Mergers and aquisitions

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  1. what is corporate restructuring?
    This term is a catchall referring to a broad array of activities intended to expand or contract a firms basic operations or fundamentally change its asset or financial structure. It is often referred to as either operational or financial restructuring.
  2. operational restructuing may include the following
    downsizing through layoffs 

    a sale or spin off

    mergers or acquisiitons to enhance strategic position
  3. Financial restructuring may include
    adding debt to lower WACC

    adding debt to repurchase outstanding stock

    leveraging the firm to distribute a special dividend to make the firm less attractive. poison pill
  4. Statutory merger
    combination of two corporations in which only one corporation survives in accordance with the statues in which the surviving firm is incorporated
  5. subsidiary merger
    combination of two corporations in which only one corporation survives in accordance with the statues of the state in which the surviving firm is incorporated
  6. consolidation
    two or more companies join to form a new company
  7. acquisition
    purchase of an entire company or a controlling interest in a company
  8. divestiture
    the sale of all or substantially all of a company or product line to another party for cash or securities
  9. LBO
    the purchase of a company financed primarily by debt. the term is more often applied to a firm going private. financed by debt.
  10. management buyout
    a leveraged byout in which the managers of the firm to be taken private are also equity investors
  11. holding company
    a single company with investments in a number of other, often diverse, operating companies.
  12. Horizontal merger
    occurs when two firms in the same industry combine
  13. Vertical merger
    mergers in which the two firms are in different stages of the value chain
  14. Conglomerate mergeres
    mergers between companies in largely unrelated industries
  15. takeover premium
    the excess of the purchase price over the targets current share price.
  16. proxy solicitors
    hired by disident shareholders to compile lists of shareholders addresses
  17. institutional investors
    Private and public pension funds, insurance firms, investment companies, bank trust departments, and mutual funds who may seek to take either a passive or activist role in how a firm is managed by how they vote their shares.
  18. arbitrageurs
    investors who attempt to profit from small differences between the offer price for a target firm and its actual share price.
  19. asset swaps
    exchanging ownership in substantially similar assets.
  20. strategic realignment
    the use of M&A to adjust to changes in a firms external environment
  21. hubris
    managers of the acquiring firm believe that their valuation of the target firm is superior to the markets, thus leading to overpayment due to their excessive optimism
  22. managerialism
    managers who make poorly planned acquisitions to increase the size of the acquiring firm and their own compensation
  23. the reasons M and As fail
    over estimating synergy/overpayment

    Slow pace of integration

    Poor strategy.
  24. corporate governance
    the interactions among shareholders, managers, boards of directors, and outside auditors and analysts.
  25. what is the goal of cooperate governance
    to protect the rights of such corporate stakeholders as shareholders, customers, employees, the government  lenders, communities  regulators, and suppliers.
  26. how does corporate governance work?
    alingnes the incentives of managers with the goals of shareholders and other primary stakeholders

    makes the firms financial position sufficiently transparent to enable shareholders to evaluate the performance of the managers based on publicly available information
  27. take over tactic advance purchase
    purchasing target stock in advance of a formal bid to acculate stock at a price lower than the eventual offer price
  28. take over tactic street sweep
    purchasing as much stock as possible as quickly as possible by seeking out large blocks of target stock
  29. Tender offers
    acquirer bypasses the targets board and management and goes directly to the targets shareholders with an offer to purchase their shares.
  30. shark repellants
    specific types of takeover defenses that are adopted by amending either a corporate charter or its bylaws
  31. Golden parachutes
    are employee severance arrangements, which are triggered whenever a change in control takes place.
  32. Key business planning concepts include the following
    • business plans
    • implementation strategies
  33. key activities include
    • external analysis to determine where and how to ocmpete
    • -an internal analysis or self-assessment of how the firm stacks up against the ocmopetition in terms of strenghts and weaknesses
    • -a mission statement summarizing where and how the firm has chosen to compete,
    • -setting goals
    • -selecting business strategy
    • -implement the plan
  34. alternative implementation
    • solo venture
    • partnering
    • minority investments
    • acquire or merge
    • swap assets
  35. two steps for an acquisition search
    - establish a primary screening selection critera

    -developing a serch strategy, using databases, and directory services.
Card Set:
Mergers and aquisitions
2013-09-30 19:33:34

Midterm 1
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