Mergers and Acquisitions Basics

Mergers and Acquisitions Basics

All You Need To Know

1st Edition - September 23, 2010

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  • Author: Donald DePamphilis
  • Paperback ISBN: 9780123749482
  • eBook ISBN: 9780080959092

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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


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



    Strategic Realignment

    Hubris and the “Winner’s Curse”

    Buying Undervalued Assets (The Q-Ratio)

    Mismanagement (Agency Problems)


    Tax Considerations

    Market Power


    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


    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


    White Knights

    Employee Stock Ownership Plans

    Leveraged Recapitalization

    Share Repurchase or Buyback Plans

    Corporate Restructuring


    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



    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


    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


    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




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 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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