Welcome.

My name's Maria Weber.

I'm one of the trainers at Financial Edge and I'm gonna be taking today's session on an introduction to the m and a process.

We have a short session today, so about 30 minutes, and we are going to go through a few things.

Um, if you wanna follow along in the slides, there is quite a lot of information on the slides.

I've put the link in the chat if by some chance you don't have access to the chat, you can always access this directly on Felix.

If you come to topics and you just go all the way to the bottom to Felix live.

And then once you click on there you will see all the past recordings. You just need to scroll down to what is coming up.

And there we are. The purple block on the right.

If you click on that coming soon m and a process, that'll take you to where you can find find A PDF of the slides.

On the right hand side, what we are going to be doing is we're gonna set the scene because yes, we are talking about the m and a process, but we need to understand a bit of context behind the process.

So we're gonna talk a little bit about m and a players m and a strategy.

Then we are gonna look at, okay, if a company is being sold, what are the options and the process for selling a business? Then we'll touch on the main documents involved in m and a.

So from an investment banking perspective, what kinds of things are you gonna see, what's involved? And then we'll end off with looking at some key ownership thresholds as well as the difference between a tender offer and a scheme of arrangements.

Right at the end, I'll direct you to some interesting documents where you can see an m and a process.

All processes are gonna be a little bit different.

I mean here we are gonna go through the main steps in a process, but I've got a nice example where you can access the public documents and have a look at what went on behind the scenes.

Okay, I'm just gonna post the link in the chat one more time because if people join they can't see the previous chat.

Okay? But any questions please do ask.

So starting with setting the scene for m and a, let's think about the different types of players you get, right, the different buyers.

First off on the left hand side we have strategic buyers.

So that's one company buying another company.

And there are various reasons that they might wanna do this.

One of them is accelerating growth.

I mean it's quicker to grow by buying a business than developing something from scratch yourself.

We'll go through more reasons on the next slide, but for now, with strategic buyers, an example would be what I'm gonna refer you to at the end of the session, a company called Smucker.

JM Smucker, they're a US company.

They do spreads, they do snacks, they do um, pet food, they do a bit of coffee.

So food and beverages company they bought in 2023, a company called Hostess Brands that does sweet uh, baked goods, right? Um, and so that is one operating company, buying another.

Any m and a transaction, there's going to be a control premium, right? Because you are buying control of the business and so you pay a premium for that.

With the strategic buyer, we look at the synergies that are expected relative to that premium, okay? Because it's too operating companies coming together.

We do have to think about tax issues, cost of funding issues, the amount of debt a company can raise without damaging its credit rating.

Also, you get different types of structures.

You get structures where the stock of the company's bought, where the assets of the company are bought.

So all of these things are gonna play into it.

If you are interested, we do actually have sessions coming up on Felix live talking about, if you just scroll down a little bit, um, first of all, analyzing a deal, which is m and a cash deals.

So looking at some of the financials behind a deal.

Then we've got asset versus stock deals, and then we have got m and a modeling complexities.

Okay? So a lot more to come on that for now, we are just focusing high level on the process in any transaction, confidentiality is important, but specifically in the context of a strategic buyer, often these buyers are competitors of the company that's being sold.

And when you put yourself up for sale, you've gotta open your books, you open the data room and people get access to things like agreements with your suppliers, with your employees.

So you wanna make sure that you don't first of all give that information out to too many parties and also that confidentiality is maintained.

So strategic buyer, that's one part of the buyer universe.

Other part of the buyer universe is a financial buyer.

So financial buyer here we are talking about funds.

So like a private equity fund, their objective is not to buy and hold companies forever.

They're looking for an exit, they're looking to make a return on that investment.

So an IRR effectively is what they are looking for, um, because these deals are often done with a lot of debt, they look for specific kinds of companies, companies that can support a lot of debt. So those companies have to have strong cash flows, they've gotta have good management, okay? There's limited opportunity for synergy.

So also think about what that might do to the price that these buyers are willing to pay.

So if it's a fund buying a company and they're not gonna integrate it with another company that already does a similar thing on, you know, as like a platform company that then acquires another company, there will be limited synergy, okay? And um, we've gotta think about conditions in the credit market because a lot of these deals are funded with debt.

And so if credit markets are tight, if interest rates are high, that is going to limit interest from these kinds of buyers.

Then we do have other buyers like wealth funds.

