International Acquisitions C H A P T E R 15 International Acquisitions

Chapter Overview A. Background on Multinational Restructuring B. Factors That Affect Expected Cash Flows of the Foreign Target C. Why Valuations of a Target May Vary among MNCs D. Other Types of Multinational Restructuring E. Restructuring Decisions as Real Options

Chapter 15 Objectives This chapter will: A. Provide a background on how MNC’s use international acquisitions as a form of multinational restructuring B. Explain how MNC’s conduct valuations of foreign target firms C. Explain why valuations of a target firm vary among MNC’s that plan to restructure by acquiring a target D. Identify other types of multinational restructuring besides international acquisitions

A. Background on Multinational Restructuring 1. Trends in International Acquisitions 2. Model for Valuing a Foreign Target 3. Market Assessment of International Acquisitions 3. Assessing Potential Acquisitions after the Asian Crisis 4. Assessing Potential Acquisitions in Europe

B. Factors That Affect Expected Cash Flows of the Foreign Target 1. Target-Specific Factors a. Target’s Previous Cash Flows b. Managerial Talent of the Target

B. Factors That Affect Expected Cash Flows of the Foreign Target 2. Country-Specific Factors a. Target’s Local Economic Conditions b. Target’s Local Political Conditions c. Target’s Industry Conditions d. Target’s Currency Conditions e. Target’s Local Stock Market Conditions f. Taxes Applicable to the Target

B. Factors That Affect Expected Cash Flows of the Foreign Target 3. Estimating the Target’s Value a. Revenue b. Expense c. Earnings and Cash Flows d. Cash Flows to Parent e. Estimating the Target’s Future Sales Price f. Valuing the Target Based on Estimated Cash Flows g. Sources of Uncertainty

B. Factors That Affect Expected Cash Flows of the Foreign Target 4. Changes in Valuation over Time a. Impact of Stock Market Conditions b. Impact of Stock Market Conditions on the Value of Private Firms c. Impact of Exchange Rates d. Combined Stock Market and Exchange Rates Effects e. Impact o0f Market Anticipation regarding the Target

C. Why Valuations of a Target May Vary among MNCs 1. Estimated Cash Flows of the Foreign Target 2. Exchange Rate Effects on the Funds Remitted 3. Required Return of Acquirer

D. Other Types of Multinational Restructuring 1. International Partial Acquisitions a. Valuation of a Foreign Firm That May Be Partially Acquired 2. International Acquisitions of Privatized Business a. Valuation of Privatized Business

D. Other Types of Multinational Restructuring 3. International Alliances 4. International Divestitures a. Assessing Whether to Divest Existing Operations in Asia b. Valuation of an International Project That May Be Divested

E. Restructuring Decisions as Real Options 1. Call Options on Real Assets 2. Put Option on Real Assets