Questions from text book Mergers, Acquistions and Other Restructuring Activities
ID: 442020 • Letter: Q
Question
Questions from text book
Mergers, Acquistions and Other Restructuring Activities, 7th Edition
ISBN-13: 9780123854872
Author(s): DePamphilis, Donald
Case Study 13.1 Hollywood's Biggest Independent Studios Combibe in a Leveraged Buyout
Discussion Questions:
1. What about Lionsgate's acquisition of Summit indicates that this transaction should be characterized as a leveraged buyout? How does Lionsgate use Summit's assets t help finance the deal? Be specific.
2. How are the $34.6 million in fees and expenses associated with the transaction paid for (see Table 13.4)? Be specific.
3. Speculate as to why Lionsgate refinanced as part of the transaction the existing Summit Term Lioan B due in 2016that had been borrowed in the early 2000s
4. Do you believe that Summit is a good candiate for a leveraged buyout? Explain your answer.
5. Why is Summit Entertainment organized as a limited liability company?
6. Why did Lionsgate make an equity contribution in the form of cash and stock to the Merger Sub rather than making the cash portion of the contributed capital in the form of a loan?
Explanation / Answer
1) yes, they have tied up not to loss their money, studios are coming rising and then fallen, Lionsgate and Summit both considered as independent Studio have facing problem such as if they producing one movie hit then they have to face series of failure. Yes, assets that help finance deal because summit having $284.4 cash itself. and providing loan $500 for Lionsgate
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2)Lionsgate considered as merger so it should be paid the $34.6. Lionsgate providing admin and production services and it would collect 10% services from summit.
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3) Lionsgate can't make big money so it has merged and asked the guarantee from the summit, summit it is considered as loan provider also.
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6)Leverage buyout allows the little cash and targeted firm assets to finance the transactions, Lionsgate needed the cash for working capital, though stock is low than cash for Lionsgate. They need huge money so they acquired summit for leverage buy out. Though share of Lionsgate would be gone for loss, and they have less bonds so it is decided to making cash portion as contribution capital.
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