Outline 8 The Market for Corporate Control

Slides:



Advertisements
Similar presentations
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Mergers and Acquisitions Chapter Twenty-Five.
Advertisements

Copyright © 2003 McGraw Hill Ryerson Limited 23-1 prepared by: Carol Edwards BA, MBA, CFA Instructor, Finance British Columbia Institute of Technology.
Mergers, Aqcuisitions and Corporate Control June 2007.
Session 10: Mergers and Acquisitions C Corporate Finance Topics.
CORPORATE FINANCIAL THEORY Lecture 9. Megers & Acquisitions Three Areas of Study 1. Determining if a Merger creates value (then developing an offer price)
Mergers and Acquisitions. M&A Market Market for Corporate Control Competition for control of firm assets Associated with Downsizing “It’s amazing that.
0 Merger versus Consolidation  Merger One firm is acquired by another One firm is acquired by another Acquiring firm retains name and acquired firm ceases.
MERGERS AND ACQUISITIONS Chapter 23. Chapter Outline The Legal Forms of Acquisitions Accounting for Acquisitions Gains from Acquisition The Cost of an.
Lecture: 8 - Mergers and Restructuring I.Reasons for Merging a. Increased Combined Value of Firms synergy, economies of scale in management, distribution,
Definition The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing.
Key Concepts and Skills
Copyright by Paradigm Publishing, Inc. INTRODUCTION TO BUSINESS CHAPTER 17 Expanding the Business.
FINANCE IN A CANADIAN SETTING Sixth Canadian Edition Lusztig, Cleary, Schwab.
MERGERS & ACQUISITIONS Corporate Finance 335 Supplemental Material.
MERGERS AND ACQUISITIONS Chapter 23.
TAKEOVERS, MERGERS AND BUYOUTS
5. P 0 =66.25; D 1 = 5.30 g =4% R e =? R e = 12%
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Mergers and Acquisitions Chapter 19.
 Mergers Principles of Corporate Finance Brealey and Myers Sixth Edition Slides by Matthew Will Chapter 33 © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw.
Mergers and Acquisitions
Revise Lecture Mergers and Acquisitions Three measure of corporate growth? Internal growth & External growth? Reasons firm’s seek to grow? 2.
Common and Preferred Stock Financing
Corporate Finance. Financial Role Financial Role Better Product at low Prices Better Product at low Prices High remunerations High remunerations Development.
Mergers and Acquisitions
Selecting the Proper Form of Business Ownership and Exploring Mergers and Acquisitions Chapter 4.
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
1 Finance 7311 Market for Corporate Control. 2 Terminology Target – Potential takeover candidate Acquirer (Bidder) – Firm doing the ‘taking over’ Merger.
課程 14: Mergers and Acquisitions - A Topic in Corporate Finance.
23-0 Merger versus Consolidation 23.1 Merger One firm is acquired by another Acquiring firm retains name and acquired firm ceases to exist Advantage –
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Mergers, Acquisitions, and Divestitures Chapter 29.
Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Corporate Finance 3e Ross, Thompson, Christensen, Westerfield and Jordan Slides.
McGraw-Hill/Irwin Corporate Finance, 7/e © 2005 The McGraw-Hill Companies, Inc. All Rights Reserved CHAPTER 29 Mergers and Acquisitions.
Megers & Acquisitions Three Areas of Study 1. Determining if a Merger creates value (then developing an offer price) 2. Evaluating M&A offers in the market.
21- 1 McGraw Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved Fundamentals of Corporate Finance Sixth Edition Richard.
Chapter 31 Mergers Principles of Corporate Finance Tenth Edition
© 2012 McGraw-Hill Ryerson LimitedChapter There are four ways to change the management:  Proxy Contests: Outsiders compete with management for shareholders’
CORPORATE ADVISORY SERVICES. CORPORATE RESTRUCTURING  Revising the organizational structure  Rearrangement and negotiation of organizational functions.
Chapter McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 25 Mergers and Acquisitions.
合併與購併 Mergers and Acquisitions - A Topic in Corporate Finance.
Chapter 21 Fundamentals of Corporate Finance Fifth Edition Slides by Matthew Will McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc.
8- 1 Outline The Market for Corporate Control 8.2 Sensible Motives for Mergers 8.3 Dubious Reasons for Mergers 8.4 Evaluating Mergers 8.5 Merger.
Chapter 20 External Growth through Mergers. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. PPT 20-1 TABLE 20-1 Largest.
Chapter 31 Principles of Corporate Finance Tenth Edition Mergers Slides by Matthew Will McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies,
1 - 0 Advanced Accounting by Debra Jeter and Paul Chaney Chapter 1: Introduction to Business Combinations Slides Authored by Hannah Wong, Ph.D. Rutgers.
MERGERS & ACQUISITIONS Prepared by: BRENDA PALAD.
Hybrid Methods Hybrid Methods – Mix of Asset Based & Income Based Method.
21-1 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Corporate Finance 4e, by Ross, Thompson, Christensen, Westerfield & Jordan.
Corporate Finance MLI28C060
Mergers & takeovers (acquisitions)
Dr. Andrianos E. Tsekrekos
MERGER AND ACQUISITION STRATEGY
MERGERS & ACQUISITIONS
TAKEOVERS, MERGERS AND BUYOUTS
Mergers and Acquisitions
M&A Financing.
Mergers and Acquisitions
Understanding Business Strategy Concepts & Cases
Advanced Accounting by Debra Jeter and Paul Chaney
Takeover and Defense Tactics
20 Chapter External Growth Through Mergers.
Mergers and Acquisitions
Mergers: An Introduction
Corporate Restructuring
MERGER AND ACQUISITION STRATEGY
Mergers, Aqcuisitions and Corporate Control
Chapter 21 Mergers & Divestitures
Acquisition and Restructuring Strategies
Corporate Financial Theory
CHAPTER 21 Mergers and Divestitures
Defensive tactics against hostile takeover
Presentation transcript:

