Mergers and Acquisitions Basics
Negotiation and Deal Structuring
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Negotiations form the heart of mergers and acquisitions efforts, for their conclusions contain both anticipated and unforeseen implications. Don DePamphilis presents a summary of negotiating and deal structuring that captures its dynamic process, showing readers how brokers, bankers, accountants, attorneys, tax experts, managers, investors, and others must work together and what happens when they don't. Writtten for those who seek a broadly-based view of M&A and understand their own roles in the process, this book treads a middle ground between highly technical and dumbed-down descriptions of complex events. It mixes theory with case studies so the text is current and useful. Unique and practical, this book can add hard-won insights to anybody's list of M&A titles..
Key Features
- Presents negotiation as a team effort
- Includes all participants, from investment bankers to accountants and business managers
- Emphasizes the interactive natures of decisions about assets, payments, and appropriate legal structures
- Written for those who seek summarizing, non-technical information
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
Preface
Acknowledgments
Chapter 1. Introduction to Negotiating Mergers and Acquisitions
Key Participants in Negotiating Mergers and Acquisitions
Senior/Operating Management
Investment Bankers
Lawyers
Accountants
Prenegotiation: Profiling the Target Market and Firm
Profiling the Market/Industry
Profiling the Firm
Estimating the Price Range of an Initial Offer
Prenegotiation: First Contact
Confidentiality Agreement
Term Sheet
Letter of Intent
Negotiation
Developing a Negotiating Strategy
Concurrent Activities
Refining Valuation
Deal Structuring
Conducting Due Diligence
Developing the Financing Plan or Strategy: The Reality Check
A Case in Point: Pfizer Acquires Wyeth in an Attempt to Kick-Start Growth
Chapter 2. Selecting the Form of Acquisition Vehicle and Postclosing Organization
Alternative Acquisition Vehicle and Postclosing Organizational Structures
Corporate Structure
Limited Liability Company
Partnership Structures
Equity Partnership or Minority Investment
Employee Stock Ownership Plans
Holding Company
Choosing the Appropriate Acquisition Vehicle
Choosing the Appropriate Postclosing Organization
A Case in Point: Vivendi Universal and GE Combine Entertainment Assets to Form NBC Universal
Chapter 3. Selecting the Form of Payment
Form of Payment or Total Consideration
Cash Payment
Noncash Payment
Cash and Stock in Combination
Managing Risk and Closing the Gap on Price
Postclosing Price Adjustments
Earnouts and Other Contingent Payments
Contingent Value Rights
Distributed or Staged Payouts
Rights, Royalties, and Fees
Using Collar Arrangements to Preserve Shareholder Value
Calculating Share Exchange Ratios
A Case in Point: Boston Scientific Overcomes Johnson & Johnson to Acquire Guidant: A Lesson in Bidding Strategies
Chapter 4. Selecting the Form of Acquisition
Form of Acquisition
Purchase of Assets
Purchase of Stock
Mergers
Staged Transactions
Acquisition Agreements
Representations and Warranties
Preclosing Covenants
Closing Conditions
Indemnification
A Case in Point: Teva Pharmaceuticals Buys Barr Pharmaceuticals to Create a Global Generic Drugs Powerhouse
Chapter 5. Tax Structures and Strategies
Taxable Transactions
Taxable Purchase of Target Assets with Cash
Taxable Purchase of Target Stock with Cash
Section 338 Election
Triangular Cash-Out Mergers
Tax-Free Transactions
Continuity of Interests and Continuity of Business Enterprise
Requirements
Alternative Tax-Free Reorganizations
Expanding the Role of Mergers in Tax-Free Reorganizations
Tax-Free Transactions Arising from 1031 “Like-Kind” Exchanges
Other Tax Considerations Affecting Corporate Restructuring Activities
Net Operating Losses
Corporate Capital Gains Taxes
Alternative Corporate Minimum Tax
Greenmail Payments
Morris Trust Transactions
Leveraged Partnerships
Legal Form of Selling Entity
A Case in Point: "Grave Dancer" Takes Tribune Company Private in an Ill-Fated Transaction
Chapter 6. Accounting Considerations
Limitations of Financial Data
Generally Accepted Accounting Principles and International Accounting Standards
Pro Forma Accounting
Financial Reporting of Business Combinations
SFAS 141R: The Revised Standards
SFAS 157: The New Fair Value Framework
Impact of Purchase Accounting on Financial Statements
Balance Sheet Considerations
Income Statement and Cash Flow Considerations
International Accounting Standards
Recapitalization Accounting
A Case in Point: JDS Uniphase-SDL Merger Results in Huge Write-off
Chapter 7. Financing Structures and Strategies
Why Financing Structures Matter
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"
Financing Strategies: Borrowing
Financing Strategies: Equity and Hybrid Securities
Financing Strategies: Seller Financing
Financing Strategies: Selling Discretionary Assets
Highly Leveraged Transactions
Common Forms of Leveraged Buyout Deal Structures
Lender Commitment Letters
Direct Merger
Subsidiary Merger
Reverse Stock Splits
Legal Pitfalls of Improperly Structured LBOs
Lender Due Diligence
Leveraged Buyout Capital Structures
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
Chapter 8. The Role of Takeover Tactics and Defenses in the Negotiation Process
Alternative Takeover Tactics in the Corporate Takeover Market
The Friendly Approach
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
Using a Hostile Tender Offer to Circumvent the Target's Board
Developing a Bidding or Takeover Strategy
Alternative Takeover Defenses in the Corporate Takeover Market—Pre-offer and Post-offer Defenses
Pre-offer Defenses
Poison Pills
Shark Repellents
Post-offer Defenses
Impact on Shareholder and Bondholder Value of Takeover Defenses
A Case in Point: Mittal Acquires Arcelor in a Battle of Global Titans
Glossary
References
Index
Product details
- No. of pages: 240
- Language: English
- Copyright: © Academic Press 2010
- Published: September 23, 2010
- Imprint: Academic Press
- eBook ISBN: 9780080959108
- Paperback ISBN: 9780123749499
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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