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The questions relate to Case Study 3: Freeport? McMoRan: Financing an Acquisition
Q1. [4 marks] Why do you think JPMorgan and Merrill Lynch were selected to underwrite and
book?run all $23.3 billion in financing (all debt, common stock, and convertible), instead of sharing
the underwriting with additional firms?
Q2. [4 marks] What was the role of the leveraged finance group at JPMorgan and why was its
involvement important to the acquisition?
Q3. [4 marks] Describe the forms of risk that an investment bank must consider in relation to
acquisition and underwriting transactions. Describe what it means for a firm to set aside capital
when it completes underwriting transactions.
Q4. [4 marks] Describe the role and importance of credit rating agencies in the Freeport?McMoRan
transaction. Which group within an investment bank has the primary responsibility to work with
companies regarding rating agency considerations?
Q5. [4 marks] Describe the role of equity research at JPMorgan in the transaction. How has the role
of equity research changed since 2003?
Q6. [4 marks] Who are the clients of the institutional sales team at JPMorgan? What is meant by a
limit order, and what is its impact on the sales function? Describe the role of an Equity Capital
Markets Syndicate group.
Q7. [6 marks] Assume the following fees were paid: M&A fee of 0.5 percent of the transaction
value; debt fees of 0.75 percent on all debt and loan financing; equity fees of 3 percent on all
equity and convertible financing. Calculate the estimated total fees for both JPMorgan and Merrill
Lynch. Indicate
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