Mergers: What Can Go Wrong and How to Prevent It
TABLE OF CONTENTS:
Chapter 1 Introduction to Mergers and Acquisitions
Background and Terminology
Merger Process
Economic Classifications of Mergers and Acquisitions
Regulatory Framework of Mergers and Acquisitions
Antitrust Laws
State Corporation Laws
Hostile Takeovers
Takeover Defense
Leveraged Transactions
Restructurings
Reasoning for Mergers and Acquisitions
Trends in Mergers
Conclusion
Case Study: Lessons from the Failures of the
Fourth Merger Wave
Chapter 2 Merger Strategy: Why Do Firms Merge?
Growth
Examples of Growth as an Inappropriate Goal
Using M&As to Achieve Growth
M&As in a Slow-Growth Industry as a Way to Achieve Growth
Synergy
Merger Gains: Operating Synergy or Revenue Enhancements—Case of Banking Industry
Industry Clustering
Deregulation
Improved Management Hypothesis
Hubris Hypothesis of Takeovers
Winner’s Curse and the Hubris Hypothesis
Cross-Industry Deals and Hubris
Diversification and CEO Compensation
Diversification That Does Seem to Work Better: Related Diversification
Merging to Achieve Greater Market Power
Do Firms Really Merge to Achieve Market Power?
Merging to Achieve the Benefits of Vertical Integration
Special Cases of Mergers Motivated by Specific Needs
Conclusion
Case Study: Vivendi
Chapter 3 Merger Success Research
Criteria for Defining Merger Success Using Research Studies
Takeover Premiums and Control
Initial Comment on Merger Research Studies
Research Studies
Mergers of Equals: Acquirers versus Target Gains
Long-Term Research Studies
Long- versus Short-Term Performance and Method of Payment
Bidder Long-Term Effects: Methods of Payment
Bidder’s Performance Over the Fifth Merger Wave
Conclusion
Case Study: Montana Power- Moving into Unfamiliar Area
Chapter 4 Valuation and Overpaying
Valuation: Part Science and Part Art
Valuation: Buyer versus Seller’s Perspective
Synergy, Valuation, and the Discount Rate
Financial Synergies and the Discount Rate
Toe Holds and Bidding Contests
Bidding Contest Protections
Overpaying and Fraudulent Seller Financials
Valuation and Hidden Costs
Post merger Integration Costs- Hard Costs to Measure
Conclusion
Case Study: AOL Time Warner
Chapter 5 Corporate Governance: Part of the Solution
Governance Failure
Regulatory Changes
Corporate Governance
Managerial Compensation and Firm Size
Managerial Compensation, Mergers, and Takeovers
Disciplinary Takeovers, Company Performance, and CEOs and Boards
Managerial and Director Voting Power and Takeovers
Shareholder Wealth Effects of Mergers and Acquisitions and Corporation Acquisition Decisions
Post-Acquisitions Performance and Executive Compensation
CEO Power and Compensation
Do Boards Reward CEOs for Initiating Acquisitions and Mergers?
Corporate Governance and Mergers of Equals
Antitakeover Measures and Corporate Governance
Conclusion
Case Study: WorldCom
Chapter 6 Reversing The Error: Sell-Offs and Other Restructurings
Divestitures
Decision: Retain or Sell Off
Spin-Offs
Involuntary Spin-Offs
Defensive Spin-Offs
Tax Benefits of Spin-Offs
Shareholder Wealth Effects of Sell-Offs
Rationale for a Positive Stock Price Reaction to Sell-Offs
Wealth Effects of Voluntary Defensive Sell-Offs
Wealth Effects of Involuntary Sell-Offs
Financial Benefits for Buyers of Sold-Off Entities
Shareholder Wealth Effects of Spin-Offs
Corporate Focus and Spin-Offs
Equity Carve-Outs
Benefits of Equity Carve-Outs
Equity Carve-Outs Are Different from Other Public Offerings
Shareholder Wealth Effects of Equity Carve-Outs
Under Which Situations Should a Company Do a Spin-Off versus an Equity Carve-Out?
Shareholder Wealth Effects of Tracking Stock Issuances
Conclusion
Case Study: Daimler Chrysler
Chapter 7 Joint Ventures and Strategic Alliances: Alternatives to Mergers and Acquisitions
Contractual Agreements
Comparing Strategic Alliances and Joint Ventures with Mergers and Acquisitions
Joint Ventures
Motives for Joint Ventures
Regulation and Joint Ventures
Shareholder Wealth Effects of Joint Ventures
Shareholder Wealth Effects by Type of Venture
Restructuring and Joint Ventures
Potential Problems with Joint Ventures
Strategic Alliances
Governance of Strategic Alliances
Shareholder Wealth Effects of Strategic Alliances
Shareholder Wealth Effects by Type of Alliance
What Determines the Success of Strategic Alliances?
Conclusion
Case Study: AT&T
Mergers: What Can Go Wrong and How to Prevent It