Mergers and Acquisitions After several years, Beta made some bad investments and continued to raise debt to finance its operations. Alpha, on the other hand, hired a strong management team and successfully launched several new products. As a result, today the balance sheet of both companies looks very different (this is a new set of facts for both companies. Do not use facts from the previous section): Alpha Tech (pre-deal) Beta Corp Assets Debt Assets Debt $23.6 million $5 million $8.5 million $4.5 million Equity Equity $18.6 million $4 million Alpha Tech closing price: $155 Shares outstanding: 120,000 Beta Corp closing price: $100 Shares outstanding: 40,000 Alpha wants to increase its market share, so it is considering acquiring Beta. Supposed that Alpha Tech plans to announce its acquisition plans next week. The CFO has the weekend to figure out how to finance the acquisition and present the proposal to the board of directors of both companies. Analyze the three scenarios below: An all-cash deal for a target price of $130. New debt will be issued in order to finance this entire deal. Calculate the following: 12) How much will it cost to finance this deal? (2 pts) 13) Calculate Alpha's current leverage ratio (pre-deal) and its leverage ratio after acquiring Beta. Keep in mind that new debt was issued in order to finance the deal. (2 pts) Mergers and Acquisitions After several years, Beta made some bad investments and continued to raise debt to finance its operations. Alpha, on the other hand, hired a strong management team and successfully launched several new products. As a result, today the balance sheet of both companies looks very different (this is a new set of facts for both companies. Do not use facts from the previous section): Alpha Tech (pre-deal) Beta Corp Assets Debt Assets Debt $23.6 million $5 million $8.5 million $4.5 million Equity Equity $18.6 million $4 million Alpha Tech closing price: $155 Shares outstanding: 120,000 Beta Corp closing price: $100 Shares outstanding: 40,000 Alpha wants to increase its market share, so it is considering acquiring Beta. Supposed that Alpha Tech plans to announce its acquisition plans next week. The CFO has the weekend to figure out how to finance the acquisition and present the proposal to the board of directors of both companies. Analyze the three scenarios below: An all-cash deal for a target price of $130. New debt will be issued in order to finance this entire deal. Calculate the following: 12) How much will it cost to finance this deal? (2 pts) 13) Calculate Alpha's current leverage ratio (pre-deal) and its leverage ratio after acquiring Beta. Keep in mind that new debt was issued in order to finance the deal. (2 pts)