So sovereign, um, sovereign funds, sovereign wealth funds, government pension funds.

Their objective is not looking at things really like synergies that is more about asset allocation diversification and generally interested in more established companies.

But I mean there are so many different types of funds out there.

Um, but the thing here is they're looking more about managing a portfolio of investments.

Okay? So those are the main types of players in the m and a market.

If we now move on to the buy side and the sell side for every transaction, there is a buyer and a seller, right? So if we just think about what each party is looking for from a transaction on the buy side, from a strategic perspective, there could be various reasons for wanting to do the deal.

So one could be vertical integration, right? Where you acquire suppliers or customers.

A great example of this that um, actually happened very recently and I've just pulled up the press release on Felix, is a company called Core Weave.

So Core Weave recently iPod earlier this year.

They are a cloud provider and they specifically focus on AI computing power and they announced a deal. You can see this was announced in July and they are buying a company called um, core Scientific, okay? And that Core Scientific is a data center provider.

I think they provide power to data centers.

That's one of the things that they do.

And so you can see here they even say Core Weave is gonna verticalize its data center footprint, okay? And so that would be an example of this vertical integration.

If we go back to our slides, you could have horizontal integration where you are acquiring competitors.

The only thing we've gotta be a bit careful about is this could be blocked on competition grounds.

So an example in the UK that happened a few years back, Sainsbury's big supermarket group was looking to acquire Asda and the competition authorities actually blocked that deal.

Um, we are looking for synergies, okay? They're gonna be different depending on different deals, okay? Typically with horizontal integration you can get quite a lot of cost savings.

You could be wanting to enter a new geographical market, you could be worried about a technological threat or the threat of substitution.

Something that comes to mind is say when Facebook bought Instagram, right? And then you accelerating your expansion, okay? So buy versus build with the J jm, Smucker hostess brands deal, they grew quickly their baked sweet baked goods business.

Another example that happened recently was Google, okay? I also just highlighted it.

I mean we can go through all these examples, but let's uh, focus one more example before we get moving.

Um, that is Google bought, um, a company called Wiz, and that company provides security, cloud security, okay? And it was a quick, it says here, it it accelerates the large and growing trends.

And so it's just quickly acquired a company that already has the tech et cetera that it wanted.

Okay? So that is looking from the buyer side of things I've already mentioned.

It's not just about strategy, it's gotta be financially viable.

So that session that we have coming up in a few weeks time on looking at an m and a deal, that's where we'll look at things like what is this deal gonna do to the earnings of the company, the return on invested capital, comparing the premium paid with the synergies, thinking about impact on credit ratings.

So all of that is something that a buyer would need to consider.

Now this is important from a process perspective because one of the key roles of an investment banker is to come up or find what you think are gonna be suitable buyers for a company.

So understanding who would be interested and would they be capable of doing a deal, could they raise the finance right next? If we move on to the sell side of things, why would a company want to sell a subsidiary or a division or even a whole company putting itself up for sale? So for a company, they might wanna get rid of something that's not core to their strategy.

They wanna focus on a certain area, they could be struggling, they could need cash, they could also be maybe underperformance in a division that they wanna get rid of.

Um, something that Unilever's doing is they getting they divesting of their ice cream business? It's a lower margin business, more capital intensive and it is kind of dragging down the performance of the rest of the group.

Okay? So various reasons they might wanna get rid of a business.

PE funds we've already mentioned, it's about that exit and achieving that return family or individual owners, you have built up this company and now you want to realize some of that value you wanna liquidate or just succession planning.

You don't wanna run this business forever and you want it to carry on once you stop.

And then governments could wanna sell businesses, businesses that they're privatizing or they wanna raise cash.

The seller's objectives, when we are managing the process, when we are advising, obviously they wanna try and get as much money as they can, they want to make sure that this is actually gonna close, that it's going to be executed.

If you're not approaching the correct buyers, they're not gonna be interested.

You've also gotta make sure that everything's in order so that the business is attractive for sale.

And that's gonna feed into our next slide where we talk about the process.

They wanna try and get things done quickly because m and a can be quite disruptive.

I mean you're trying to run a company day to day and then in the background you've got this process going on.

You've got people wanting to have access to documents and access to management and site visits, et cetera.

So you wanna try and get it done as quickly as you can.

You wanna minimize disseminating confidential information, okay? Like we already mentioned disruption, we've talked about this.

