Introduction - Who wins? Who loses? Around transaction...

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FIN 461 Professor Thomas Boulton Reference: “The Basics of Mergers and Acquisitions”
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Agenda Main players Who wins? Who loses?
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Bank of America Family Tree Note: Ironically, MBNA was once owned by a previous version of Bank of America, which sold it in an IPO. 2007: LaSalle ($21B) 2008: Merrill Lynch ($50B) & Countrywide ($4.1B)
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Mergers (1988-2009)
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Synergies – financial or operational synergies Diversification – reduce risk and/or increase returns Strategic – buying talent, patents Hubris Buying undervalued assets Mismanagement Managerialism Tax considerations – use losses from another firm to reduce your taxes Market power Misvaluation
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Main players Investment bankers Lawyers Accountants Proxy solicitors Institutional investors M&A Arbitrageurs
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Unformatted text preview: Who wins? Who loses? Around transaction announcement date, abnormal returns average: 20% for target shareholders in friendly transactions; 30-35% in hostile transactions Bidders shareholders on average earn zero to slightly negative returns Positive abnormal returns to bidders often are situational and include the following: Target is a private firm or a subsidiary of another firm The acquirer is relatively small The target is small relative to the acquirer Cash rather than equity is used to finance the transaction Transaction occurs early in the M&A cycle No evidence that alternative strategies (e.g., solo ventures, alliances) to M&As are likely to be more successful For next time What is Investment Banking? What do investment banks (investment bankers) do?...
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Introduction - Who wins? Who loses? Around transaction...

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