Fixed exchange w/collar Floating exchange w/collar
Exchange ratio Offer value Exchange ratio Offer value Exchange ratio Offer value
1.144x 199,259 1.378x 181,585 1.378x 181,547
1.144x 199,259 1.314x 181,585 1.314x 190,403
1.144x 199,259 1.256x 181,585 1.144x 199,259
1.144x 199,259 1.202x 189,655 1.144x 199,259
1.144x 199,259 1.153x 197,726 1.144x 199,259
1.144x 199,259 1.108x 205,796 1.144x 199,259
1.144x 199,259 1.066x 205,796 1.066x 207,073
1.144x 199,259 1.027x 205,796 1.027x 214,887

Fixed exchange ratio Floating exchange ratio


250,000

200,000

150,000

100,000

50,000

0
$86 $90 $94 $98 $102 $106 $110 $82 $86 $90 $94 $98 $102 $106 $110

Fixed exchange w/collar Floating exchange w/collar


220,000
210,000
200,000
190,000
180,000
170,000
160,000
$86 $90 $94 $98 $102 $106 $110
$82 $86 $90 $94 $98 $102 $106 $110
ng exchange w/collar
Exchange ratio
1.256x
1.256x
1.256x
1.202x
1.153x
1.108x
1.108x
1.108x

tio

102 $106 $110

ollar

102 $106 $110