IFM8e-IM-ch15 - Chapter 15 Multinational Restructuring...

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Chapter 15 Multinational Restructuring Lecture Outline Background on Multinational Restructuring Trends in International Acquisitions Model for Valuing a Foreign Target Assessing Potential Acquisitions After the Asian Crisis Assessing Potential Acquisitions in Europe Factors that Affect the Expected Cash Flows of the Foreign Target Target-Specific Factors Country-Specific Factors Example of the Valuation Process International Screening Process Estimating the Target’s Value Changes in Valuation Over Time Why Valuations of a Target May Vary Among MNCs Estimated Cash Flows of the Foreign Target Exchange Rate Effects on the Funds Remitted Required Return of Acquirer Other Types of Multinational Restructuring International Partial Acquisitions International Acquisitions of Privatized Businesses International Alliances International Divestitures Restructuring Decisions as Real Options Call Option on Real Assets Put Option on Real Assets 243
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244 International Financial Management Chapter Theme This chapter emphasizes that the strategic plan of an MNC can be modified continuously in response to changing global conditions, and multinational restructuring may be needed to achieve the plan. Some of the more critical issues related to multinational restructuring are discussed. Topics to Stimulate Class Discussion 1. Why do MNCs consider multinational restructuring? 2. How should MNCs determine whether multinational restructuring is worthwhile? 3. What are common ways by which an MNC can conduct multinational restructuring? 4. What role does valuation play in the multinational restructuring process? POINT/COUNTER-POINT: Can a Foreign Target Be Assessed Like Any Other Asset? POINT: Yes. The value of a foreign target to an MNC is the present value of the future cash flows to the MNC. The process of estimating a foreign target’s value is the same as the process of estimating a machine’s value. A target has expected cash flows, which can be derived from information about previous cash flows. COUNTER-POINT: No. A target’s behavior will change after it is acquired by an MNC. Its efficiency may change depending on the ability of the MNC to integrate the target with its own operations. The morale of the target employees could either improve or worsen after the acquisition, depending on the treatment by the acquirer. Thus, a proper estimate of cash flows generated by the target must consider the changes in the target due to the acquisition. WHO IS CORRECT? Use InfoTrac or some other search engine to learn more about this issue. Which argument do you support? Offer your own opinion on this issue. ANSWER: Some targets may continue their business in the same manner as before, and their cash flows may not change significantly. Others are restructured due to the acquisition, so their cash flows might deviate substantially from before the acquisition. Answers to End of Chapter Questions
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This note was uploaded on 12/05/2010 for the course FIN 6098 taught by Professor Uknown during the Fall '10 term at East Texas Baptist University.

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IFM8e-IM-ch15 - Chapter 15 Multinational Restructuring...

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