10. New Mergers & Acquisitions

10. New Mergers & Acquisitions - Click to edit Master...

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Unformatted text preview: Click to edit Master subtitle style 1 School of Business Administration University of Miami Mergers & Acquisitions and Leveraged Buy-Outs Corporate Financial Management Replaces slides 36 to end for Advanced Capital 22 Assigned Readings & Problems  Read EFS Chapter 25  In Chapter 25 do: › Questions/Challenging Questions: All › Problems: A1, A2, A4, A6-A9, B1-B5, B7-B10, B14, C1, C3 Replaces slides 36 to end for Advanced Capital 33 Objectives  Examine the underlying economic reasons for mergers  Detail the various categories and structures of M&A transactions  Overview the take-over tactics available to acquirers and the defensive tactics available to targets  Examine the empirical evidence on the market reaction of stock prices at the announcement of a merger for both acquirer and target Replaces slides 36 to end for Advanced Capital 44  Highlight the importance of tax considerations in mergers  Value a potential corporate acquisition  Describe leveraged buyouts  What are the economic reasons for an LBO?  What types of firms are good candidates for LBOs?  What is the typical life cycle of an LBO? Replaces slides 36 to end for Advanced Capital 55  Corporate takeovers are the logical outgrowth of competitive struggles in the free market. ..Mergers and acquisitions make sense because they increase the value of the shares held in the target company. ..The takeover market also provides a unique, powerful, and impersonal mechanism to accomplish the major restructuring and redeployment of assets continually required by changes in technology and consumer preferences. ...Scientific evidence indicates that activities in the market for corporate control almost uniformly increase efficiency and shareholder’s wealth. Yet there is an almost continuous flow of unfavorable publicity and calls for regulation and restriction of unfriendly takeovers. Many of these appeals arise from managers who want protection from competition for their jobs and others who desire more controls on corporations -Michael Jensen Replaces slides 36 to end for Advanced Capital Record M&A Deals Replaces slides 36 to end for Advanced Capital Why Merge? 77 Replaces slides 36 to end for Advanced Capital 8 Why Merge?  When one company purchases another company, it is making an investment decision and all the capital budgeting techniques and rules apply A good acquisition will have a positive NPV and will enhance shareholder wealth  In M&A terms, The economic gain or synergy resulting from the combination is Replaces slides 36 to end for Advanced Capital...
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This note was uploaded on 09/18/2011 for the course FIN 303 taught by Professor Bernile during the Spring '11 term at University of Miami.

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10. New Mergers & Acquisitions - Click to edit Master...

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