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Due Diligence
Šmídová, Jekaterina ; Králíček, Vladimír (advisor) ; Müllerová, Libuše (referee) ; Jiroudek, Jaromír (referee)
One of the main strategic goals of an owner is the growth of their company. To seek company growth in todays ever changing world, company owners and their management frequently turn to the discipline of mergers and acquisitions (hereinafter M&A). This M&A focus is evidenced by the sustained long term growth of the M&A markets, which for example in the Czech Republic alone amounted to a 38% increase between the years 2015 and 2016. The transaction decision making process takes place with an information deficit to the detriment of the buyer. 50% to 70% of transactions will be identified as not meeting the expectations of the buyer, and this is in large part due to the information deficit on the part of the buyer. This thesis takes as its subject due diligence, a tool that enables the buyer to mitigate (but never to fully overcome) the risks brought about by the information deficit. The due diligence process enables the buyer to gather information on the target company and to get to know it in greater detail prior to assuming the full risks of ownership. Due diligence becomes a key component of the M&A process, with direct impact on the transaction valuation and evaluation of the future performance of the target company. This thesis will provide all parties interested in the M&A process with an overview of both general and specific characteristics of the due diligence process and its key components. It will also widen the traditional understanding of the due diligence process, shifting it from a mere pre-investment check-up to a more complex and robust process, that includes the setup of post transaction integration guidelines. The purpose of this thesis is to provide an analysis of the due diligence process in its wider connotations, with emphasis on financial due diligence and post transaction integration. As part of this analysis the key milestones of the due diligence process were identified, and their influence on the increase of the likelihood of a successful M&A process is examined. Based on the stated purpose of this thesis a null hypothesis was formulated (and the analysis and evaluation of the said hypothesis is the goal of this thesis): Due diligence, in its traditional understanding, is a fundamental support tool for the successful realization of mergers and acquisitions. The methodology applied to the examination of the null hypothesis comprises the detailed analysis of information from specialized and academic publications, their theoretical evaluation and comparison to case studies. In line with the stated goal and its hypothesis, this thesis is structured into six chapters. The first chapter defines the term theory of a company and examines the basic economic reasons for the creation and existence of companies. The second chapter describes transactions dedicated to companies and focuses on the underlying reasons for undertaking transactions, and their effect on the methodology of due diligence. The third chapter defines due diligence, describes the process and its key components, and provides theoretical recommendations. The fourth chapter focuses on the practical undertaking of a due diligence process, and examines the applicability of the theoretical recommendations in real life. The fifth chapter examines the post-transaction components of due diligence. The sixth chapter focuses on examination of factors critical to the undertaking of a due diligence, and also on the contractual tools available for the mitigation of the inherent risks. The sources of information for this thesis are mainly, but not limited to, foreign specialized and academic literature focused on mergers and acquisitions, international and local published research, and own research undertaken for the purpose of this thesis. The detailed analytical work undertaken and described in this thesis enabled the evaluation of the null hypothesis and the completion of the stated thesis goal.
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Empirical Analysis on Multiple Mergers of US Banks
Le Thi Hong, Minh ; Novák, Jiří (advisor) ; Serdarevič, Goran (referee)
We use logistic analysis to predict the probability of making non-programmed merger in a data sample of 45 US banks. Non-programmed merger is the merger that happens next to the subject merger but has at least three years apart from the subject merger. We apply logistic regression of the occurrence of the non-programmed merger on main characteristics of the subject merger. We first examine the effects of each of three explanatory variables, which are firstly abnormal return around the approved date, secondly hubris management hidden in the subject merger, and thirdly the value of asset acquired, on the dependent variable. We then try to find the best prediction model by controlling some variables both confounding and rescaling. Our final prediction model shows that the probability of making a next merger at least three year after the subject merger will significantly decrease if there is abnormal return realized in the subject merger. On the other hand, using event study methodology to search for the abnormal return of the acquirer's stock price around the approved date, we prove that the information of FDIC s' merger decision is not totally confidential to public and has significant impact on the stock price of the acquirer
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Přímé zahraniční investice do těžebního průmyslu v Africe
Král, Jakub ; Štěrbová, Ludmila (advisor) ; Halík, Jaroslav (referee)
The goal of this diploma thesis is to analyse the trend of foreign direct investment into mining industry in Africa. In this thesis, I focus solemnly on the extraction of minerals, excluding the oil and gas industry. The analysis looks at the FDI from a historical perspective in the new millennium up to the current situation, which is characteristic for low commodity prices, which subsequently depress the activities of mining corporations. Furthermore, the important part of the thesis is also the projection of future development of FDI, the analysis of the correlation between commodity prices and FDI development and the research of African investment environment. A brief case study regarding the real-life foreign direct investment into copper mining projects in Democratic Republic of the Congo is carried out in the end of this thesis. In this case study I present details about this project, however, also the professional opinion of co-head of mining division at Trafigura, Emmanuel Henry, on the investment environment in Africa in regard to the mining industry and his feelings about the future development of the investment.
