Mergers and Acquisitions Basics
All You Need To Know
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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.
Key Features
- 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
Readership
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
Table of Contents
- 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
Product details
- No. of pages: 304
- Language: English
- Copyright: © Academic Press 2010
- Published: September 23, 2010
- Imprint: Academic Press
- Paperback ISBN: 9780123749482
- eBook ISBN: 9780080959092
About the Author
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
Clinical Professor of Finance, Loyola Marymount University, Los Angeles, CA, USA
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