ffm11i21 - LearningObjectives Chapter21 ,...

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Chapter 21 Mergers and Acquisitions Learning Objectives After reading this chapter, students should be able to: Define the term merger, and list some motives for mergers. Characterize the different types of mergers. Identify the five major “merger waves” that have occurred in the United States. Differentiate between the merger processes in hostile versus friendly takeovers. Briefly explain the need to regulate mergers, and whether states play a role in merger regulation. Determine the value of a target firm using discounted cash flow analysis and the appropriate discount  rate. Explain the correct financial reporting treatment for mergers. Discuss the roles investment bankers play in merger transactions. Explain whether corporate acquisitions create value and how the value is shared between the parties. Differentiate between a merger and a corporate alliance. Explain what a leveraged buyout (LBO) is. Define the term divestiture, briefly discuss the major types of divestitures, and give some reasons for  divestitures. Chapter 21:  Mergers and Acquisitions Learning Objectives 41
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Lecture Suggestions In this chapter we discuss mergers, LBOs, and divestitures.   Merger rationales, classifications, merger  regulation, merger analysis, and the accounting treatment for mergers are also discussed.  Finally, we talk  about divestitures and the rationale behind them. What we cover, and the way we cover it, can be seen by scanning the slides and Integrated Case  solution for Chapter 21, which appears at the end of this chapter solution.  For other suggestions about the  lecture, please see the “Lecture Suggestions” in Chapter 2, where we describe how we conduct our classes. DAYS ON CHAPTER:  2 OF 58 DAYS (50-minute periods) 42 Lecture Suggestions Chapter 21:  Mergers and Acquisitions
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Answers to End-of-Chapter Questions 21-1 Horizontal and vertical mergers are most likely to result in governmental intervention, but mergers of  this type are also most likely to result in operating synergy.  Conglomerate and congeneric mergers  are attacked by the government less often, but they also are less likely to provide any synergistic  benefits. 21-2 A tender offer might be used.  Although many tender offers are made by surprise and over the  opposition of the target firm’s management, tender offers can and often are made on a “friendly”  basis.  In this case, management (the board of directors) of the target company endorses the tender  offer and recommends that shareholders tender their shares.
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