Now comes into play with the deal structuring with the legal agreements guys. There are going to be lawyers involved very heavily in the process.

Something that the seller would want to try and limit is any liability for after they've sold the business for say any um, legal liability, anything that comes up post-sale.

So that's something to work out with the legal teams.

And then you might not be selling the entire business, you might just be selling a minority stay or a majority stake, sorry, you keep the minority and then you are exposed to how that company's gonna be doing.

So you wanna make sure that the owners will run it well and um, you participate in that upside.

Okay? If there's any questions, please do ask.

I'm aware that we are going through the slides pretty quickly, but you do have a copy of them and I'm just gonna paste the link again in the chat for anyone that has joined and that can't see the chat, right? So let's look at sell side options, right? So we wanna sell a business or we wanna sell a division.

How are we gonna do that? What are options? First option on the left is you negotiate with a single party.

As you can see on the slide, each of these options has got pros and cons, single party negotiation, you minimizing leakage of confidential information because you're just dealing with one party minimizes disruption to your operations because you don't have numerous parties wanting access to management records, et cetera.

It can be shorter if it's successful and it can also be more flexible because you're negotiating just with one party problem.

If we look at the cons is you may not realize the full value, there's no competitive tension and you are potentially ruling out buyers that would be very interested in this business and potentially pay a higher price.

That then moves us on to a limited auction.

So it's in the name we get a limited auction and a full auction.

The limited auction is where you only approach a handful of parties and you can see at the top block there, it's high probability candidates.

This is the point I was mentioning about bankers knowing which buyers would be interested, would it fit with their strategy, can they raise the funding? Those kinds of things. You controlling who you disseminate this confidential information to.

It's not as disruptive on your operations as a full auction, but again, you may be excluding potential buyers, you may not realize full value.

That brings us to a full auction.

And as you might imagine, this theoretically should maximize the value because you've got lots of competitors bidding for the asset, but it can be disruptive.

You're gonna disseminate confidential information to loads of people.

And then finally, this isn't a merger or an acquisition, but you, one option you do have is an IPO with an IPO, you are not selling control of the business to one party.

Instead you are selling the business to many different investors.

One of the downsides of an IPO is that you're not gonna get that control premium, right? Because not no one party's gaining control.

So the price is less than if you were to sell to a party that's gonna gain control.

Also, if we look at the bottom here, IPOing a hundred percent of a business is often difficult because the market would expect that the owner still has a bit of a stake in that business. They still invested in that business, so might not be able to sell the full a hundred percent immediately.

Okay? So those are your various options.

We are not focusing on an IPO for now, but instead we will focus on these the m and a process, right? So that brings us onto the process.

As you can see, we've got some indicative timings here.

Like I said earlier, every process is gonna be slightly different, but these are the main steps, the main things we need to think about.

So it starts on the left hand side with preparing the company for a sale.

You've gotta make sure the company is in a good position to be sold legally structure wise.

So if we look at this legal and tax structuring, it's kind of like getting the house in order.

If for example you're selling a division, you need to start carving out that division from the rest of the business, okay? You've gotta make sure that you've got robust corporate governance controls, et cetera.

So you're gonna have a kickoff meeting with management. Obviously you're gonna spend a lot of time with management to prepare all of this information, okay? You've gotta have a very good business plan because think about it, you're selling this, you've gotta present the business in an attractive light so that people want to buy it and want to pay a good price for it.

So you've gotta work on the business plan.

Then you start gathering stuff for the next phases, right? So you start getting the information together for the data room.

The data room is these days, uh, electronic data room where you put all of the documents, right? So once the buyers get access to the data room, things that they need to do, their due diligence will be in there.

So all the financial information, tax information, contractual information, customer contracts, supplier contracts, employee contracts.

So all of the stuff that would be needed to be checked goes into the data room.

Then you start preparing the teaser and the info memo.

So if we talk about a teaser teaser, it is what it sounds like.

It's just to see if there's interest.

So often the teasers on a noname basis, you don't say what company it is, it's one to two pages.

High level summary, what industry is this company in? What's the industry overview? Where does this company fit in high level financial data? What maybe differentiates this company from others? Maybe some of the attractive points about this company.

And that is literally to just tease, to test interest.

If people then are interested, and we can see this coming up in the next phase, the second phase on the right hand side here, if people are interested, they then get the confidential information memorandum.

That information memo is a longer document and it's got a lot more detail in it.

