Vous êtes sur la page 1sur 13

--------

Chapter 1

--------

The Takeover Process

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 1

Introduction
Goals of course
Practical guidelines for M&A analysis To evaluate policies toward M&As

M&As refer to
Traditional mergers and acquisitions Takeovers Corporate restructuring Corporate control Changes in the ownership structure of firms
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 2

Forces Affecting Mergers


Technology Globalization Deregulation Efficiency of operations Changes in industry organization Entrepreneurship Economic and financial environment
Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 3

2001 Prentice Hall

Terminology
Merger
Negotiated deals Mutuality of negotiations Mostly friendly

Tender offers
Offer made directly to the shareholders Hostile when offer made without approval of the board

Restructuring changes to improve operations, policies, and strategies


2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 4

Types of Mergers
Horizontal mergers
Combination between firms in same business activity Rationale
Economies of scale and scope Synergies such as combining of best practices

Government regulation due to potential anticompetitive effects

Vertical mergers
Combinations between firms at different stages Rationale is information and transaction efficiency
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 5

Conglomerate mergers
Combination of firms in unrelated types of business activity

Distinctions between conglomerate and nonconglomerate firms


Investment companies diversify to reduce portfolio risk Financial diversified provide funds and expertise on generic management functions of planning and control Concentric diversified combine with firms in less related activities to broaden market potentials
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 6

Mergers in a Legal Framework


Statutory merger formal legal procedures Short-form merger streamlined legal procedures when ownership is 90% Holding company parent company has a controlling interest

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 7

Tender Offers
Bidder seeks target's shareholders approval Minority shareholders
Terms may be "crammed down" May be subject to "freeze-in" Minority has the right to bring legal actions

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 8

Kinds of tender offers and provisions


Conditional vs. unconditional Restricted vs. unrestricted "Any-or-all" tender offer Contested offers Two-tier offers Three-piece suitor

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 9

Risk Arbitrage in M&A Activity


Usually, long in the target stock and short in the bidder stock Nature of the arbitrage industry
Information gathering and analysis is the principal raw material Arbitragers attempt to anticipate takeover bids

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 10

Arbitrage funds
Intensive research No investment on rumors Invest in 10-20 transactions at a given time Main risk is whether deals are completed

2001 Prentice Hall

Takeovers, Restructuring, and Corporate Governance, 3/e

Weston - 11

Numerical example
An arbitrage firm (A) notes that a bidder (B) whose stock is selling at $50 makes an offer for a target (T) selling at $40. Exchange offer is 1 share of B for 1 T share. T rises to $48; B stays at $50. A sells 1 share of B short for $50 and goes long on T at $48. One month later the deal is completed with B at $50 and T at $50. What is A's dollar and percentage annualized gain assuming a required 50% margin on both transactions?
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 12

Solution
A sells 1 B for $50 and buys T at $48. Assuming 50% margin, the investment is .5($50 + $48) = $47.5. In one month, A uses 1 T to cover 1 B. The gain is $2. The percentage gain is [($2/$47.5)] * 12 = 50.21% less the interest on the $47.5 borrowed on margin. If A invested the full $98, the gain would be ($2/$98) * 12 = 24.49%.
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 13