lecture_mergers_521_2011_lecture

lecture_mergers_521_2011_lecture - Mergers &...

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1 Mergers & Acquisitions
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2 Goals: You should be able to … Explain valid reasons (and dubious reasons) for a merger Discuss the costs and benefits of a merger Discuss ways to prevent a merger / acquisition
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3 Examples of “Mega-Mergers” ACQUIRER TARGET Kmart Sears Pfizer Warner Lambert Media One Viacom CBS Exxon Mobil AOL Time Warner Hewlett Packard Compaq
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4 Mechanics of a Merger Antitrust Law Proposed merger must pass scrutiny by the Dept. of Justice and the Federal Trade Commission Clayton Act forbids acquisitions that may substantially lessen competition or tend to create a monopoly Government may forbid a merger, or require the parties to divest some assets before the merger is completed in order to lessen market power in a particular sector
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5 Good Economic Reasons for Merger Economies of scale (horizontal merger) Economies of scope (vertical merger) Complementary resources (substitute for investment) Unused tax shields IRS will object if this is only reason Eliminate inefficiencies Merger can eliminate bad management
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Dubious Reasons for Merger (in general) Diversification Why is this a dubious reason?
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This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

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lecture_mergers_521_2011_lecture - Mergers &...

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