Mergers, Acquisitions, and Other Restructuring Activities : An Integrated Approach to Process, Tools, Cases, and Solutions

by Depamphilis, Donald

• ISBN13: 9780122095528
• ISBN10: 0122095529
• Edition: 2nd
• Format: Hardcover
• Copyright: 2002-12-01
• Publisher: Academic Pr

Summary

This second edition is written readers who crave real world learning. Professor DePamphilis has filled this book with updated cases and grounded models which reflect the theoretical underpinnings of the field. Expanded usage of "key idea" section headings enable the student to understand more easily the key point in each section of each chapter. Chapter 5 provides a detailed listing of questions commonly used to evaluate target firms doing due diligence. A primer on using financial ratios in Chapter 8 has been extended to include a convenient summary of commonly used financial ratios and suggestions as to how they may be used to evaluate target firms. The accompanying CD includes a set of Excel spreadsheets that supplements Chapter 8. An Instructor's manual, available on the web, contains suggested learning objectives, chapter presentations for creating lectures or providing students with study guides, more than 750 test questions and answers (including true/false, multiple choice, essay questions, and practice problems), and solutions to all chapter business case studies in the book. The manual also contains detailed course syllabi that have been used extensively for both undergraduate and graduate classes and suggested ways for teaching the materials. Includes 18 new case studies; all 70 cases have been updated Instructor's Manual available on the web; includes practice problems and solutions Accompanying CD includes a set of Excel spreadsheets that will supplement Chapter 8