So only once you've signed a confidentiality agreement with the potential buyer, then they get access to the info memo.

And there you're going into more detail on the processes that this company follows, what their operations are like, who their customers are, who their suppliers are.

Then we start identifying potential buyers.

Lots of different parties involved in this beginning stage, right? You've got your investment bankers being involved, you've got management being involved, you've got lawyers, you've got accountants, okay, to get the company ready to put out there.

That takes us onto the second phase.

Second phase, you can see we get non-binding bids.

So informal approach to the buyer universe.

If we start up at the top here.

So that would be an MD or other senior banker just putting feelers out, calling some potential buyers.

And that's why in investment banking relationships are so important, right? Doing a lot of deals is important because then you know the landscape.

I know, oh this company strategy, they were looking for something like this.

You know the industry that you're working in.

So you approach informally, you call them, you send them the teaser, you get a feel, okay if the people are interested, we then said they've gotta sign a confidentiality agreement, a non-disclosure agreement.

Then you provide the info pack, which is your info memo.

You would also include things like what is the process.

So in the process letter we'll see on the documentation page that will say how you need to submit your bid, what you need to include when you need to submit it by.

And then people submit their indicative bids.

Now those indicative bids are non-binding and the reason is because these buyers haven't had access yet to all of the data necessary to do the due diligence.

So this is like subject to due diligence that then brings us on to the next phase, which is due diligence.

Here you're gonna narrow down the buyers because as we said earlier, you don't just wanna give out all this information to people that are maybe not serious buyers.

They just curious.

They're phishing, they wanna get information, see what's going on in the company.

So here you've gotta narrow it down to serious buyers.

And this takes us back to what does the seller want? The seller wants a successful execution and they wanna get it done hopefully quite quickly.

So you select those buyers, then you open up the data room, that's where they get access to all the more detailed stuff.

There's also q and a. They can submit questions for the bankers, for management, there are management presentations.

So management will present the business.

So you work as a banker with management to come up with the presentation, coach them.

So they're gonna present the business in a good light.

There could be site visits where the buyers go visit some of the sites and then the legal documentation starts getting worked on.

So the sale and purchase agreement or the merger agreement, this is where the lawyers are working with each other and working out behind the scenes, the key elements of these agreements.

Then the final round bids are submitted and the marked up SPA, that just means, okay, the things in that draft agreement that need to be worked out.

Okay? So those final offers are then submitted.

That brings us to the final phase, which once those final offers are submitted, there'd be some negotiation trying to maybe increase the price a bit.

Also negotiation over the points in the legal agreements.

Once everyone agrees, obviously you pick the best bid, everyone agrees documents are signed, but we've gotta then still make sure before the deal can actually close.

So we've agreed the deal, but there's certain post-closing conditions that, or not post-closing.

Um, post signing conditions that have to happen before the deal actually gets executed.

And that would be things like antitrust.

So in the uk, the CMA in the US looking at the FTC, the DOJ, they're gonna look at deals and say, look, do we actually approve these? Are we gonna block them? And then there would be the final closing and payment.

Okay? Also to mention, I mean we'll talk about this now when we go onto um, the difference between a tender offer and a scheme of arrangements, shareholders, okay would have to vote potentially.

And then we get the final deal being done.

Okay? That brings us on to the main documents in m and a.

There are loads of documents in M and a, these are just some of the main ones. And thinking more kind of from like a banker's perspective, what are you gonna be seeing? So an engagement letter, an investment bank, just because you are an advisor to a company, you may have done work for them in the past, you may have done an IPO for them.

That doesn't mean you are automatically gonna get to work on a transaction for them.

So you're gonna be engaged to work on a transaction.

Then we spoke about confidentiality agreements.

We spoke about the teasers or the info memo, working group lists.

You are gonna be working with loads of different parties.

Parties. There's gonna be teams of lawyers.

The seller's gonna have a team of lawyers, buyer's gonna have a team of lawyers.

The bank might have their own lawyers.

You're gonna be working with different bankers, you're gonna be working with management. So just keeping a list of the working group.

Then the process letter we spoke about.

That's, you know, how people must submit their bids, how they must submit questions, how the data room will work, okay? Bid letters, people put their bids in indicative in the first round firm in the second round.

Then due diligence, request lists, data rooms, site visits, management presentation we spoke about then a letter of intent.

A letter of intent is sometimes called heads of terms or heads of agreement.

