In the Mellon Financial and BAnk of N$.$Y$.$ merger, What is the value of the cost saving synergies created by the deal, assume:

a$.$ The combined company will have a tax rate of $38\%$;

b$.$ Deposits, Short$-$Term Borrowings, Long$-$Term Debt and Equity are part of the

bank$$s capital structure; $$Other Liabilities$$ are not;

c$.$ An aggregate of debt beta of $0\mathrm{.}1$is a reasonable estimate of the $($average$)$ beta

of the debt that supports the assets that give rise to the merger$$s synergy;

d$.$ The equity betas reported in Exhibit $2$ may be used as estimates for the betas

of the equity that support the assets that give rise to the synergies;

e$.$ The market risk premium is $6\mathrm{.}2\%$

$2.$ How much confidence do you have in your valuation of your synergies? Fully explain

why

$3.$ Will synergies cash flows allow the banks to increase their debt?

$4.$ Under the terms of the proposed deal, what fraction of the synergies will be captured

by Mellon Legacy shareholders? By BNY legacy shareholders? $($Legacy$$ shareholders

are the shareholders of Mellon and BNY after they become shareholders of the new

company$)$

$5.$ Based on the last closing stock prices, and assuming no synergies, what exchange

ratio would leave the per$-$share values of Mellon and BNY stock the same? How f the

actual exchange ratio differs from this number? Who benefits from the difference?

$6.$ In the absence of synergies, what exchange ratio would keep the earnings attributed

to each legacy share in Q$42007$ equal before and after the merger?

$7.$ In the absence of synergies, is the proposed deal accretive of dilutive for Mellon$$s

shareholders? For BNY shareholders?

$8.$ How do synergies impact accretion$/$dilution analysis?

$9.$ BNY managers have argued that their P$/$E multiple is temporarily low relative to their

peers because of the $$overhang$$ of recently completed deals. Do you buy their logic or

is this simply a negotiating tactic?

$10.$ In negotiations with BNY$,$ should Kelly have held out for an exchange ratio that was

more favorable to Mellon? Is he selling out the shareholders of Mellon and the city of

Pittsburgh by doing the deal on disadvantageous terms?