Mergers, Acquisitions, and Other Restructuring Activities

Mergers, Acquisitions, and Other Restructuring Activities

3rd Edition - July 28, 2005

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  • Author: Donald DePamphilis
  • eBook ISBN: 9780080511436

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Dr. Donald DePamphilis explains the real-world of mergers, acquisitions, and restructuring based on his academic knowledge and personal experiences with over 30 such deals himself. The 77 case studies span every industry and countries and regions worldwide show how deals are done rather than just the theory behind them, including cross-border transactions. New additions to the third edition: 17 new cases, with all 77 cases updated, Glossary, real options applications, projecting growth rates.

Key Features

  • Practical, real-world approach with 77 case studies from around the globe


MBA students taking courses in: Mergers & Acquisitions, corporate restructuring, corporate strategy. Secondary market: practitioners, including CFOs, investment bankers, entrepreneurs

Table of Contents

  • PART I
    The Mergers and
    Acquisitions Environment

    Introduction to Mergers and Acquisitions

    Building a Common Vocabulary
    Participants in the Mergers and Acquisitions Process
    Common Motivations for Mergers and Acquisitions
    Historical Merger and Acquisition Waves
    Do Mergers and Acquisitions Pay Off for Shareholders?
    Do Mergers and Acquisitions Pay Off for Bondholders?
    Do Mergers and Acquisitions Pay Off for Society?
    Why Do Mergers and Acquisitions Often Fail to Meet Expectations
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: America Online Acquires Time Warner—The Rise and Fall of a Vertically
    Integrated Internet and Media Giant*
    Chapter Business Case: Vodafone AirTouch Acquires Mannesmann in a Record Setting Deal

    Regulatory Considerations

    Federal Securities Laws
    Securities Act of 1933
    Securities Exchange Act of 1934
    Williams Act: Regulation of Tender Offers
    Sarbanes-Oxley Act of 2002
    Antitrust Laws
    Sherman Act
    Clayton Act
    Federal Trade Commission Act of 1914
    Hart-Scott-Rodino Antitrust Improvements Act of 1976
    Procedural Rules
    The Consent Decree
    Antitrust Guidelines for Horizontal Mergers
    Antitrust Guidelines for Vertical Mergers
    Antitrust Guidelines for Collaborative Efforts
    Limitations of Antitrust Laws
    State Regulations Affecting Mergers and Acquisitions
    Regulated Industries
    Environmental Laws
    Labor and Benefit Laws
    Cross-Border Transactions
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Exxon and Mobile Merger—The Market Share Conundrum*
    Chapter Business Case: GE’s Aborted Attempt to Merge with Honeywell
    The Corporate Takeover Market:
    Common Takeover Tactics, Anti-Takeover Defenses, and
    Corporate Governance

    Factors Affecting Corporate Governance
    Factors Internal to the Firm
    Factors External to the Firm
    Alternative Takeover Tactics in the Market for Corporate Control
    The Friendly Approach: “Sweet Talking the Target”
    The Aggressive Approach
    The Bear Hug: Limiting the Target’s Options
    Proxy Contests in Support of a Takeover
    Pre-Tender Offer Tactics: Purchasing Target Stock in the Open Market
    Tender Offers: Circumventing the Target’s Board
    Other Potential Takeover Strategies
    Developing a Bidding or Takeover Strategy Decision Tree
    Alternative Takeover Defenses in the Corporate Takeover Market: Pre- and Post-Bid
    The Role of Planning
    Pre-Bid Defenses
    Poison Pills
    Shark Repellants
    Golden, Silver, and Tin Parachutes
    Post-Bid Defenses
    Developing the Target’s Defensive Strategy
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Tyco Rescues AMP from Allied Signal*
    Chapter Business Case: Pfizer Acquires Warner Lambert in a Hostile Takeover

    The Mergers and Acquisitions Process:
    Phases 1–10

    Planning: Developing Business
    and Acquisition Plans—Phases 1 and 2
    of the Acquisition Process