That main merger document or the sale and purchase agreement can take quite a while to actually fully negotiate.

So in the meantime you could agree on, okay, these are the key things that we have agreed on and that is just a shorter contract.

Basically setting out the key terms of the transaction that have been agreed.

Okay? Then we've talked about your merger agreement.

We'll talk about uh, offer to the public.

So offer documents if it's a public company.

Then SEC filings, if you're a US public company or in any other jurisdiction, what do you have to file with regulators? And then a fairness opinion we haven't yet spoken about.

I'm gonna show you an example of a fairness opinion in a moment.

But with a fairness opinion, this is usually obtained by the sellers board of directors, okay? Definitely for public companies, right? Because the directors are responsible for making sure shareholders get the best deal effectively, right? That they get a fair price.

So what they do is they would engage normally an investment bank to give their opinion on whether the valuation is fair.

So the bankers do a valuation from scratch internally at the bank. It would go to valuation committees to be approved.

And that is then all the targets directors to say to shareholders, we've got an opinion that this is a fair valuation.

And then finally we have the media announcements announcing the deal, announcing the closing of the deal, okay? I am aware of the time, I know I said we are going to go for half an hour and I'm already at 28 minutes in, but there's just a few things I wanna show you, um, that I haven't yet had a chance to do. So I'm gonna carry on the session is being recorded.

It'll be posted on um, Felix probably on Tuesday because Monday is a bank holiday in the uk.

So if you can stay with me, please do.

But if you need to drop off then thanks for joining.

Okay, let's talk about the key ownership thresholds. Okay, so these are examples.

I am definitely not a lawyer and specifically not an m and a lawyer.

Um, and even on the slide it says you're gonna consult with legal teams, right? The lawyers know this kind of stuff.

But this is just to give you an idea of some of these key ownership thresholds and what they actually mean.

If we start on the left hand side, we've got mandatory disclosure rules.

Mandatory disclosure rules are if a party owns over a certain percentage of a public company, they need to make that known, they need to report it, okay? So in the US you report it to the SEC in the UK I think you report it to the company and then the company does an announcement.

Okay? So mandatory disclosures if you own a certain percentage of a company.

Now if we think about what the intention behind this is, that's to prevent a party from secretly building up an interest in another company and then basically surprising that company with a takeover o we've now gained control of the business, right? So this is, if you look, I mean I just did a bit of reading around it and it's actually quite interesting, but it's lots of like legal language.

But in the US, if you own more than 5% of any class of securities, you've gotta report it.

And in that you've gotta say what your intention is.

What is your intention with the stake? Why are you building the stake? Okay? Um, you can see in the UK it's a lower threshold. So it's 3%. In Hong Kong it's 5%, okay? So it's gonna be different in different jurisdictions, but that's kind of the spirit behind it.

So people don't secretly build these stakes because they could influence the business, right? Of a listed public company.

If you own even quite a small percentage, you could have some influence on the operations of that company.

So people should be aware it's about transparency.

If we then move on to the next block, which is mandatory offers, this is where if you own over a certain percentage of the company shares, you have to make an offer to all the other shareholders to buy them out.

Mandatory offer, if we think about the intention of that, that is to basically make sure that all shareholders have the same opportunity to sell their shares at a good price.

Because imagine someone building up their stake and then they get to just over 50%.

So people that have sold shares to them, they maybe got a very nice price for those shares. And then what about the minority shareholders that are left, right? Someone else has gained control of the business but you actually haven't been compensated, you haven't had the opportunity to sell your shares to them, okay? Also, if you own more than a certain percentage, you can frustrate the board.

You can do things like blocking votes.

I mean if you own 25% of a business, you can block say special resolutions.

So if we look at these thresholds, first of all in the US we've always gotta check state laws and regulations because there's the federal rules and then there's also state rules.

So there's no countrywide mandatory offer limit, but states have them.

Some states have them in the UK and Hong Kong you can see the threshold is 30%.

So if you own 30% or more, you gotta offer to buy out all the other shareholders.

And then the final one is a squeeze out.

What squeeze out means is where you can force other shareholders to sell their shares to you as the buyer.

This is where I've achieved, I wanna say overwhelming control, right? I mean you can see in the UK that's 90% where it's a tender offer. We'll talk about that in a moment.

And then 75%, if it's a scheme of arrangement, that means most people have agreed to this and it can be quite frustrating to just have say like 10% of shareholders left minority interest.

