Mergers and Acquisitions Basics

Mergers and Acquisitions Basics: All You Need to Know provides an introduction to the fundamental concepts of mergers and acquisitions. Key concepts discussed include M&As as change agents in the context of corporate restructuring; legal structures and strategies employed in corporate restructuring; takeover strategies and the impact on corporate governance; takeover defenses; and players who make mergers and acquisitions happen. The book also covers developing a business plan and the tools used to evaluate, display, and communicate information to key constituencies both inside and outside the corporation; the acquisition planning process; the negotiation, integration planning, and closing phases; financing transactions; and M&A post-merger integration.

This book is written for buyers and sellers of businesses, financial analysts, chief executive officers, chief financial officers, operating managers, investment bankers, and portfolio managers. Others who may have an interest include bank lending officers, venture capitalists, government regulators, human resource managers, entrepreneurs, and board members. The book may also be used as a companion or supplemental text for undergraduate and graduate students taking courses on mergers and acquisitions, corporate restructuring, business strategy, management, governance, and entrepreneurship.

• Describes a broad view of the mergers and acquisition process to illustrate agents' interactions
• Simplifies without overgeneralizing
• Bases conclusions on empirical evidence, not experience and opinion
• Features a recent business case at the end of each chapter

Students and professionals around the world who are studying or working in mergers and acquisitions. The book is especially useful for readers who seek material that lies between intensive and superficial coverage of these subjects. It requires only passing acquaintance with finance, economics, business law, and accounting

1. Introduction to Mergers and Acquisitions
   
   Mergers and Acquisitions as Change Agents
   
   Why Mergers and Acquisitions Happen
   
   Synergy
   
   Diversification
   
   Strategic Realignment
   
   Hubris and the “Winner’s Curse”
   
   Buying Undervalued Assets (The Q-Ratio)
   
   Mismanagement (Agency Problems)
   
   Managerialism
   
   Tax Considerations
   
   Market Power
   
   Misvaluation
   
   Alternative Forms of Corporate Restructuring
   
   Mergers and Consolidations
   
   Acquisitions, Divestitures, Spinoffs, Carve-Outs, and Buyouts
   
   Friendly versus Hostile Takeovers
   
   Alternative Ways to Increase Shareholder Value
   
   A Case in Point: Mars Buys Wrigley in One Sweet Deal
   
   2. What History Tells Us about M&A Performance
   
   Merger and Acquisition Waves
   
   Why M&A Waves Occur
   
   Similarities and Differences among Merger Waves
   
   Why It is Important to Anticipate Merger Waves
   
   Do Mergers and Acquisitions Pay Off for Shareholders, Bondholders, and Society?
   
   Premerger Returns to Shareholders
   
   Postmerger Returns to Shareholders
   
   Specific Characteristics Vary Acquirer Returns
   
   Aquifer Experience May Not Improve Long-Term Performance of Combined Companies
   
   Bidder Returns Are Good Predictors of Successful Transactions
   
   Bondholder Payoffs
   
   Payoffs for Society
   
   Why Some M&As Fail to Meet Expectations
   
   Overpaying
   
   Overestimating Synergies
   
   Slow Integration
   
   Long-Term Performance is Similar for M&As, Business Alliances, and Solo Ventures
   
   A Case in Point: Consolidation in the Telecommunications Industry
   
   3. Developing Takeover Strategies and the Impact on Corporate Governance
   
   Corporate Governance
   
   Alternative Models of Corporate Governance
   
   Internal Factors That Affect Corporate Governance
   
   Factors External to the Firm
   
   The Role of M&A in Achieving Good Corporate Governance
   
   The Friendly Approach in the Corporate Takeover Market
   
   The Hostile Approach in the Corporate Takeover Market
   
   The Bear Hug: Limiting the Target’s Options
   
   Proxy Contests in Support of a Takeover
   
   The Hostile Tender Offer
   
   What Makes the Aggressive Approach Successful?
   
