Mergers, Acquisitions, Divestitures, and Other Restructurings, + Website

PAUL PIGNATARO is the founder and CEO of the New York School of Finance (NYSF). He has over thirteen years of experience in investment banking and private equity in business mergers, acquisitions, restructurings, asset divestitures, asset acquisitions, and debt and equity transactions covering the oil, gas, power and utility, internet and technology, real estate, defense, travel, banking, and service industries. At NYSF, Mr. Pignataro continues to participate on the training team, actively providing training at bulge bracket banks and M&A teams at corporations and billion dollar funds. Prior to his entrepreneurial en- deavors, Mr. Pignataro worked at TH Lee Putnam Ventures, a $1 billion private equity firm affiliatedwith buyout giant Thomas H. Lee Partners. Prior to that, he worked in the Investment Banking department of Morgan Stanley.

• Preface xiPart One Introduction 1Chapter 1 Merger and Acquisitions Overview 3The M&A Process 5Office Depot and OfficeMax 7Chapter 2 Financial Statements Refresher 13The Income Statement 13The Cash Flow Statement 22The Balance Sheet 27Depreciation 32Working Capital 42Debt Schedule 44Financial Statement Flows Example 45Part Two M&A Analyses 53Chapter 3 Raising Debt and Equity 55Raising Debt 55Raising Equity 60Chapter 4 Asset Acquisitions and Asset Divestitures 71Asset Acquisitions 72Asset Divestitures 83Chapter 5 Accretion/Dilution Analysis 87Step 1: Obtaining a Purchase Price 88Step 2: Estimating Sources and Uses of Funds 89Step 3: Creating a Pro-Forma Analysis 94Summary 105Drivers 106Part Three Office Depot/OfficeMax Merger 109Chapter 6 Assumptions 111Uses of Funds 119Sources of Funds 122Chapter 7 Income Statement 129Pro-Forma Income Statement 130Chapter 8 Cash Flow Statement 171Cash Flow from Operating Activities 171Chapter 9 Balance Sheet Adjustments 191The Buyer is Paying for 191The Buyer is Receiving 192Additional Adjustments 192Office Depot and OfficeMax Balance Sheet Adjustments 198Chapter 10 Depreciation Schedule 217Straight-Line Depreciation 218Chapter 11 Operating Working Capital 229Receivables 231Inventories 233Prepaid Expenses and Other Current Assets 235Deferred Income Taxes and Receivables 236Trade Accounts Payable, Accrued Expenses, and Other Accrued Liabilities 238Income Tax Payable 240Other Current Liabilities 241Projecting Operating Working Capital 242Operating Working Capital and the Cash Flow Statement 251Chapter 12 Balance Sheet Projections 261Cash Flow Drives Balance Sheet versus Balance Sheet Drives Cash Flow 265Balancing an Unbalanced Balance Sheet 278Chapter 13 Debt Schedule and Circular References 289Debt Schedule Structure 289Modeling the Debt Schedule 290Circular References 314Automatic Debt Paydowns 320Basic Switches 322Chapter 14 Accretion/Dilution 323Fairness Opinions 323Preferred Shares 325Contribution Analysis 327Conclusion 328AppendixesAppendix 1: Model Quick Steps 331Appendix 2: Financial Statement Flows 333Appendix 3: Excel Hot Keys 335About the Companion Website 337About the Author 339Index 341