Exchange Ratio

Investment Banking Slide Examples of Exchange Ratio and Contribution Analysis

Tl;dr: Part of a collection of real examples of M&A investment banking slides. This blog covers relative value, specifically Exchange Ratio and Contribution Analysis. See the PowerPoint presentations investment bankers are paid millions for. No matter your job, or your aspirations, you can learn from these slides.

This is part of a collection of 67 free M&A presentations from the top 20 banks (based on ranking, and also the quality of presentation for you to learn from).

Collection of M&A slide examples

The main page for all the M&A resources is here.

I have broken out 827 examples of slides across 32 sections. You can click through to the section you want to learn about next here:

Company Overview
Corporate Structure
Management Projections
Research Analyst
Comparison Financial Projections
Analysis At Various Prices
Share Price Analysis
Volume Weighted Average Price
Regression Analysis
Discounted Cash Flow
Weighted Average Cost Of Capital
Comparable Companies
Comparable Transactions
Dividend Discount Model
Leveraged Buy Out
Premiums Paid
Sum Of The Parts
Football Field
Executive Summary
Offer Summary
Offer Comparison
Accretion Dilution 
Exchange Ratio And Contribution Analysis
Shareholder Analysis
Ability To Pay
Strategic Options
Transaction Case Study
Next Steps
Full valuation
Sales Pitches

Is this blog for you?

Why the heck should you care? Investment banks (historically) attracted the best and the brightest.

  • Slide structure/design: Learn how complicated concepts are structured and designed in PowerPoint
  • Analysis approach: See exactly how complex financial methods are presented
  • Strategy and communication: M&A deals are not (normally, other than many Duff and Phelps decks) cookie cutter. There’s a host of topics that need to be dealt with
  • Morbid interest: I used to do this for a living, but it’s still interesting to see how PPT are made… but then maybe it’s just me and so FML 😉

Who this will help:

  • You want to work in banking: There’s a lot of applicants. Knowing the job helps you answer questions
  • You work in banking: Even if you’re an MD, you need to know how the best are structuring their thoughts/analysis
  • You write presentations: You can’t buy learnings like this. You can learn from the slides
  • You have a curious mind: Good for you

About Exchange Ratio and Contribution Analysis

Relative valuation is utilized to illustrate how the value of one company compares to another company.

A contribution analysis compares how much revenue, EBITDA, Pre-Tax Income, cash, and possibly other items the buyer and seller are “contributing” to estimate what the ownership of the combined company should be.

For example, let’s say that the buyer is set to own 50% of the new company and the seller is set to own 50%. But the buyer has $100 million of revenue and the seller has $50 million of revenue – a contribution analysis would tell us that the buyer “should” own 66% instead because it’s contributing 2/3 of the combined revenue.

It’s most common to look at this with merger of equals scenarios, and less common when the buyer is significantly larger than the seller.

The exchange ratio reflects the number of acquiror shares offered for each target share.

I found JP Morgan explain relative value valuations, so I’ll let them get into the details to teach you.

Why these slides are made

This is a less common analysis. you use them when a company is merging or you are acquiring a company using stock. Relative valuation analysis is utilized in the context of stock-for-stock exchanges to determine the appropriate exchange ratio offered to shareholders in a transaction.

The reason you do this analysis is simple and it’s also really important. Why? If you’re merging two companies you’re going to have a bum fight over who gets what. Bankers will do a crap tonne of analysis to give ammunition to negotiate.

If you say you should get 68% of the new entity, well, why? You need to back it up. You’re not a 9 year old with your parents saying “because I said so”. Negotiation is a lot about having the numbers to support your argument. It’s hard to argue with numbers.

Comments on making these slides

Bankers like management consultants never give specifics. You always provide a range and the assumptions that underpin those numbers.

Your MD is going to rely on minions to do all the work and they need to be able to rely on those numbers or they will look like a tit in front of the client. The client also needs to have the numbers to negotiate. Whilst bankers will lead the negotiation, clients need to sign off on it because it’s their company they have fiduciary responsibility for.

This exchange ratio stuff is really important because it’s the headline number for a deal. Everything else that comes after are deatils.

Examples of Exchange Ratio

Exchange Ratio

Contribution Analysis

Want to learn more about investment banking presentations?

Want easy access to knowledge?

Get in the game

Free tools and resources like this shipped to you as they happen.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.