Table of Contents

Preface to the Second Edition	xvii
PART I The Mergers and Acquisitions Environment
Introduction to Mergers and Acquisitions
Overview	4	(1)
Building a Common Vocabulary	5	(8)
Participants in the Mergers and Acquisitions Process	13	(6)
Common Motivations for Mergers and Acquisitions	19	(10)
Historical Merger and Acquisition Waves	29	(3)
Do Mergers and Acquisitions Pay Off for Shareholders?	32	(6)
Why Do Mergers and Acquisitions Often Fail to Meet Expectations?	38	(2)
Do Mergers and Acquisitions Pay Off for Society?	40	(1)
Things to Remember	41	(2)
Chapter Discussion Questions	43	(1)
Chapter Business Case: America Online Acquires Time Warner---The Emergence of a Vertically Integrated Internet and Media Giant*	44	(7)
Chapter Business Case: Vodafone AirTouch Acquires Mannesmann in a Record-Setting Deal	51	(7)
References	58	(8)
Regulatory Considerations
Overview	66	(2)
Federal Securities Laws	68	(3)
Insider Trading Laws	71	(1)
Antitrust Laws	72	(24)
State Regulations Affecting Mergers and Acquisitions	96	(1)
Regulated Industries	97	(4)
Environmental Laws	101	(1)
Labor and Benefit Laws	101	(1)
Cross-Border Transactions	102	(1)
Things to Remember	103	(1)
Chapter Discussion Questions	104	(1)
Chapter Business Case: Exxon and Mobil Merger---The Market Share Conundrum*	105	(1)
Chapter Business Case: GE's Aborted Attempt to Merge with Honeywell	106	(5)
References	111	(2)
Common Takeover Tactics and Defenses
Overview	113	(1)
Alternative Takeover Tactics	114	(16)
The Takeover Decision Tree	130	(2)
Alternative Takeover Defenses: Prebid and Postbid	132	(19)
Things to Remember	151	(1)
Chapter Discussion Questions	152	(1)
Chapter Business Case: Tyco Rescues AMP from AlliedSignal*	153	(4)
Chapter Business Case: Pfizer Acquires Warner-Lambert in a Hostile Takeover	157	(5)
References	162	(6)
PART II The Mergers and Acquisitions Process: Phases 1--10
Planning: Developing Business and Acquisition Plans---Phases 1 and 2 of the Acquisition Process
Overview	168	(1)
A Planning-Based Approach to Mergers and Acquisitions	169	(3)
Phase 1: Building the Business Plan	172	(25)
The Business Plan as a Communication Document	197	(2)
Phase 2: Building the Merger/Acquisition Implementation Plan	199	(6)
Things to Remember	205	(2)
Chapter Discussion Questions	207	(1)
Chapter Business Case: Consolidation in the Global Pharmaceutical Industry Continues: The Glaxo Wellcome and SmithKline Beecham Example*	207	(3)
Chapter Business Case: Pepsi Buys Quaker Oats in a Highly Publicized Food Fight	210	(5)
Appendix A: Common Sources of Economic, Industry, and Market Data	215	(1)
References	216	(2)
Implementation: Search Through Closing---Phases 3--10
Overview	218	(1)
Phase 3: The Search Process	219	(3)
Phase 4: The Screening Process	222	(2)
Phase 5: First Contact	224	(3)
Phase 6: Negotiation	227	(16)
Phase 7: Developing the Integration Plan	243	(2)
Phase 8: Closing	245	(5)
Phase 9: Implementing Postclosing Integration	250	(2)
Phase 10: Conducting a Postclosing Evaluation	252	(1)
Things to Remember	253	(2)
Chapter Discussion Questions	255	(1)
Chapter Business Case: When Companies Overpay---Mattel Acquires the Learning Company*	255	(7)
Chapter Business Case: First Union Buys Wachovia Bank: A Merger of Equals?	262	(3)
Appendix A: Legal Due Diligence Preliminary Information Request	265	(10)
References	275	(3)
Integration: Mergers, Acquisitions, and Business Alliances
Overview	278	(1)
The Role of Integration in Successful Mergers and Acquisitions	278	(4)
Viewing Integration as a Process	282	(34)
Integrating Business Alliances	316	(2)
Things to Remember	318	(1)
Chapter Discussion Questions	319	(1)
Chapter Business Case: Daimler Acquires Chrysler---Anatomy of a Cross-Border Transaction*	320	(3)
Chapter Business Case: The Travelers and Citicorp Integration Experience	323	(3)
References	326	(6)
PART III Merger and Acquisition Tools and Concepts
A Primer on Merger and Acquisition Valuation
Overview	332	(1)
Required Returns	332	(3)
Analyzing Risk	335	(2)
Calculating Free Cash Flows	337	(5)
Time Value of Money	342	(3)
Alternative Approaches to Valuation	345	(3)
Applying Income or Discounted Cash-Flow Methods	348	(9)
Estimating the Market Value of the Firm's Debt	357	(3)
Applying Market-Based (Relative Value) Methods	360	(5)
Applying Asset-Oriented Methods	365	(2)
Valuing the Firm Using the Weighted Average Method	367	(2)
Valuing Nonoperating Assets	369	(7)
Adjusting the Target Firm's Equity Value for Nonoperating Assets and Liabilities	376	(2)
Things to Remember	378	(2)
Chapter Discussion Questions	380	(1)
Chapter Practice Problems and Answers	380	(7)
Chapter Business Case: The Hunt for Elusive Synergy---@Home Acquires Excite*	387	(1)
References	388	(4)
