ESG-Related Risks and Opportunities

Investors get a wider picture of industry and company analysis when integrating ESG considerations in the investment process. The effects of ESG factors on the company’s valuation—and financial statements—can be evaluated and inform investment decisions. ESG Integration A good starting…

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Identifying ESG-Related Risks and Opportunities

When integrating ESG factors into investment analysis, the major challenge is identifying and obtaining information that is relevant and useful. Another challenge is the inconsistency of ESG metrics and information. ESG-related disclosures are voluntary for many companies. Materiality and Investment…

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Evaluating Corporate Governance Policies and Procedures

Some benefits of effective corporate governance are: Better access to credit. Improved profitability. High returns and growth. Sustainable dividends. Good long-term share performance. Lower cost of capital. Some drawbacks to companies with ineffective corporate governance are: Reputational damage. Reduced competitiveness….

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Global Variations in Ownership Structures

Mismanagement of finite resources and environmental degradation from manufacturing processes can lead to corporate events that negatively impact security prices. Therefore, companies have seen the need to integrate such factors in their investment analysis. Dispersed vs Concentrated Ownership Dispersed ownership…

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Reasons for Restructuring

Sometimes mergers do not work out as expected, or the companies fail to get the synergies they had estimated, and they end up undoing the merger or restructuring. The following are some of the common reasons for restructuring: Change in…

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Corporate Restructuring: Equity Carve-Outs, Spin-Offs, Split-Offs, and Liquidation

Corporate restructuring is the act of modifying a company’s capital structure or operations by selling, splitting off, or shedding operating assets. Divestiture occurs when a company decides to liquidate or spin-off a division or a subsidiary. Restructuring can take the…

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Characteristics of M&A Deals that Create Value

The following are characteristics of deals that create value: The buyer is strong: Acquirers with a high average growth rate three years before the merger will earn significant positive returns on the announcement. The transaction premiums are relatively low: Acquirers…

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Effects of Price and Payment Method in M&A Transactions

The form of payment and the price in a merger determine the distribution of benefits and risk. Acquiring managers will prefer to pay with cash if they are confident that estimated synergies will be realized. However, the target management will…

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Estimated Post-Acquisition Value

In a merger and acquisition transaction, the acquirer will always want to get the best possible price for the target, while the target will always want to sell at a higher price. As such, the acquirer usually pays a premium…

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Target Company Valuation

Discounted cash flow analysis, comparable company analysis, and comparable transactions are valuation techniques used by companies to value companies’ mergers and acquisitions. 1. Discounted Cash Flow (DCF) Analysis Discounted cash flow (DCF) analysis derives an estimated company’s estimated value by…

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