FSW 261 Exam 1

FSW 261 Exam 1 - FIN 461 Study Guide Exam 1 Chapter 1...

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FIN 461 Study Guide Exam 1 Chapter 1 Merger Waves: Liquidity Technological shifts Consolidation Competition Regulation Why Merge? Synergies Diversification Strategic Hubris Buying undervalued assets Mismanagement Managerialism Tax considerations Market power Misvaluation Companies with overvalued Equity want to spend Diversified firms are worth less than focused firms Destroys value—leads to negative stock reaction Who wins? Target shareholders typically (20% abnormal return. 30-35% in hostile firm) Bidders (buyer) typically see zero or slightly negative return BUT bidder can gain if - target is private - acquirer relatively small - target small to acquirer - pay in cash not stock - transaction occurs early in M&A cycle Chapter 2 Investment Banking: IBs assist companies in raising capital and provide strategic advisory 1. Corporate Finance – M and A Advisory 2. Underwriting- capital raising 3. Sales 4. Trading – facilitate trades 5. Research – follow stocks and industries 6. Syndicate –link between sales and corporate finance Why Involve IBs Reputation, knowledge, repeated game, knowledge, economies of scale, resources Important Legislation 1933 securities act- required investors to give out more info
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FIN 461 Study Guide Exam 1 Glass-Steagall- created FDIC and banned commercial banks from owning IB Securities Act 1934 – supervision of new security offerings, created SEC Gramm-Leach-Billey Act 1999- overturned Glass-Steagall, formed US based IB
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FSW 261 Exam 1 - FIN 461 Study Guide Exam 1 Chapter 1...

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