In this session, we'll look at the Felix m and a challenge. If you want, you can post your video right now, read through the handout and come back and we'll go through some of the highlights.

Okay, so before we begin, it is important to note that in this session we'll use data. As of the recording date in your analysis, you will use live data, so your numbers will be different. However, we should be getting similar results and output.

Your team is acting as an advisor to General Dynamics in this case, they acquire.

Now, they have asked you for advice on a potential acquisition of L three Harris Technologies or the Target.

Your MD has asked you to run an m and a analysis on this acquisition.

Now, the management of the company requires that the deal be EPS Creative for the year 2027, and also that the company maintains an investment grade credit rating.

So let's go through some of the details and some of the assumptions of this challenge.

The first is related to deal synergies. The CEO of the client company believes that synergies will result from a combination of revenue and cost synergies, and they're expected to be 5% of LTM revenues. Also, those synergies will be achieved within two years post-acquisition.

The client also believes that the targets shareholders would accept an acquisition premium of 30% over the one month volume weighted average price.

We are gonna assume that the deal date will happen on December 31st, 2025, and we're gonna use data from both Felix as well as the company's filings such as the 10 K or the 10 Q.

Assume that both companies have a tax rate of 21%, and the fees for the deal are gonna be in the range of 0.5 to 1% of acquisition equity value.

The target's existing debt financing has a change of control clause, so the combined business must maintain a minimum cash balance of 1% of LTM combined revenues, excluding synergies.

We're gonna assume that the targets average cost of debt is 5%, and that the cash rate for both companies is 3%.

Also, we're gonna assume that the acquisition debt will be at the acquirer's current cost of debt.

Finally, for simplicity, we're gonna ignore the acquirer's pension liability when calculating its existing debt.

Now, to build up our m and a analysis, we are provided with an Excel template, and once we are done building up our m and a analysis, there's gonna be an additional task. So your MD has asked you to do a more comprehensive review of this deal and to identify any qualitative considerations that should be flagged, of course, in relation to the transaction itself.