Mergers and aquisitions
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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.
operational restructuing may include the following
downsizing through layoffs
a sale or spin off
mergers or acquisiitons to enhance strategic position
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
combination of two corporations in which only one corporation survives in accordance with the statues in which the surviving firm is incorporated
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
two or more companies join to form a new company
purchase of an entire company or a controlling interest in a company
the sale of all or substantially all of a company or product line to another party for cash or securities
the purchase of a company financed primarily by debt. the term is more often applied to a firm going private. financed by debt.
a leveraged byout in which the managers of the firm to be taken private are also equity investors
a single company with investments in a number of other, often diverse, operating companies.
occurs when two firms in the same industry combine
mergers in which the two firms are in different stages of the value chain
mergers between companies in largely unrelated industries
the excess of the purchase price over the targets current share price.
hired by disident shareholders to compile lists of shareholders addresses
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.
investors who attempt to profit from small differences between the offer price for a target firm and its actual share price.
exchanging ownership in substantially similar assets.
the use of M&A to adjust to changes in a firms external environment
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
managers who make poorly planned acquisitions to increase the size of the acquiring firm and their own compensation
the reasons M and As fail
over estimating synergy/overpayment
Slow pace of integration
the interactions among shareholders, managers, boards of directors, and outside auditors and analysts.
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.
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
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
take over tactic street sweep
purchasing as much stock as possible as quickly as possible by seeking out large blocks of target stock
acquirer bypasses the targets board and management and goes directly to the targets shareholders with an offer to purchase their shares.
specific types of takeover defenses that are adopted by amending either a corporate charter or its bylaws
are employee severance arrangements, which are triggered whenever a change in control takes place.
Key business planning concepts include the following
- business plans
- implementation strategies
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
- solo venture
- minority investments
- acquire or merge
- swap assets
two steps for an acquisition search
- establish a primary screening selection critera
-developing a serch strategy, using databases, and directory services.
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