183662258 Group 6 M A MellonBNY Case Pdf
Mellon Financial And The Bank
Of New York
Case on Growth And Value Creation
Presented to:
Dr. Mayank Joshipura
Submitted by
Group 6
Ankit
Gaurav Bansal
Vaibhav Jha
Shipra Jha
Prachi Khaitan
Akshat Pareek
Raghvendra Raghao
Piyush Upadhyay
Contents
Part 1: Estimation of Synergy Value.................................................................... 3
Question 1: What is the value of the cost savings synergies created by the deal?
3
Question 2: How much confidence do you have in your estimate of synergies?3
Question 3: Will synergy cash-flows allow the banks to increase their debt? . 4
Question 4: Under that terms of proposed deal, what fraction of the synergies will be captured by Mellon legacy shareholders? By BNY legacy shareholders? (“Legacy” shareholders are the former shareholders of BNY or Mellon, after they become shareholders of the new company.) ................................................................ 4
Part 2 - Accretion vs. Dilution of Earnings per share ........................................... 5
Question 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? (This is sometimes called “Zero premium” exchange ratio.) How does the actual exchange ratio differ from this number? Who benefits from the difference? (Hint: Chart discussed with
ER1 and ER2 would be useful guide to answer this question.) ......................... 5
Question 6: In the absence of synergies, what exchange ratio would keep the earnings attributed to each legacy share in Q4 2007 equal before and after merger? ... 5
Question 7: In the absence of synergies, is the proposed deal accretive or dilutive for
Mellon shareholders? For BNY shareholders? ................................................. 6
Question 8: How do synergies impact accretion/dilution of analysis? ............ 6
Part 3- The Deal
Of New York
Case on Growth And Value Creation
Presented to:
Dr. Mayank Joshipura
Submitted by
Group 6
Ankit
Gaurav Bansal
Vaibhav Jha
Shipra Jha
Prachi Khaitan
Akshat Pareek
Raghvendra Raghao
Piyush Upadhyay
Contents
Part 1: Estimation of Synergy Value.................................................................... 3
Question 1: What is the value of the cost savings synergies created by the deal?
3
Question 2: How much confidence do you have in your estimate of synergies?3
Question 3: Will synergy cash-flows allow the banks to increase their debt? . 4
Question 4: Under that terms of proposed deal, what fraction of the synergies will be captured by Mellon legacy shareholders? By BNY legacy shareholders? (“Legacy” shareholders are the former shareholders of BNY or Mellon, after they become shareholders of the new company.) ................................................................ 4
Part 2 - Accretion vs. Dilution of Earnings per share ........................................... 5
Question 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? (This is sometimes called “Zero premium” exchange ratio.) How does the actual exchange ratio differ from this number? Who benefits from the difference? (Hint: Chart discussed with
ER1 and ER2 would be useful guide to answer this question.) ......................... 5
Question 6: In the absence of synergies, what exchange ratio would keep the earnings attributed to each legacy share in Q4 2007 equal before and after merger? ... 5
Question 7: In the absence of synergies, is the proposed deal accretive or dilutive for
Mellon shareholders? For BNY shareholders? ................................................. 6
Question 8: How do synergies impact accretion/dilution of analysis? ............ 6
Part 3- The Deal