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Private equity and leveraged buyout
Růžička, Jakub ; Pláničková, Markéta (advisor) ; Plánička, Pavel (referee)
The goal of the Thesis was to perform a research about the Private Equity industry and Leveraged Buyout type of deal. Within practical part of the Thesis, was goal to create financial model and use it to analyse real case LBO transaction. Due to lack of Czech literature about the topic and secrecy of the industry, foreign studies and literature were primary source of information but also an interviews with Czech investment professionals and advisors. In practical part of the Thesis was created general LBO model with Microsoft Excel, with functions able to perform different LBO transactions. This financial model, was later used to perform LBO acquisition analysis of company Severomoraské vodovody a kanalizace Ostrava a.s.
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Financial due diligence: theory and practice in M&A transactions
Vavrovič, Maroš ; Brabenec, Tomáš (advisor) ; Hamplová, Barbora (referee)
This thesis focuses on financial due diligence within M&A transactions. In the first part, due diligence is characterized as one of the main factors of M&A failure. Due diligence process and definition is described afterwards, as well as purpose of due diligence, various types of due diligence and position of due diligence within individual phases of M&A transaction. Furthermore, financial due diligence and its main principles are defined. Essential differences between financial due diligence, audit and financial analysis are also described. The diploma thesis analyzes the focus of financial due diligence on specific items of balance sheet, P&L account and cash flow statement. In the final part, an actual financial due diligence report from Czech M&A transaction is analyzed, including its individual parts.
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Due Diligence in the Field of Mergers and Acquisitions
Dendisová, Zuzana ; Moravec, Tomáš (advisor) ; Čadílek, Jan (referee)
Diploma thesis "Due Diligence in the Field of Mergers and Acquisitions" analyses due diligence in perspective of Czech legal practice and clarifies the due diligence concept during M&A transactions. The first chapter is an introduction to due diligence . The second chapter is dedicated to international mergers and acquisitions. The third chapter explains due diligence in practice and the fourth chapter analyses benefits and risks of M&A.
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Analysis of company development by entering foreign partner
Jirků, Petra ; Scholleová, Hana (advisor) ; Kazda, Petr (referee)
One of the main goals of the company is to ensure its development. The development can be achieved by many options - for example an acquisitions or a merger as the way of cooperation. The strategic decision-making and the post evaluation are important parts that need to be taken into account. This diploma thesis analysis the evolution of Helika company after entering the foreign partner. The evolution has been involved by the depression and its impacts on the industry. Through financial analysis is compared with the development of the business sector and its competitors across the market. The conclusion of the thesis is evaluation whether the decision of entering the foreign partner was suitable act and whether the company achieved to required effects.
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Choosing a strategic partner in the process of cross-border mergers and acquisitions
Gromadová, Lucia ; Klosová, Anna (advisor) ; Gullová, Soňa (referee)
This master thesis is in its five chapters dealing with the issue of cross-border mergers and acquisitions, taking as its main objective to describe a process of acquiring one company by another - from the perspective of a foreign acquirer - with an emphasis on identifying key attributes of his decision and the main criteria for selecting the final acquisition target. The first chapter sets theoretical basis for the work and provides definition, classification and characterization of motives for the implementation of mergers and acquisitions. The second part enriches the thesis with the historical and current development of international acquisition activity. The third chapter chooses a strategic approach to M&A. The fourth part explaines the process side of these transactions. The final, fifth chapter follows up on the development in the CEE region and highlights the Czech Republic as a traditional acquisition target for foreign investors, assessing of areas that increase or decrease its attractiveness at once.
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Factors affecting M&A failures in the Czech republic
Putna, Radomír
The purpose of this thesis is to investigate merger failure rate and critical success factors that lie behind outcome of mergers. Based on many influential papers and studies it has been identified that mergers and M&A in general have high failure rate. After the literature research in M&A definition, history and studies already conducted in this field the own research is employed in order to achieve the main objective of this thesis. The quantitative research is conducted on mergers con-ducted from 2007 to 2010 in the Czech Republic. The qualitative analysis consists of semi-structured interviews with experts in M&A field.
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