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1、,Irwin/McGraw-Hill,Chapter 22,Fundamentals of Corporate FinanceThird Edition,Mergers, Acquisitions, and Corporate Control,Brealey Myers Marcusslides by Matthew Will,Irwin/McGraw-Hill,The McGraw-Hill Companies, Inc.,2001,Topics Covered,The Market for Corporate ControlSensible Motives for MergersDubio
2、us Reasons for MergersEvaluating MergersMerger TacticsLeveraged Buy-OutsMergers and the Economy,The Merger Market,Proxy battle for control of the board of directorsFirm purchased by another firmLeveraged buyout by a group of investorsDivestiture of all or part of the firms business units,Methods to
3、Change Management,Recent Mergers,The Merger Market,Tools Used To Acquire Companies,Sensible Reasons for Mergers,Economies of ScaleA larger firm may be able to reduce its per unit cost by using excess capacity or spreading fixed costs across more units.,$,$,$,Reduces costs,Sensible Reasons for Merger
4、s,Economies of Vertical IntegrationControl over suppliers “may” reduce costs.Over integration can cause the opposite effect.,Sensible Reasons for Mergers,Combining Complementary ResourcesMerging may results in each firm filling in the “missing pieces” of their firm with pieces from the other firm.,S
5、ensible Reasons for Mergers,Mergers as a Use for Surplus FundsIf your firm is in a mature industry with few, if any, positive NPV projects available, acquisition may be the best use of your funds.,Dubious Reasons for Mergers,DiversificationInvestors should not pay a premium for diversification since
6、 they can do it themselves.,Dubious Reasons for Mergers,The Bootstrap Game,Acquiring Firm has high P/E ratio,Dubious Reasons for Mergers,The Bootstrap Game,Evaluating Mergers,QuestionsIs there an overall economic gain to the merger?Do the terms of the merger make the company and its shareholders bet
7、ter off?,Evaluating Mergers,Economic Gain,Evaluating Mergers,Example - Given a 20% cost of funds, what is the economic gain, if any, of the merger listed below?,Evaluating Mergers,Estimated net gain,Merger Tactics,White Knight - Friendly potential acquirer sought by a target company threatened by an
8、 unwelcome suitor.Shark Repellent - Amendments to a company charter made to forestall takeover attempts.Poison Pill - Measure taken by a target firm to avoid acquisition; for example, the right for existing shareholders to buy additional shares at an attractive price if a bidder acquires a large holding.,Leveraged Buy-Outs,Unique Features of LBOs,Large portion of buy-out financed by debt,Shares of the LBO no longer trade on the open market,Leveraged Buy-Outs,Junk bond marketLeverage and taxesOther stakeholdersLeverage and incentivesFree cash flow,Potential Sources of Value in LBOs,