Today, running a business successfully requires the ability to not only understand the issues and methods involved with M&A but to harness their complexities for maximum advantage. The world of mergers and corporate structuring has undergone dramatic change in the past several years. The highly-leveraged deals of the 1980s have been replaced by more strategically designed, less leveraged transactions for which new techniques have been developed. This book takes a fresh look at mergers, acquisitions, divestitures, and reorganizations, and other corporate restructuring practices and describes how they are currently being used to revitalize and supercharge companies.
Preface. Part One: Background. 1 Introduction. Definitions. Valuing a Transaction. Types of Mergers. Reasons for Mergers and Acquisitions. Merger Financing. Merger Professionals. Leveraged Buyouts. Corporate Restructuring. Merger Negotiations. Merger Approval Procedures. Short--Form Merger. Freezeouts and the Treatment of Minority Shareholders. Purchase of Assets Compared with Purchase of Stock. Assumption of the Seller's Liabilities Advantages of Asset Acquisitions. Asset Selloffs. Reverse Mergers. Holding Companies. Joint Ventures. Strategic Alliances. References. 2 History of Mergers. The First Wave, 1897-1904. The Second Wave, 1916-29. The 1940s. The Third Wave, 1965-69. Trendsetting Mergers of the 1970s. The Fourth Wave, 1981-89. The Fifth Wave. Summary. References. 3 Legal Framework. Overview. Laws Governing Mergers, Acquisitions, and Tender Offers. Securities Laws. Business Judgment Rule. Antitrust Laws. Antitrust Enforcement in the United States in the Fifth Merger Wave. Measuring Concentration and Defining Market Share. European Competition Policy. State Antitakeover Laws. Regulation of Insider Trading. A Company's Obligation to Disclose Merger Negotiations. Summary. References. 4 Merger Strategy. Growth. Synergy. Diversification. Economic Motives. Hubris Hypothesis of Takeovers. Other Motives. Tax Motives. Summary. References. Part Two: Hostile Takeovers. 5 Antitakeover Measures. Management Entrenchment Hypothesis versus Stockholder Interests Hypothesis. Preventative Antitakeover Measures. Changing the State of Incorporation. Active Antitakeover Defenses. Information Content of Takeover Resistance. Summary. References.6 Takeover Tactics. Preliminary Takeover Steps. Tender Offers. Open Market Purchases and Street Sweeps. Advantages of Tender Offers over Open Market Purchases. Proxy Fights. Role of the Independent Election Corporation of America. Combination of a Proxy Fight and a Tender Offer. Proxy Fights and Takeovers in the 1990s. Summary. References. Part Three: Leveraged Transactions. 7 Leveraged Buyouts. Historical Trends in LBOs. Costs of Being a Public Company. Management Buyouts. Leveraged Buyout Process. Financing for Leveraged Buyouts. Capital Structure of Unsecured LBO Firms. Sources of LBO Financing. LBO Funds. LBO Firms. Financial Analysis of LBO Candidates. Returns to Stockholders from LBOs. Returns to Stockholders from Divisional Buyouts. Efficiency Gains from LBOs. Reverse LBOs. Conflicts of Interest in Management Buyouts. Empirical Research on Wealth Transfer Effects. Protection for Creditors. Summary. References. 8 Junk Bonds. History. Investment Bankers and Junk Bond Financing. The Evolutionary Growth of the Junk Bond Market. Rating System for Bonds. Failed Acquisition Programs and Bond Ratings. Z Scores and Zeta Analysis: Credit Evaluation Alternative to Bond Ratings.Junk Bond Research. Junk Bond Returns: 1980-94. Diversification of Junk Bond Investments. Risk of a Junk Bond Portfolio. Bank Loan Financing versus Junk Bond Financing. Junk Bonds and Greenmail. Regulations Affecting Junk Bond Financing. Summary. References. 9 Employee Stock Ownership Plans. Historical Growth of ESOPs. Types of Plans. Characteristics of ESOPs. Leveraged versus Unleveraged ESOPs. Corporate Finance Uses of ESOPs. Voting of ESOP Shares. Cash Flow Implications. Valuation of Stock Contributed into an ESOP. Eligibility of ESOPs. Put Options of ESOPs. Dividends Paid. ESOPs versus a Public Offering of Stock. Employee Risk and ESOPs. Securities Laws and ESOPs. Tax Benefits of LESOPs. Balance Sheet Effects of ESOPs. Drawbacks of LESOPs. ESOPs and Corporate Performance. ESOPs as an Antitakeover Defense. ESOPs and Shareholder Wealth. ESOPs and LBOs. Summary. References. Part Four: Corporate Restructuring. 10 Corporate Restructuring. Divestitures. Divestiture and Spin--Off Process. Wealth Effects of Sell--Offs.Equity Carve--Outs. Voluntary Liquidations, or Bustups. Tracking Stocks. Master Limited Partnerships. Summary. References. 11 Restructuring in Bankruptcy. Types of Business Failure. Causes of Business Failure. Bankruptcy Trends. Bankruptcy Laws. Reorganization versus Liquidation. Chapter 11 Reorganization Process. Benefits of the Chapter 11 Process for the Debtor. Company Size and Chapter 11 Benefits. Prepackaged Bankruptcy. Workouts. Corporate Control and Default. Liquidation. Investing in the Securities of Distressed Companies. Summary. References. Part Five: Valuation for Mergers and Acquisitions. 12 Financial Analysis. Hostile versus Friendly Deals: Access to Financial Data. Balance Sheet. Income Statement. Statement of Cash Flows. Analysis of Financial Statements and Computer Programs. Financial Ratio Analysis. Summary. References. 13 Valuation of a Publicly Held Company. Valuation Methods: Science or Art? Managing Value as an Antitakeover Defense. Stock Valuation Methods. Marketability of the Stock.Defining the Earnings Base. Forecasting Methods. Financial Valuation Methodologies. Cost of Preferred Stock. Cost of Common Stock. How the Market Determines Discount Rates. Control Premium. Valuation of Stock--for--Stock Exchanges. Exchange Ratio. Fixed Number of Shares versus Fixed Value. International Takeovers and Stock--for--Stock Transactions. Benchmarks of Value. Desirable Financial Characteristics of Targets. Summary. References. 14 Valuation of Privately Held Businesses. Differences in Valuation of Public and Private Businesses. Differences in Reporting of Income. Recasting the Income Statement: An Example of the Addback Process. Most Commonly Used Valuation Methods. Summary. References. 15 Tax Issues. Financial Accounting. Taxable versus Tax--Free Transactions. Tax Consequences of a Stock--for--Stock Exchange. Asset Basis Step--Up. Changes in the Tax Laws. Role of Taxes in the Merger Decision. Taxes as a Source of Value in Management Buyouts. Miscellaneous Tax Issues. Summary. References. Glossary. Review Questions. Index.