    A Planning-Based Approach to Mergers and Acquisitions
    Key Business Planning Concepts
    The Acquisition Process
    Phase 1: Building the Business Plan
    Key Activities
    External Analysis
    Determining Where to Compete
    Determining How to Compete
    Internal Analysis
    Defining the Mission Statement
    Setting Strategic or Long-Term Objectives
    Selecting the Appropriate Corporate Level Strategy
    Selecting the Appropriate Business Level Strategy
    Selecting the Appropriate Implementation Strategy
    Functional Strategies
    Strategic Controls
    The Business Plan as a Communication Document
    Phase 2: Building the Merger/Acquisition Implementation Plan
    Management Objectives
    Market Analysis
    Resource Availability
    Management Preferences
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Consolidation in the Global Pharmaceutical Industry—The Glaxo Wellcome and
    SmithKline Beecham Example*
    Chapter Business Case: Pepsi Buys Quaker Oats in a Highly Publicized Food Fight
    Appendix A: Common Sources of Economic, Industry, and Market Data

    Implementation: Search through Closing—
    Phases 3 to 10

    Phase 3: The Search Process
    Initiating the Search
    Brokers and Finders
    Phase 4: The Screening Process
    Phase 5: First Contact
    Alternative Approach Strategies
    Discussing Value
    Preliminary Legal Documents
    Phase 6: Negotiation
    Developing a Negotiating Strategy
    Defining the Purchase Price
    Refining Value
    Deal Structuring
    Conducting Due Diligence
    Developing the Financing Plan: The Reality Check
    Phase 7: Developing the Integration Plan
    Earning Trust
    Choosing the Integration Manager
    Phase 8: Closing
    Assigning Customer and Vendor Contracts
    Gaining the Necessary Approvals
    Completing the Definitive Agreement
    Is Closing Ever Simple?
    Phase 9: Implementing Post-Closing Integration
    Communication plans
    Employee Retention
    Satisfying Cash Flow Requirements
    Employing Best Practices
    Cultural Issues
    Phase 10: Conducting Post-Closing Evaluation
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: The Anatomy of a Transaction: K2 Incorporated Acquires Fotoball USA*
    Chapter Business Case: Cingular Acquires AT&T Wireless in a Record-Setting Cash Transaction
    Appendix A: Legal Due Diligence Preliminary Information Request

    Integration: Mergers, Acquisitions,
    and Business Alliances

    The Role of Integration in Successful Mergers and Acquisitions
    Realizing Projected Financial Returns
    The Impact of Employee Turnover
    Acquisition-Related Customer Attrition
    Viewing Integration as a Process
    Integration Planning
    Developing Communication Plans: Talking to Key Stakeholders
    Creating a New Organization
    Developing Staffing Plans
    Functional Integration
    Building a New Corporate Culture
    Integrating Business Alliances
    Integrating Mechanisms
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Daimler Acquires Chrysler—Anatomy of a Cross-Border Transaction*
    Chapter Business Case: The Travelers and Citicorp Integration Experience

    Merger and Acquisition Tools
    and Concepts

    A Primer on Merger
    and Acquisition Valuation

    Required Returns
    Analyzing Risk
    Calculating Free Cash Flows
    Time Value of Money
    Alternative Approaches to Valuation
    Applying Income or Discounted Cash Flow Methods
    Estimating the Market Value of the Firm’s Debt
    Valuing Firms under Special Situations
    Firms with Temporary Problems
    Firms with Longer-Term Problems
    Cyclical Firms
    Applying Market-Based (Relative Value) Methods
    Applying Asset-Oriented Methods
    Valuing the Firm Using the Weighted Average Method
    Analyzing Mergers and Acquisitions in Terms of Real Options
    Identifying Real Options Embedded in M&A Decisions
    Applying Real Options to Value Mergers and Acquisitions
    Valuing Put Options
    Valuing Non-Operating Assets
    Adjusting the Target Firm’s Equity Value for Non-Operating Assets and Liabilities
    Things to Remember
    Chapter Discussion Questions
    Chapter Practice Problems and Answers
    Chapter Business Case: The Hunt for Elusive Synergy -- @Home Acquires Excite*

