Tl;dr: Part of a collection of real examples of M&A investment banking slides. This blog covers Premiums Paid 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:
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 Premiums Paid Analysis
You can go to Yahoo finance and see the market cap of a company. You might even see the enterprise value (which will probably be calculated wrong). But if you want to buy a public company, the price you pay will always be more than the price you see.
Premium means more. Premium paid is how much more other people had to pay when they bought someone. The analysis gives you an idea of how much more you might have to pay, or rather your client.
The analytical part of the analysis is pretty simple. How you do the analysis is a little more technical. Someone can teach you quite a lot about it in one hour, but to have mastery on anything takes a little more time. There are some concepts you will have to learn, which again are simple, but it’s something to learn.
So “unaffected share price”. Secrets don’t remain secret for long. Whether it is a leak, or you have to make an announcement, your share price is going go up if an acquisition is possible (they know there is always a premium paid). To calculate the premium on an unaffected share price you need to pick a point at which the company wasn’t affected by the rumors/announcement.
There is no scientific basis for this. You basically look for a point in time in which the price goes up and to the right and pick the day before. You’ll also look at the volume traded to get a feel for this.
Bankers, like management consultants, hate specifics. They love ranges. You’ll never do premiums paid with one data point. There will always be multiple data points such as:
- Premium over the day prior to the announcement
- Premium over 1 week prior to the announcement
- Premium over 1 month prior to the announcement
You’ll notice in the examples that there are spot and VWAP prices. The spot means they probably picked the closing price. VWAP is a little more complicated, but not so much. I cover this in another blog.
Why these slides are made
As I’ve explained, you don’t pay what Yahoo finance says. You pay 10-50% more. Premiums paid isn’t a core banker analysis, but it is something you will do at some point.
The reason you do it is simple. Clients want to get a feeling for how much they might have to pay up. So if the market cap is $1b and the premium paid is 30% then you will probably be paying $1.3.
There is a bit of science and art involved here but it’s pretty much monkey work when it comes to it. I’ve never paid a lot of attention to this analysis. The other usual DCF/CoCO/CoTrans are what take the most time as an analyst.
Comments on making these slides
I could never understand the premiums paid in deals. This one time I was a senior analyst or junior associate. I was working on this deal with a few MDs and this one really senior MD asked me to do some work on a Saturday as I was there. He told me premiums paid were like 35% and I honestly said something like “no f’n way that’s BS”. Affronted by this he gave me a task to do. He got me to make a data set and sort of stared over my shoulder to see what the numbers came out as. He was sort of right, which goes to show that kids don’t have a clue. I loved that MD.
Examples of Premiums Paid Analysis
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