Académique Documents
Professionnel Documents
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Mergers, Acquisitions,
& Other Restructuring
Activities
Part I: M&A
Environment
Part V:
Alternative
Strategies
Motivations for
M&A
Business &
Acquisition
Plans
Public Company
Valuation
Payment &
Legal
Considerations
Business
Alliances
Regulatory
Considerations
Search through
Closing
Activities
Private
Company
Valuation
Accounting &
Tax
Considerations
Divestitures,
Spin-Offs &
Carve-Outs
Takeover Tactics
and Defenses
M&A Integration
Financial
Modeling
Techniques
Financing
Strategies
Bankruptcy &
Liquidation
Cross-Border
Transactions
3
Strategic realignment
Technological change
Deregulation
Synergy
Economies of scale/scope
Cross-selling
Diversification (Related/Unrelated)
Financial considerations
Acquirer believes target is
undervalued
Booming stock market
Falling interest rates
Market power dominate pricing
Ego/Hubris I can do it
Tax considerations-tax free, NOLs
The New M&A Playbook, Christensen, HBR March 2011 See website
7
M&As as a Form of
Corporate Restructuring
Restructuring Activity
Corporate Restructuring
Balance Sheet
Assets Only
Financial Restructuring
(liabilities only)
Operational Restructuring
Potential Strategy
Redeploy Assets
Mergers, Break-Ups, &
Spin-Offs
Acquisitions,
divestitures, etc.
Increase leverage to lower
cost of capital or as a
takeover defense
Divestitures, widespread
employee reduction, or
reorganization
10
Alternative Ways of
Increasing Shareholder Value
Solo venture (AKA going it
alone or organic growth)
Partnering
(Marketing/distribution alliances,
JVs, licensing, franchising, and
equity investments)
Mergers and acquisitions
Minority investments in other
firms. (EMC discussion)
Asset swaps (Real Estate)
Financial restructuring
Operational restructuring
11
13
Merger Waves1
(Boom Periods)
17
Low
LowInterest
Interest
Rates
Rates&&Declining
Declining
Risk
Aversion
Risk Aversion
Drive
DriveIncreasing
Increasing
--Sub-Prime
--Sub-Prime
Mortgage
MortgageLending
Lending
--LBO
Financing
--LBO Financing&&
Other
OtherHighly
Highly
Leveraged
Leveraged
Transactions
Transactions
Investment
InvestmentBanks:
Banks:
Repackage
Repackage &&
Underwrite
Underwrite
--Mortgage
--Mortgage
Backed
Backed
--High
--HighYield
Yield
Bonds
Bonds
Banks
Banks&&
Hedge
HedgeFunds
Funds
Create:
Create:
--Collateralized
--Collateralized
Debt
DebtObligations
Obligations
(CDOs)
(CDOs)
--Collateralized
--Collateralized
Loan
LoanObligations
Obligations
CLOs)
CLOs)
Foreign
Foreign
Investors
Investors
Buy
BuyHighest
Highest
Rated
RatedDebt
Debt
Hedge
Hedge
Funds
Funds
Buy
BuyLower
Lower
Rated
Rateddebt
debt
22
23
24
25
27
0% 10% 20%
.
29
Other
Key Point: Profit margin improvement is due to spreading fixed costs over more units of output.
Margin per $ of revenue = $4.00 - $2.75 - $1.00 = $.25
Margin per $ of revenue = $4.00 - $2.75 - $.67 = $.58
1
2
31
Post-Merger:
Key Point: Cost savings due to expanding the scope of a single center to
support all 8 manufacturing facilities of the combined firms.
32
Empirical Findings
Branch, Mergers and Acquisitions and the Universal Investor, Investor Responsibility Research Center
Institute, January 2012-3
33
Things to Remember