Corporate Growth Growth from within Introducing new products Entering new markets Growth through mergers and acquisitions Merger: the purchase of one corporation by another; essentially the same as an acquisition Hostile takeover: a situation in which the management and board of directors of the firm targeted for acquisition disapprove of the merger Tender offer: an offer to purchase the stock of a firm targeted for acquisition at a price just high enough to tempt stockholders to sell their shares Proxy fight: a technique used to gather enough stockholder votes to control the targeted company Copyright © Cengage Learning. All rights reserved.

Three Types of Growth by Merger Copyright © Cengage Learning. All rights reserved.

Corporate Growth (cont’d) Current merger trends Takeover advocates say Companies that are taken over are made more profitable and productive Proceeds from the sale of non-core subsidiaries help pay off debt or enhance the company Takeover opponents say Takeover threats force managers to spend time on defense rather than vital business activities The only people who benefit from takeovers are investment bankers, brokerage firms, and takeover artists Copyright © Cengage Learning. All rights reserved.

Corporate Growth (cont’d) Current merger trends Mergers during the first part of the 21st century will be the result of cash-rich companies looking to enhance their position in the marketplace There will be more mergers involving companies or investors from other countries Future mergers and acquisitions will be driven by solid business logic and the desire to compete internationally There will be more leveraged buyouts A purchase arrangement that allows a firm’s managers and employees or a group of investors to purchase the company Copyright © Cengage Learning. All rights reserved.