Thermo Fisher Designed a Capital Structure for Financing the Deal

question 108

Essay

Thermo Fisher designed a capital structure for financing the deal that would retain its investment grade credit rating. To do so, it targeted a debt to total capital and interest coverage ratio consistent with the industry average for these credit ratios. What is the potential impact on Thermo Fisher's ability to retain an investment grade credit rating if it had financed the takeover using 100% senior debt? (Hint: In the Sources and Uses section of the Transaction Summary Worksheet, set excess cash, new common shares issued, and convertible preferred shares to zero. Senior debt will automatically increase to 100% of the equity consideration plus transaction expenses.) Explain your answer.

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Definitions:

Skewed Distribution

A statistical term describing an asymmetry from the normal distribution in a set of data, where the tail on one side of the peak is longer or fatter than the other.

Statistically Significant

A determination that a result from data analysis is unlikely to have occurred by chance, suggesting a real effect or difference is present.

Standard Deviations

A measure of the dispersion or variability within a set of numerical data, indicating how much variation there is from the average (mean).

Sample Averages

The mean value calculated from a sample set of data, representing the central tendency or typical value of that sample.