CorpFina - Corporate Restructuring, Where Are We Going Are...

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Unformatted text preview: Corporate Restructuring, Where Are We Going Are We Going? Focus: Restructuring through mergers, acquisitions, takeovers, selloffs, spinoffs, highly-leveraged transactions, or investor activism Theoretical basis: Value Additivity Principle (VAP) Mergers acquisitions or takeovers Mergers, acquisitions, or takeovers V(A+B) > V(A) + V(B) Selloffs or spinoffs V(A+B) < V(A) + V(B) Why the whole might be worth more than the sum of the parts: Operating synergy Operating synergy Strategic considerations: RCA/NBC example Some questionable reasons for expansion Operating synergy Common product (economies of scale) Common product (economies of scale) Common market (economies of distribution) Common technology Less staff overhead Less staff overhead Strategic considerations: RCA/NBC example Project: Color Television Project: Color Television Time: Early 50s Problems: Without broadcasters, no demand for sets Without installed sets, no incentive for broadcasters Solution: Merger of RCA and NBC Some questionable reasons for expansion Pure diversification Pure diversification Financial synergy Target firm undervalued Does market know something you dont? Why the parts may be worth more than the wholeanergy: Improved efficiency from smaller scale Improved efficiency from smaller scale Improved management Eliminate unnecessary bureaucracy Gain better focus Gain greater flexibility and responsiveness to...
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This note was uploaded on 04/15/2011 for the course FINA 5220 taught by Professor Staff during the Spring '08 term at North Texas.

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CorpFina - Corporate Restructuring, Where Are We Going Are...

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