Investment Banking
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Transcript of Investment Banking
7/21/2019 Investment Banking
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Investment Banking:
Merger Acquisition
By: Ankit BhatnagarMBM -104
Self Study
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(he (o! ten largest glo&al investment &anks
Rank Company
1" )"*" Morgan
+" Bank of America Merrill ,ynch
"
.oldman Sachs 4"
Morgan Stanley
/"
#redit Suisse
" eutsche Bank
2"
#iti Bank 3" Barclays #a!ital
"
5BS
10" B6* *ari&as
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#ommercial Bank vs" Investment Bank
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#ommercial Bank
A commercial &ank is licensed to take de!osits7the funds that are !aid into current 8checking9 andde!osit 8savings9 accounts &y its customers"
(o !rotect the funds of de!ositors" Another is tosafeguard the sta&ility of the financial system $hich is vitally im!ortant for the economy as a $hole"
(he commercial &ank generates a !rofit &y !ayingde!ositors a lo$er interest rate than the &ankcharges on loans"
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Investment Bank
An investment &ank does not have an inventory ofcash de!osits to lend as a commercial &ank does An investment &ank acts as an intermediary
matching sellers of stocks and &onds $ith &uyers ofstocks and &ondsIf a com!any needs ca!ital it may get a loan from a
&ank or it may ask an investment &ank to sellequity or de&t 8stocks or &onds9"Investment-&ank must s!end considera&le time
finding investors in order to o&tain ca!ital for itsclient"
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IB: Merger and Acquisitions
• Acquisition
hen a larger com!any takes over another8smaller firm9 and clearly &ecomes the ne$ o$ner
the !urchase is ty!ically called an acquisition" In most cases the target com!any ceases to e%ist
!ost-transaction 8from a legal !oint of vie$9 and theacquiring cor!oration s$allo$s its &usiness" (he
stock of the acquiring com!any continues to &etraded"
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IB: Merger and Acquisitions
• Merger
A merger occurs $hen t$o com!anies often roughlyof the same si;e com&ine to create a ne$ com!any"
Such a situation is often called a <merger of equals"=Both com!anies> stocks are tendered 8or given u!9
and ne$ com!any stock is issued in its !lace" ?ore%am!le &oth Chrysler and Daimler-Benz ceased to
e%ist $hen their firms merged and a ne$ com&inedcom!any DaimlerChrysler $as created"
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In Investment &ank Merger @ Acquisition advisingcan &e highly !rofita&le and there are !ossi&ilitiesfor many ty!es of transactions"
A small !rivate com!any>s o$nermanager $ishes tosell out for cash and retire"
A &ig !u&lic firm aims to &uy a com!etitor through astock s$a!"
Merger @ Acquisition Advisors come directly fromthe cor!orate finance de!artments of investment
&anks"
Merger & Acquisitions Advisory service
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Merger & Acquisitions advisory service
5nlike !u&lic offerings merger transactions do notdirectly involve sales!eo!le traders or researchanalysts"
esearch analysts in !articular can !lay anim!ortant role in <&lessing= the merger" In!articular Merger @ Acquisition advisory falls ontothe la!s of Merger @ Acquisition s!ecialists and fits
into one of either t$o &uckets seller re!resentationor &uyer re!resentation 8also called targetre!resentation and acquirer re!resentation9"
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Merger & Acquisitions Boom and Bust
Mergers and acquisitions advisory $as for most ofthe late 10s and early +000s a leading source ofrevenue for the glo&al investment &anking industry
In +000 the $orld>s volume of Merger @ Acquisitions activity totalled almost C"/ trillion
Business di!!ed in +001 and in +00+ deal volume $as do$n to C1"+ trillion $orld$ide"
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Merger & Acquisitions Boom and Bust
Market !icked u! in +004 as a strong glo&aleconomy lo$ interest rates and thriving stock !ricesraised confidence and s!urred deal making
Merger @ Acquisition activity $as u! to C+"2 trillion &y +00/ and &oth Duro!e and the 5S sa$ 0 to 40!er cent increases in volume"
eals ke!t going through +00 !eaking in mid-
+002"
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Merger & Acquisitions Boom and Bust
6ota&le feature of the mid-+000s Merger @ Acquisitions &oom $as the maEor !art !layed &yfinancial !urchasers including some multi&illion-dollar deals"
(he glo&al recession that nearly destroyed &anks in+003 took a &ig toll on mergers and acquisitions ithout access to chea! !lentiful credit !otential
&uyers $ere less likely to &uy" Dm&attled com!anies
made less-attractive targets" And in a climate of noconfidence fe$ #DFs $anted to take on anyunnecessary risk" As a result &anks> Merger @ Acquisitions revenues d$indled
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Merger & Acquisitions Boom and Bust
(he $orld>s Investment-&ankers did Eust C+" &illionof Merger @ Acquisitions &usiness in the first threemonths of +00
(he !eak of C3 &illion in the fourth quarter of +002" hen the Market sta&les
/ acquisitions in +011 valued in e%cess of C2" &illion"
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,ast / Gears Merger and acquisition data
Year Acquisitions Value in $ Billion
2011 65 7.3
2010 105 10.6
2009 52 17
2008 66 5.7
2007 58 19.9
2006 57 10.7
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Gear Hs Acquisition
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Gear Hs Halue in C Billion
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Gear Hs" Acquisition : C Billion
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/ acquisitions in +011 valued of C2" Billion
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Investment Banking : Merger and Acquisition
@A
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Investment Banking : Merger and Acquisition
(hanks Gou