   Other Tactical Considerations
   
   Developing a Bidding or Takeover Strategy
   
   A Case in Point: Mittal Acquires Arcelor in a Battle of Global Titans
   
   4. Common Takeover Defenses
   
   Pre-offer Defenses
   
   Poison Pills
   
   Shark Repellents
   
   Other Pre-offer Defenses
   
   Post-offer Defenses
   
   Greenmail
   
   White Knights
   
   Employee Stock Ownership Plans
   
   Leveraged Recapitalization
   
   Share Repurchase or Buyback Plans
   
   Corporate Restructuring
   
   Litigation
   
   The Impact of Takeover Defenses on Shareholder and Bondholder Value
   
   Experience Shows Mixed Results
   
   Takeover Defenses May Destroy Shareholder Value
   
   Takeover Defenses May Benefit Initial Public Offerings
   
   Takeover Defenses May Benefit Bondholders
   
   A Case in Point: Verizon Acquires MCI
   
   5. Key Players in Mergers and Acquisitions
   
   Providers of Specialized Services
   
   Investment Banks
   
   Lawyers
   
   Accountants
   
   Proxy Solicitors
   
   Public Relations Firms
   
   Institutional Investors and Lenders
   
   Commercial Banks
   
   Insurance Companies
   
   Pension Funds
   
   Mutual Funds
   
   Hedge and Private Equity Funds
   
   Sovereign Wealth Funds
   
   Venture Capital Firms
   
   Angel Investors
   
   Activist Investors
   
   Mutual Funds and Pension Funds
   
   Hedge Funds and Private Equity Firms
   
   A General Point about Activist Investors
   
   M&A Arbitrageurs
   
   Regulators
   
   Securities and Exchange Commission
   
   Federal Trade Commission and Department of Justice
   
   Other Regulators
   
   A Case in Point: Blackstone Outmaneuvers Vornado to Buy Equity Office Properties
   
   6. Developing the Business Plan as the Initial Phase of the Merger and Acquisition Process
   
   A Planning-Based Approach to Mergers and Acquisitions
   
   Key Business Planning Concepts
   
   The Acquisition Process
   
   Good Planning Expedites Sound Decision Making
   
   Mergers and Acquisitions Are a Process, Not an Event
   
   Building the Business Plan
   
   External Analysis
   
   Determining Where to Compete
   
   Determining How to Compete
   
   Internal Analysis
   
   Defining the Mission Statement
   
   Setting Strategic or Long-Term Business Objectives
   
   Selecting the Appropriate Corporate, Business, and Implementation Strategies
   
   Corporate-Level Strategies
   
   Business-Level Strategies
   
   Implementation Strategies
   
   The Role of Intangible Factors
   
   Functional Strategies
   
   Strategic Controls
   
   The Business Plan as a Communication Document
   
   A Case in Point: Nokia Moves to Establish Industry Standards
   
   7. The Role of the Acquisition Plan, Finding a Target, and Making First Contact
   
   Pre-Target Selection
   
   Plan Objectives
   
   Resource/Capability Evaluation
   
   Management Preferences
   
   Timetable
   
   Searching for Potential Acquisition Targets
   
   Screening the Initial Search Results
   
   Contacting the Selected Target
   
   First Contact
   
   Discussing Value
   
   Preliminary Legal Documents
   
   A Case in Point: K2 Incorporated Acquires Fotoball USA
   
   8. The Negotiation, Integration Planning, and Closing Phases
   
   Negotiation Phase
   
   Refining Valuation
   
   Deal Structuring
   
   Conducting Due Diligence
   
   Developing the Financing Plan
   
   Integration Planning Phase
   
   Earning Trust
   
   Choosing the Integration Manager and Other Critical Decisions
   
   Closing Phase
   
   Assigning Customer and Vendor Contracts
   
   Gaining the Necessary Approvals
   
   Completing the Acquisition/Merger Agreement
   
   Financing Contingencies
   
   Is Closing Ever Simple?
   
   Thoughts on Negotiating Dynamics
   
   Thoughts on Closing the Price Gap
   
   A Case in Point: InBev Buys an American Icon for $52 Billion
   
   9. Financing Transactions
   
   Financing Options: Borrowing
   
   Asset-Based or Secured Lending
   
   Security Provisions and Protective Covenants
   
   Cash-Flow or Unsecured Lenders
   
   Types of Long-Term Financing
   
   Junk Bonds
   
   Leveraged Bank Loans
   
   The “Road Show”
   
   Assessing Risk Associated with Alternative Capital Structures
   
   Financing Options: Equity and Hybrid Securities
   
   Seller Financing
   
   Highly Leveraged Transactions
   
   Financing Transactions by Selling Discretionary Assets
   
   Estimating the Impact of Alternative Financing Structures
   
   Selecting the Appropriate Capital or Financing Structure
   
   The Importance of Stating Assumptions
   
   A Case in Point: Financing LBOs—The SunGard Transaction
   
   10. M&A Postmerger Integration
   
   The Role of Integration in Successful Mergers and Acquisitions
   
   Realizing Projected Financial Returns
   
   The Impact of Employee Turnover
   
   Acquisition-Related Customer Attrition
   
   Rapid Integration Does Not Mean Doing Everything at the Same Pace
   
   Viewing Integration as a Process
   
   Premerger Integration Planning
   
   Putting the Postmerger Integration Organization in Place before Closing
   
   Postmerger Integration Organization: Composition and Responsibilities
   
   Developing Communication Plans for Key Stakeholders
   
   Employees: Addressing the “Me” Issues Immediately
   
   Customers: Undercommitting and Overdelivering
   
   Suppliers: Developing Long-Term Vendor Relationships
   
   Investors: Maintaining Shareholder Loyalty
   
   Communities: Building Strong, Credible Relationships
   
   Creating a New Organization
   
   Establishing a Structure
   
   Developing Staffing Plans
   
   Functional Integration
   
   Revalidating Due Diligence Data
   
   Benchmarking Performance
   
   Integrating Manufacturing Operations
   
   Integrating Information Technology
   
   Integrating Finance
   
   Integrating Sales
   
   Integrating Marketing
   
   Integrating Purchasing
   
   Integrating Research and Development
   
   Integrating Human Resources
   
   Building a New Corporate Culture
   
   Identifying Cultural Issues through Cultural Profiling
   
   Overcoming Cultural Differences
   
   A Case in Point: The Challenges of Integrating Steel Giants Arcelor and Mittal
   
   Glossary
   
   References
   
   Index