Mergers and Acquisitions

It’s been a while, I know. During the Christmas holidays it seemed not very useful to publish new posts, because all potential readers would be too busy. Then, at the beginning of 2018 I was working on other parts of the AnRep3D business, mainly the preparation of a new set of videos. Because the old recording software didn’t work well on the new laptop, I had to investigate the alternatives. While doing this, I was also thinking about interesting examples of the usage of the AnRep3D generator. Then I realized Mergers & Acquisitions are a different area we didn’t discuss yet.

When two companies are going together in one way or another, it could be interesting to present their “buildings” together in an AnRep3D graph. During the previous year (2017) we witnessed a lot of Acquisitions (and also attempts not being successful). One of them was all over te news: Verizon taking over Yahoo. So I thought it would be interesting compare both companies in a single graph.

I went back to the basic “RPEA” sequence, meaning Revenue, Profit, Equity and (Total) Assets. It’s not a problem to show different values, like EBITDA and Liabilities, but this is the classic set for now. The values will be found easily in the annual reports for 2016 (look in the range of pages 40 – 43, where both present their Profit & Loss statement and the Balance Sheet).

The AnRep3D input file is quite simple for this choice (all USD):

2, 1, 5, 100,3

Verizon,2016,125.980, 13.608, 24.032, 244.180

Yahoo,  2015,  5.167, -0.214,  31.049, 48.083

The first line holds all the parameters, like number of companies, number of years, scaling factor, extra distance and label-size. The next two lines hold the RPEA values for Verizon and Yahoo. Fed to the generator, a .htm-file is obtained, to be read in a browser. The buildings look a little bit remote, but by clicking the right mouse-button and moving the mouse they will come to the front. Below are two screenshots of the graph. By clicking one of them, the real 3D-graph will be shown in a new tab in your browser.

Top view Verizon Yahoo AnRep3DFront view Verizon Yahoo AnRep3D

Double-click the screenshot to see the live 3D-graph in your browser. For manipulation: Clicking the right mouse-button, moving the mouse up and down will zoom the graph in and out. Clicking left and moving the mouse will tilt the graph in different directions (or move the observer’s viewpoint around a fixed graph – it’s relative of course). Double clicking in the graph translates it and moves the centre at the same time. As a result the way the graph tilts will change. Just try it. If you don’t know how to get the normal position back, just refresh the graph.

Looking at the graph, it’s immediately clear that the revenue of Verizon is about ten times as high as Yahoo’s and while Yahoo shows a loss, Verizon shows a nice profit. However, although Verizon’s total assets are about five times Yahoo’s, the equity of Yahoo is larger than Verizon’s. So in the end it doesn’t seem like a bad acquisition, because a company with a low revenue, losing money and facing some other challenges as well, won’t be too expensive. The equity will be absorbed and probably improve the gearing.

The funny part is that Yahoo is known as an Internet company, but its balance sheet shows more of a private equity firm. 80% of the total assets is “Alibaba Group Equity Securities” and then another 14% is about “Marketable securities”.  Those values could be visualised in AnRep3D, but it’s a rare situation and I preferred to stick to the RPEA series this time. Revenue, Profit, Equity, Assets.

Don’t forget to try yourself! Download the free 3D-graph generator package.

About AnRep3D

AnRep3D is the new company, founded after the handover of Scientassist (together with VRBI) to one of my sons. From now I will focus on three-dimensional graphs for the financial markets, showing the main figures from annual reports in comparison. As per 2021 a second product is available: EnRep3D. It is meant to visualise energy. Although the engine is the same, the texts, manual, website and examples (including blogposts) are focused at energy.
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