    Applying Financial Modeling Techniques
    to Value and Structure Mergers
    and Acquisitions

    Limitations of Financial Data
    Model-Building Process
    Step 1: Value Acquirer and Target Firm as Standalone Businesses
    Step 2: Value Acquirer and Target Firm Including Synergy
    Step 3: Determine Initial Offer Price for Target Firm
    Step 4: Determine the Combined Firm’s Ability to Finance the Transaction
    Factors Affecting Post-Merger Share Price
    Share Exchange Ratios
    Estimating Post-Merger Earnings Per Share
    Estimating Post-Merger Share Price
    Key M&A Model Formulas
    M&A Model Balance Sheet Adjustment Mechanisms
    Alternative Applications of M&A Models
    When the Acquirer or Target is Part of a Larger Legal Entity
    Joint Ventures and Business Alliances
    Things to Remember
    Chapter Discussion Questions
    Chapter Practice Problems
    Chapter Business Case: Ford Acquires Volvo’s Passenger Car Operations*
    Appendix A: Commonly Used Financial Ratios

    Analysis and Valuation of Privately
    Held Companies

    Challenges of Valuing Privately Held Companies
    Lack of Externally Generated Information
    Lack of Internal Controls and Inadequate Reporting Systems
    Firm Specific Problems
    Common Forms of Manipulating Reported Income
    Adjusting the Income Statement
    Making Informed Adjustments
    Areas Commonly Understated
    Areas Commonly Overlooked
    Applying Valuation Methodologies to Private Companies
    Defining Value
    Hiring Valuation Professionals
    Selecting the Appropriate Valuation Methodology
    Developing Capitalization Rates
    Estimating Marketability or Liquidity Discounts
    Reverse Mergers
    The Value of Corporate Shells
    Avoiding the Cost of Going Public
    Exploiting Intangible Value
    Using Leveraged Employee Stock Ownership Plans to Buy Private Companies
    Analyzing Private Shareholder Returns
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Valuing a Privately Held Company*
    Chapter Business Case: Pacific Wardrobe Acquires Surferdude Apparel by A Skillful Structuring of the
    Acquisition Plan

    Structuring the Deal: Payment, Legal, Tax,
    and Accounting Considerations

    The Deal-Structuring Process
    Key Components
    Common Linkages
    Form of Acquisition Vehicle
    Post-Closing Organization
    Legal Form of Selling Entity
    Form of Payment or Total Consideration
    Non-Cash Forms of Payment
    Closing the Gap on Price
    Using Collar Arrangements to Preserve Shareholder Value
    Form of Acquisition
    Purchase of Assets
    Purchase of Stock
    Tax Considerations
    Taxable Transactions
    Tax Free Transactions
    Net Operating Losses
    Financial Reporting of Business Combinations
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Vivendi Universal Entertainment and GE Combine Entertainment Assets*
    Chapter Business Case: JDS Uniphase-SDL Merger Results in Huge Write-Off

    Alternative Strategies and Structures

    Financing Transactions:
    Leveraged Buyout Structures and Valuation

    The Emergence of the Financial Buyer
    Characteristics of LBOs in the Early 1980s
    LBOs in the Mid-to-Late 1980s
    LBOs in the 1990s and Beyond
    Alternative Financing Options
    Asset Based or Secured Lending
    Security Provisions and Protective Covenants
    Cash Flow or Unsecured Lenders
    Junk Bonds
    Other Sources of Funds
    Common Forms of Leveraged Buyout Structures
    Critical Success Factors
    Developing an Exit Strategy
    Impact on Shareholder Returns of Leveraged Buyouts
    Analyzing Leveraged Buyouts
    Valuing LBOs: The Variable Risk Method
    Valuing LBOs: The Adjusted Present Value Method
    Comparing Variable Risk and Adjusted Present Value Methods
    Case Study: Pacific Investors Acquires California Kool in a Leveraged Buyout
    Shareholder and Public Policy Issues
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Buyout Firms Acquire Yellow Pages Business in Largest LBO Since 1980s*
    Chapter Business Case: RJR Nabisco Goes Private—Key Shareholder and Public Policy Issues