I've got a school report to them. Okay? So actually you can just squeeze out that other 10%, okay? And we've got that also in Hong Kong.

But guys with this, there are lots of exceptions, rules, different jurisdictions.

So this is just high level overview, okay, we are nearly there.

Let's have a look at the last little bit, which is public m and a transactions.

I've been mentioning tender offers and schemes of arrangement.

Tender offer is where you go directly to the shareholders, right? So me as the buyer, I offer to buy shares at a certain price on certain terms.

And each shareholder decides, do you want to accept the offer? So this isn't going through the company's board, this is going straight to the shareholders.

The company's board.

The targets board usually then would give a recommendation, they would release a statement saying to their shareholders, we support this, we think it's a good idea, we think you should sell or we think you shouldn't sell.

Okay? And they'll give reasons why.

So that is a, there's a very strict rules to follow for the process, for the flow of information.

And we'll talk about an example of that on the next slide.

And we've already talked about the mandatory bids and the squeeze out a scheme of arrangement, this is where the acquisition happens through the courts.

So the targets board of directors applies to the court obviously with the support of the buyer and then shareholders vote.

And you can see the squeeze out is lower. 75%.

If 75% accept, okay, then the rest of the shareholders have to sell.

Now schemes of arrangement don't exist in every single country.

Um, typically I think, and again I'm not a lawyer, but I think countries that have a history of like English common law, okay, they would have schemes of arrangement there.

If you are looking to do a hostile takeover where the board of the target does not wanna sell, they don't think it's a good idea, then you have to follow a tender offer, right? Because there you don't need the cooperation of the board there, you're just going straight to shareholders.

The board can tell shareholders they don't agree with it, but then it's up to shareholders to decide if they wanna sell or not.

Okay? Last little thing and then I will show you a nice practical example and then we'll finish off.

We mentioned that when you're dealing with a public company, there are rules, regulations you've gotta follow.

So just taking an example of this, in the UK we have the takeover code and we have the takeover panel.

In the US it's a bit more fragmented as far as I'm aware.

I don't think there's one like central board, but you've got involvement from say the SEC from the stock exchanges, different parties.

But if we think again about the spirit of these rules, it's about the fair treatment of shareholders.

That's what it's about. Protecting the shareholders.

So if we just have a quick look through some of them, the takeover panel rules have provisions about acting in concert.

Basically acting in cahoots with someone.

So if you are colluding with someone and you are building up a stake in the business, you can't say, oh but I only own 15%.

I don't have to make a mandatory bid.

If you are working in concert with another party who owns 20%, then actually between the two of you, you own 35%, you've gotta make a bid, okay? Equal treatment for all shareholders, all shareholders have to have access to the same information.

They also have to be offered the same price, right? All shareholders of that class.

I can't give some a better price or better terms than others.

Restrictions on stake building we've spoken about, that's your disclosure requirements. If you own more than a certain percentage of the company, 3% in the UK or more, you've gotta disclose that We've talked about the mandatory bids, information released must be accurate, okay? Whether that's an offer document, financial projections, accuracy of information, this is an interesting one, no frustration action by the targets management.

So in the uk, and this is gonna be different, I know say in the US, and this is very state dependent, I think in places like Delaware it is easier to do stuff like this.

In the UK you are not allowed to, for example, issue more shares to other shareholders to dilute the person that's trying to gain control, okay? Or you can't go and say sell off some assets to make the business unattractive.

Just once someone has expressed interest, they wanna buy it, now all of a sudden I'm gonna sell something off so they can't buy it, okay? So that is not allowed. Strict timetable has to be followed.

So I think in the UK you, once you announce your intention that you wanna buy, you've gotta give the offer document within 28 days to shareholders.

Then you also have to give shareholders enough opportunity to review the documentation, make a decision.

I think it's a minimum of 21 days.

And then finally there's restrictions after an offer's been made.

So for example, if um, your offer's not successful, you can't within the next 12 months approach the shareholders again with another offer.

Okay? So there's certain restrictions and it is all about protecting the shareholders.

Okay? So guys, I know that is a lot of information.

What I wanna end off with is just showing you where you can find some really interesting stuff.

If you have not been privy to a transaction before and you're interested to see like what actually goes on behind the scenes, if you look at public companies, they disclose certain things.

One of those companies I was using the example of um, James Mucker buying Hostess Brands.

