INTRO TO M&A SPRING 2011

INTRO TO M&A SPRING 2011 - INTRODUCTION TO INTRODUCTION...

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INTRODUCTION TO INTRODUCTION TO HARVEY PONIACHEK, Ph.D. SPRING 2011
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2 2 LECTURE OUTLINE LECTURE OUTLINE 1. 1. 1. MERGER WAVES--HISTORICAL PERSPECTIVE 2. 3. 4. 5. 6. MERGER THEORIES--MOTIVATION, BENEFIT 7. BASIC MERGER STRUCTURES
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3 3 GLOBAL M&As REACHED AN ESTIMATED $1 TRILLION IN 2008, DOWN BY 36% FROM THE PRIOR YEAR, AND CONTINUED TO DECLINE IN THE SECOND HALF OF 2008 AS THE GLOBAL RECESSION DEEPENED SLUGGISH ECONOMIC GROWTH AND DEPRESSED STOCK MARKETS SUBSTANTIALLY REDUCED M&As ACTIVITIES M&As GENERALLY FOLLOW THE BUSINESS CYCLE EVOLUTION (CUMULATIVE DOLLAR VALUE GROWTH IN EARLY 1970S WAS 23%, 1980S 146%, EARLY 1990S 92%, IN LATE 1990S 650%; 50% IN 2000, DECLINED SINCE THEN) FACTORS AFFECTING M&As / RESTRUCTURING INCLUDE: ATTRACTIVE ECONOMIC AND FINANCIAL CONDITIONS, DEREGULATIONS, TECHNOLOGICAL INNOVATIONS, SHIFTS IN THE COMPETITIVENESS OF COMPANIES AND NATIONS, GLOBALIZATION
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4 4 GE’S EXPERIENCE GE’S EXPERIENCE The Jack Welch era (1981-2001) included 993 acquisitions for GE at an estimated cost of approx. $165 billion Divestitures included over 400 businesses valued at an estimated $28 billion The company's revenue has grown to $130 billion in 2000 from $21 billion when Welch became Chairman in 1981 GE EXPERIENCED 9.9% ANNUAL COMPOUNDED GROWTH DURING 1985-2000, OF WHICH 4 PERCENTAGE POINTS CAME FROM ACQUISITIONS [WSJ, “SOME WONDER HOW LONG GE CAN RELY ON DEALS FOR GROWTH”, JULY 31, 2001]
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5 5 GE’s MAJOR ACQUISITIONS GE’s MAJOR ACQUISITIONS Notable buys are RCA in 1986, a deal that included NBC; investment bank Kidder, Peabody in 1990; aircraft firms Greenwich Air Services and UNC in 1997. GE Capital, the huge financial services arm of General Electric Co., has acquired Heller Financial Inc. for $5.3 billion in cash (Announced on July 30, 2001) GE Capital grew to one of the powerhouses of the financial services industry during Welch’s tenure, and now accounts for nearly half of the company's revenue.
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6 6 GE’s PERFORMANCE GE’s PERFORMANCE GE is the world's most valuable company, with a market capitalization of $402 billion, about a 5,000 percent increase in value for the stock, including dividends, during 1981- 2001. [GE CAPITALIZATION WAS $384 BN ON 1/18/02] The market cap (i.e., outstanding shares X price per share) is more than $100 billion greater than the next two largest companies, which include Microsoft Corp. and Exxon Mobil Corp. [GE=$384 BN, MSFT=$355 BN, XOM=$262BN ON 1/18/02]
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7 CONSTRAINTS ON GE’S FURTHER CONSTRAINTS ON GE’S FURTHER LIMITED POOL OF AVAILABLE TARGETS ANTITRUST CONCERNS (E.G. FAILED
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This note was uploaded on 05/09/2011 for the course FIN 101 taught by Professor Cho during the Spring '08 term at NYU.

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INTRO TO M&A SPRING 2011 - INTRODUCTION TO INTRODUCTION...

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