    Shared Growth and Shared Control
    Strategies: Joint Ventures, Partnerships,
    Strategic Alliances, and Licensing

    Motivations for Business Alliances
    Critical Success Factors for Business Alliances
    Alternative Legal Forms of Business Alliances
    Corporate Structures
    Limited Liability Companies
    Partnership Structures
    Franchise Alliances
    Equity Partnerships
    Written Contracts
    Strategic and Operational Plans
    Resolving Business Alliance Deal Structuring Issues
    Legal Form
    Resource Contribution and Ownership Determination
    Financing Ongoing Capital Requirements
    Owner or Partner Financing
    Equity Financing
    Debt Financing
    Distribution Issues
    Performance Criteria
    Dispute Resolution
    Transfer of Interests
    Management and Organization
    Empirical Findings
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: Coca-Cola and Proctor & Gamble’s Aborted Effort to Create a Global Joint
    Venture Company*
    Chapter Business Case: Strains Threaten Verizon and Vodafone Joint Venture:

    Alternative Exit and Restructuring
    Strategies: Divestitures, Spin-offs,
    Carve-outs, Split-ups, Split-Offs, Bankruptcy,
    and Liquidation

    Motives for Exiting Businesses
    Spin-offs and Split-ups
    Equity Carve-outs
    Tracking, Targeted, and Letter Stocks
    Voluntary Liquidations (Bust-ups)
    Comparing Alternative Exit Restructuring Strategies
    Choosing Among Divestiture, Carve-out, and Spin-Off Restructuring Strategies
    Returns to Shareholders
    Business Failure
    Voluntary Settlements with Creditors Outside of Bankruptcy
    Voluntary Settlements Resulting in Continued Operation
    Voluntary Settlement Resulting in Liquidation
    Reorganization and Liquidation in Bankruptcy
    Bankruptcy Laws and Procedures
    Strategic Options for Failing Firms
    Returns to Firms Emerging From Bankruptcy
    Things to Remember
    Chapter Discussion Questions
    Chapter Business Case: The Enron Shuffle---A Scandal to Remember*
    Chapter Business Case: AT&T—A Poster Child for Restructuring Gone Awry

    PART V
    Putting It All Together

    The Acquisition Process:
    The Gee Whiz Media Case

    Part I: Planning
    Part II: Implementation
    Gee Whiz Media Case Study Discussion Questions


    Contents of CDROM Accompanying Text Book

    Acquirer Due Diligence Question List
    Excel Based Mergers and Acquisitions Valuation and Structuring Model
    Excel Based LBO Valuation and Structuring Model
    Excel Based Real Options Valuation Model
    Solutions to Selected End of Chapter Business Cases
    Student Chapter PowerPoint Presentations
    Student Study Guide, Practice Questions and Answers

    *The asterisk indicates that a solution to the case study is available on the CDROM accompanying this book.

Product details

  • No. of pages: 632
  • Language: English
  • Copyright: © Academic Press 2005
  • Published: July 28, 2005
  • Imprint: Academic Press
  • eBook ISBN: 9780080511436

About the Author

Donald DePamphilis

Donald DePamphilis
Donald M. DePamphilis has a Ph.D. in economics from Harvard University and has managed more than 30 acquisitions, divestitures, joint ventures, minority investments, as well as licensing and supply agreements. He is Emeritus Clinical Professor of Finance at the College of Business Administration at Loyola Marymount University in Los Angeles. He has also taught mergers and acquisitions and corporate restructuring at the Graduate School of Management at the University of California, Irvine, and Chapman University to undergraduates, MBA, and Executive MBA students. He has published a number of articles on economic forecasting, business planning, and marketing. As Vice President of Electronic Commerce at Experian, Dr. DePamphilis managed the development of an award winning Web Site. He was also Vice President of Business Development at TRW Information Systems and Services, Director of Planning at TRW, and Chief Economist at National Steel Corporation

Affiliations and Expertise

Professor Emeritus of Computer Information Systems & Finance ,Department of Computer Information Systems & Finance , Loyola Marymount University ,Los Angeles, CA, USA

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