Hostess Brands is the company that does Twinkies.

If you know Twinkies, so if you go into Felix, and this is publicly available information on the accs website, but just nice and easy to find all in one place, if I type in Smucker and I'll put the link in the chat in a moment, but if you wanna find it yourself, if we go to their filings, they did this deal in 2023.

So if we go to the prospectuses and regulations sec uh, registration section, part of the deal they were paying in shares.

And so you issue a prospectus in that regard and you can see there's lots of updates, right? Updated information coming through.

But the one that I wanted to look at is this latest prospectus supplement. So you can see there the 4 2 4 B three from the 11 0 1 23 date.

If you click into that prospective supplement, so this is the buyer, right? On the table of contents you can find background of the offer and the merger.

If you click on that, I've highlighted it.

So let me actually put this link in the chat.

If you wanna just click on the link, you'll be able to access that. Hopefully you've got that. Okay? This, I'm obviously not gonna read to you, it's very long.

But guys, this goes through what actually happened.

So someone approached someone else, they had a discussion, then they engaged bankers, then they signed a confidentiality agreement, then they offered a price, then the price wasn't high enough, then the board met.

This is really interesting reading if you have not seen inside a deal, right? So go through this, have a read through.

The other thing I wanted to show you is the fairness opinion.

So the fairness opinion, you can find it again in the table of contents, but I've just linked it in my annotations fairness opinion.

So Morgan Stanley was advising the target.

So the target was hostess and this is going through what they did, right? So their actual opinion is in an annex in an appendix at the bottom.

But here it explains what they did.

And they did a valuation of the business to see what price is fair and they look at things. Those of you that have learned about valuation comps, they looked at comparable companies, Hershey, Pepsi, et cetera.

They also did, if you scroll further down, precedent transactions, other transactions that were done, what were the multiples? Scroll further down. They talk about a discounted cashflow analysis.

Okay? So that's also a really interesting reading to have a look through.

Something I discovered from reading this, I didn't realize that there were other parties initially interested in buying hostess brands.

If you read through the background to the transaction, they were engaged in discussions with other parties before Smucker approached them.

And then uh, you read in here that there was a leak and I found the article.

So it was um, reported by Reuters that hostess brands Twinkie maker explores a sale amid takeover interest. So this happened in August of 2023 and it goes through here and obviously it was an anonymous source because guys, this should be confidential information, you shouldn't be leaking to the press.

Um, but here they even mentioned who are the potentially interested buyers, general Mills, Mondelez, Pepsi, Hershey.

So then what I did this like sleuthing like going and putting all the pieces together.

I went and I looked at Hostess's background of the deal.

So if you go look at hostess brands, I wanted to see, okay, who, they don't disclose who the parties were, they just say party A, party B.

But I just wanted to know like how far back, you know, had this been going.

So if you go to hostess brands, you can find it under prospectuses and regulations.

And this one you've just gotta expand a little bit.

There was a tender offer to the shareholders and you can see the board gives the, I think this 14 D nine that from the 10th of the 10th.

10th of the 10th, where was the one that I found? There we go. So there's lots of revisions. You can probably find this information in some of the revised stuff as well.

But in that 14 D nine, okay, you can see here the board recommends it.

If you click in there, I'll make my link available if I just copy that link.

Okay? So that's available in the chat.

Um, background to the offer.

And you can see just above this if you scroll a little bit up, there's the recommendation of the board of hostess.

So they're saying we do unanimously recommend this transaction.

Okay? And then they give the background to the offer.

And in this background to the offer, you can see who is or not who they call it Party A, party B.

But this started back I think in May or June. Okay? And then MKA only came along later.

So that's some interesting reading as well.

And then something else that just as I was reading through it, I highlighted, that's my other annotation on the left is just what we were talking about, how bankers advise on who good buyers would be, right? So this was, they reiterated, so Morgan Stanley were the advisors to Hostess and they initially, when they were talking about a sale, they said, look, identifying well capitalized strategic companies, they would be best suited to make an offer, synergies, closing certainty.

So all those things that we spoke about, the bankers do consider that.

Okay? So you've got the links in the chat, you've got some nice reading to do over the weekend if you are interested guys, that brings me to the end of our presentation for today.

Thanks very much for joining.

If anyone has any questions, let me know.

But otherwise, thank you very much and I hope to see you in a future Felix live session.

Thanks everyone. Have a great weekend.