Applying Financial Modeling Techniques to Value and Structure Mergers and Acquisitions
Overview	392	(1)
The Limitations of Financial Data	393	(5)
The Model-Building Process	398	(13)
Factors Affecting Postmerger Share Price	411	(4)
Key M&A Model Formulas	415	(3)
Business Case: Determining the Initial Offer Price: The Gee Whiz Media and Go Go Technology Saga	418	(20)
Maintaining Shareholder Value in a Stock-for-Stock Exchange	438	(3)
Things to Remember	441	(1)
Chapter Discussion Questions	442	(1)
Chapter Practice Problems	442	(2)
Chapter Business Case: Tribune Company Acquires the Times Mirror Corporation in a Tale of Corporate Intrigue*	444	(7)
Chapter Business Case: Ford Acquires Volvo's Passenger Car Operations	451	(6)
Appendix A: Commonly Used Financial Ratios	457	(2)
References	459	(3)
Analysis and Valuation of Privately Held Companies
Overview	462	(1)
Challenges of Valuing Privately Held Companies	463	(4)
Adjusting the Income Statement	467	(6)
Applying Valuation Methodologies to Private Companies	473	(11)
Reverse Mergers	484	(3)
Calculating Ownership Share: The Venture Capital Method	487	(1)
Using Leveraged Employee Stock Ownership Plans to Buy Private Companies	488	(1)
Analyzing Private Shareholder Returns	489	(1)
Things to Remember	489	(2)
Chapter Discussion Questions	491	(1)
Chapter Business Case: Valuing a Privately Held Company*	492	(1)
Chapter Business Case: Pacific Wardrobe Acquires Surferdude Apparel by a Skillful Structuring of the Transaction	492	(4)
References	496	(4)
Structuring the Deal: Payment, Legal, Tax, and Accounting Considerations
Overview	500	(1)
The Deal-Structuring Process	501	(4)
Form of Acquisition Vehicle	505	(2)
Postclosing Organization	507	(1)
Legal Form of Selling Entity	508	(1)
Form of Payment or Total Consideration	509	(4)
Form of Acquisition	513	(8)
Tax Structures and Strategies	521	(10)
Financial Reporting of Business Combinations	531	(7)
Things to Remember	538	(1)
Chapter Discussion Questions	539	(1)
Chapter Business Case: Consolidation in the Wireless Communications Industry: Vodafone Acquires AirTouch*	540	(7)
Chapter Business Case: JDS Uniphase-SDL Merger Results in Huge Write-Off	547	(6)
References	553	(5)
PART IV Alternative Strategies and Structures
Leveraged Buyout Structures and Valuation
Overview	558	(1)
The Origins of Leveraged Transactions	559	(2)
Alternative Financing Options	561	(9)
Common Forms of Leveraged Buyout Structures	570	(2)
Critical Success Factors	572	(2)
Impact on Shareholder Returns of Leveraged Buyouts	574	(4)
Analyzing Leveraged Buyouts	578	(6)
Case Study: Pacific Investors Acquires California Kool in a Leveraged Buyout	584	(5)
Things to Remember	589	(1)
Chapter Discussion Questions	589	(1)
Chapter Business Case: Evaluating a Leveraged Buyout Opportunity*	590	(1)
Chapter Business Case: RJR Nabisco Goes Private---Key Shareholder and Public Policy Issues	591	(3)
References	594	(4)
Shared Growth and Shared Control Strategies: Joint Ventures, Partnerships, Strategic Alliances, and Licensing
Overview	598	(3)
Motivations for Business Alliances	601	(10)
Critical Success Factors for Business Alliances	611	(2)
Alternative Legal Forms of Business Alliances	613	(6)
Strategic and Operational Plans	619	(1)
Business Alliance Deal Structuring	620	(13)
Empirical Findings	633	(1)
Things to Remember	634	(1)
Chapter Discussion Questions	635	(1)
Chapter Business Case: Bell Atlantic and Vodafone Form Wireless Operation to Expand Geographic Coverage*	636	(2)
Chapter Business Case: Coca-Cola and Procter & Gamble's Aborted Effort to Create a Global Joint Venture Company	638	(2)
References	640	(4)
Alternative Exit and Restructuring Strategies: Divestitures, Spin-Offs, Carve-Outs, Split-Ups, Bankruptcy, and Liquidation
Overview	644	(1)
Motives for Exiting Businesses	645	(7)
Divestitures	652	(4)
Spin-Offs and Split-Ups	656	(2)
Equity Carve-Outs and Split-Off Initial Public Offerings	658	(3)
Tracking, Targeted, and Letter Stocks	661	(3)
Voluntary Liquidations (Bust-Ups)	664	(1)
Comparing Alternative Exit Restructuring Strategies	664	(1)
Choosing Among Divestiture, Carve-Out, and Spin-Off Restructuring Strategies	665	(2)
Returns to Shareholders	667	(4)
Business Failure	671	(18)
Things to Remember	689	(1)
Chapter Discussion Questions	690	(1)
Chapter Business Case: Allegheny Teledyne Restructures*	691	(1)
Chapter Business Case: AT&T---A Poster Child for Restructuring Gone Awry	692	(6)
References	698	(5)
PART V Putting It All Together
The Acquisition Process: the Gee Whiz Media Case
Part I: Planning	703	(8)
Part II: Implementation	711	(18)
Gee Whiz Media Case Study Discussion Questions	729	(4)
Appendix Solutions to Selected Chapter Business Case Study Discussion Questions	733	(26)
Index	759