Transcript

Meeyeon (00:15)
Hi everyone and welcome back to another episode of What’s New at CFI. Today, I’m here with my colleague Jeff. Jeff, welcome.

Jeff Schmidt (00:24)
Hi. Thanks for having me.

Meeyeon (00:25)
And we are today going to be talking about one of our favorite topics. It is about M&A. We’re going to talk about our latest course called Intro to M&A Mergers and Acquisitions. Well, I guess just kind of topically, M&A has been down for 2023, came back, but probably not a roaring comeback in 2024. And so, especially with the kind of the future of global markets based on,

general elections and stuff in certain countries. It should be a really interesting topic this year. 2025 I think would be a really interesting year for M&A generally. But going back to our course, let’s talk about why we made this course. I think it’s also very topically relevant, but why we made this course, who is it for, and what can a learner expect to get out of our Intro to M&A course?

Jeff Schmidt (00:53)
Mm-hmm.

I’m always happy to talk about M&A. I could probably talk your ears off on M&A and whatnot and what’s changing. the primary reason we created this course is you hear a lot about M&A, of course. It’s announced in newspapers. It’s widely followed by people. Not even people that work on Wall Street or in M&A, but you just hear a lot about it.

So, there’s just a lot of terms, a lot of nuances to understand before embarking on a career in M&A. So, while we have a very thorough M&A modeling course, we wanted to create a shorter course

that introduces learners to M&A without having to go through that long modeling course. So again, we talk about a lot of M&A topics. And it’s not so modeling-focused, though.

Meeyeon (02:17)
Nice. And so we took, I think this was a really good time to have this course because it’s a very, very popular course, but the existing one that we have does require a really, really long time commitment. So, it’s nice to get a more bite-sized piece earlier on before we dive into the whole thing, because M&A is, like, M&A is not a, M&A is not a tiny little course that we could take in

one day and be done with it. It is a continuous learning thing. You can do a career for 15, 20 years in M&A and constantly be learning new things.

Jeff Schmidt (02:52)
Absolutely.

Meeyeon (02:53)
And so now that we’ve talked a little bit about why we made the course, let’s talk about who is exactly four and what they could expect to get out of it.

Jeff Schmidt (03:06)
The course is primarily designed for people, professionals in investment banking, corporate development, even equity research

or other roles that deal with corporate finance and strategic investments, or for people that want to be in those roles. Even if you’re a seasoned professional in M&A, we have stuff in this course that you’ve likely never seen before.

And if you’re brand new to M&A, again, you’ll just get a really great feel for a lot of the terminology. We talked about different types of buyers, strategic buyers versus financial buyers.

We get into how to finance M&A transactions, things of that nature. So it’s really beneficial for anybody that wants to be working in mergers and acquisitions. And again, there’s quite a few really good nuggets in there for people that actually do work in M&A.

Meeyeon (04:14)
And for what people can get out of it, can the people get out of it, let’s say, was it just in 2024, was it the year before there was the big merger with Verizon? That was the US one. And then there was in Canada, at least, Rogers and Shaw, they’re all media and telco coincidentally. But will they be able to, like, at a base level kind of understand

what that transaction would be like if they read it in the headlines or the papers?

Jeff Schmidt (04:47)
Potentially, of course, any real-world transaction is going to be infinitely more complicated, but we do get into things like M&A strategy and…

Meeyeon (05:00)
Yeah, like why? Why the company would decide to acquire another.

Jeff Schmidt (05:04)
Exactly. And we talked about, you know, you talked about the Rogers-Shaw integration. That’s a horizontal merger.

If I’m not mistaken, they’re they were competitors, right? I’m US based, so I’ve used Rogers when I’ve been in Canada, but I just want to double-check. So we talk about horizontal mergers, where you merge with a competitor. We talk about vertical mergers where you merge with someone something downstream or upstream. So retailers on one end of the spectrum versus.

Wholesale or supply chain companies that would be a vertical merger. We even talk about conglomerate mergers. They’re not that popular anymore. But we do get into kind of that rationale. We also discuss, okay, why do a transaction, what’s the underlying rationale, and we discuss some of the pitfalls the companies encounter because

really, even though mergers and acquisitions are very popular and extremely common, most research has shown that…

M&A deals don’t really end up working out that well. It’s usually a fraction of all deals that actually create value, but they happen quite a bit. And so we discuss what are the risks and, you know, one of the biggest risks, maybe probably the biggest risk is overpaying for the target company. So we get into discussions like that. We get into synergies. And then, we also get into calculating accretion, dilution, and earnings per share,

which is probably the…

Meeyeon (06:48)
It would never be complete without the word accretion in there.

Jeff Schmidt (06:51)
Exactly. Every time you see an acquisition announcement, this deal is accretive to earnings and cash.

Meeyeon (06:58)
Immediately accretive.

Jeff Schmidt (07:00)
Immediately accretive. I’ve probably worked on in my career probably a hundred M&A transactions and 99 of them said the deal is immediately accretive. There’s only one instance where I can remember the company said, okay, it’s not going to be immediately accretive, but we expected to be accretive by year three or something like that. And I did the math and it actually worked out, but we do calculate accretion dilution

in earnings per share and we do it several different ways. We actually start off with some back-of-the-envelope calculations that I guarantee a lot of M&A practitioners have never seen before.

It doesn’t, It gives you a really quick view of whether a deal is creative or dilutive. It is very, these are very simplistic calculations, so it’s not 100% accurate. But you know you can look at multiples. You can invert multiples so you get yields and compare those, Again, if you need to figure out whether a deal is a creative dilutive in 30 seconds. We show you how to do that, but then we get a little bit more complex example.

So you know, we’ll do an all-stock transaction, we do an all-cash transaction, and depending on where that cash comes from,

how that impacts accretion and dilution. And then we even get into, what if you use stock? What if you use cash on the balance sheet? What if you issue new debt to help pay for the target? So, we go through all of that and we discuss the implications of accretion or dilution based on the financing structure as well. But again, it’s still a lot shorter, even though we have quite a few accretion dilution calculations and examples, it’s still a lot shorter than taking the full-blown course.

Meeyeon (08:50)
And so would you say that this is just as or like maybe a little bit less quantitatively heavy?

Jeff Schmidt (08:56)
It’s definitely less quantitatively heavy. The calculations we employed in this course are pretty straightforward. The M&A course, just because of the sheer size of it, and there’s a 3-statement model for the acquirer and the target, and then a combined company, and then there’s valuations for each, that one’s quite a bit more daunting. It’s definitely big. So this one’s significantly less quantitative.

Meeyeon (09:19)
Big one.

Well, that’s so exciting. This is one of the most popular topics in the Stubbler. So I’m so excited that we’re going to have a more bite-sized version of the course. And so I think this course is maybe going to be our best performing one as soon as this is released for the quarter.

Jeff Schmidt (09:33)
I hope so.

Meeyeon (09:34)
Very exciting. Hopefully, fingers crossed.

Jeff Schmidt (09:38)
Ha.

Meeyeon (09:39)
And so that’s our introduction today, our introduction to M&A. I hope that you will all be very excited that there is a more bite-sized piece on this topic.

And yes, that wraps it up for today. And I hope that you will love this course as much as we all do. And till next time, we will see you all later.

Jeff Schmidt (10:10)
Bye.