tailieunhanh - Lecture Fundamentals of financial management (13/e) - Chapter 23: Mergers and other forms of corporate restructuring

After studying chapter 23, you should be able to: Explain why a company might decide to engage in corporate restructuring; understand and calculate the impact on earnings and on market value of companies involved in mergers; describe what merger benefits, if any, accrue to acquiring company shareholders and to selling company shareholders;. | Chapter 23 Mergers and Other Forms of Corporate Restructuring © 2001 Prentice-Hall, Inc. Fundamentals of Financial Management, 11/e Created by: Gregory A. Kuhlemeyer, . Carroll College, Waukesha, WI Mergers and Other Forms of Corporate Restructuring Sources of Value Strategic Acquisitions Involving Common Stock Acquisitions and Capital Budgeting Closing the Deal Mergers and Other Forms of Corporate Restructuring Takeovers, Tender Offers, and Defenses Strategic Alliances Divestiture Ownership Restructuring Leveraged Buyouts Why Engage in Corporate Restructuring? Sales enhancement and operating economies* Improved management Information effect Wealth transfers Tax reasons Leverage gains Hubris hypothesis Management’s personal agenda * Will be discussed in more detail in Slides 23-5 and 23-6 Sales Enhancement and Operating Economies Sales enhancement can occur because of market share gain, technological advancements to the product table, and filling a gap in the product line. Operating economies can be achieved because of the elimination of duplicate facilities or operations and personnel. Synergy -- Economies realized in a merger where the performance of the combined firm exceeds that of its previously separate parts. Sales Enhancement and Operating Economies Horizontal merger: best chance for economies Vertical merger: may lead to economies Conglomerate merger: few operating economies Divestiture: reverse synergy may occur Economies of Scale -- The benefits of size in which the average unit cost falls as volume increases. Strategic Acquisitions Involving Common Stock When the acquisition is done for common stock, a “ratio of exchange,” which denotes the relative weighting of the two companies with regard to certain key variables, results. A financial acquisition occurs when a buyout firm is motivated to purchase the company (usually to sell assets, cut costs, and manage the remainder more efficiently), but keeps it as a stand-alone entity. Strategic . | Chapter 23 Mergers and Other Forms of Corporate Restructuring © 2001 Prentice-Hall, Inc. Fundamentals of Financial Management, 11/e Created by: Gregory A. Kuhlemeyer, . Carroll College, Waukesha, WI Mergers and Other Forms of Corporate Restructuring Sources of Value Strategic Acquisitions Involving Common Stock Acquisitions and Capital Budgeting Closing the Deal Mergers and Other Forms of Corporate Restructuring Takeovers, Tender Offers, and Defenses Strategic Alliances Divestiture Ownership Restructuring Leveraged Buyouts Why Engage in Corporate Restructuring? Sales enhancement and operating economies* Improved management Information effect Wealth transfers Tax reasons Leverage gains Hubris hypothesis Management’s personal agenda * Will be discussed in more detail in Slides 23-5 and 23-6 Sales Enhancement and Operating Economies Sales enhancement can occur because of market share gain, technological advancements to the product table, and filling a gap in the product line. .