183662258 Group 6 M A MellonBNY Case Pdf - 1545 Words

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?†¦show more content†¦By doing this we are ensuring that, 1. The cash flows are discounted at the rate at which they are going to be invested 2. The two entities have different betas, which mean we should use different WACCs for the cost savings from each of them. 3. For the onetime costs we do not have enough data to calculate the company wise expenses so, we discount it at a rate that seems reasonable. In this case which we have assumed to be the mean of the WACCs of the two entities. Question 3: Will synergy cash-flows allow the banks to increase their debt? Answer 3 Since, cost synergies will not change the book values of equities for the merged entity, but they will be transferred to the retained earnings which will increase the overall equity. An increase in the equity will leave some leeway for the debt which can be used to get additional debt. Question 4: Under that terms of proposed deal, what fraction of the synergies will be captured by Mellon legacy shareholders? By BNY legacy shareholders? (â€Å"Legacy† shareholders are the former shareholders of BNY or Mellon, after they become shareholders of the new company.) Answer 4 The calculation of the synergy captured by the Mellon Legacy shareholder has been shown in the attached excel sheet Group_6_MA_Mello nBNY_Calc.xlsx Synergy to Mellon shareholders Synergy to BNY shareholders 4949.50 8674.88 Part 2 - Accretion vs. Dilution of Earnings per share Question 5: Based on the last closing stock