Outline 8 The Market for Corporate Control Sensible Motives for Mergers Dubious Reasons for Mergers Evaluating Mergers Merger Tactics Leveraged Buy-Outs 2

The Merger Market Methods to Change Management Proxy battle for control of the board of directors Firm purchased by another firm Leveraged buyout by a group of investors Divestiture of all or part of the firm’s business units 3

Recent Mergers

Tools Used To Acquire Companies The Merger Market Tools Used To Acquire Companies Proxy Contest Acquisition Tender Offer Leveraged Buy-Out Management Buy-Out Merger 9

Sensible Reasons for Mergers Economies of Scale A larger firm may be able to reduce its per unit cost by using excess capacity or spreading fixed costs across more units. $ Reduces costs $ $ 11

Sensible Reasons for Mergers Economies of Vertical Integration Control over suppliers “may” reduce costs. Over integration can cause the opposite effect. 14

Sensible Reasons for Mergers Combining Complementary Resources Merging may results in each firm filling in the “missing pieces” of their firm with pieces from the other firm. Firm A Firm B 16

Sensible Reasons for Mergers Mergers as a Use for Surplus Funds If your firm is in a mature industry with few, if any, positive NPV projects available, acquisition may be the best use of your funds. 17

Dubious Reasons for Mergers Diversification Investors should not pay a premium for diversification since they can do it themselves. 18

Dubious Reasons for Mergers The Bootstrap Game Acquiring Firm has high P/E ratio Selling firm has low P/E ratio (due to low number of shares) After merger, acquiring firm has short term EPS rise Long term, acquirer will have slower than normal EPS growth due to share dilution. 22

Evaluating Mergers ???? Questions Is there an overall economic gain to the merger? Do the terms of the merger make the company and its shareholders better off? ???? 23

Evaluating Mergers Economic Gain 24

Evaluating Mergers Example - Given a 20% cost of funds, what is the economic gain, if any, of the merger listed below? 26

Evaluating Mergers Estimated net gain 27

Merger Tactics White Knight - Friendly potential acquirer sought by a target company threatened by an unwelcome suitor. Shark Repellent - Amendments to a company charter made to forestall takeover attempts. Poison Pill - Measure taken by a target firm to avoid acquisition; for example, the right for existing shareholders to buy additional shares at an attractive price if a bidder acquires a large holding. 28

Leveraged Buy-Outs Unique Features of LBOs Large portion of buy-out financed by debt Shares of the LBO no longer trade on the open market 29