BusinessCombinationsPart1 Compass

BusinessCombinationsPart1 Compass - firms stock by another...

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Business Combinations – Part 1
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Why do firms engage in  Eliminate overcapacity in an industry and streamline operations Consolidate dispersed competitors and achieve economies of scale (think Big 4) Enter new products / markets Converge markets and processes
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Business Combinations Q’s  What’s the difference between a  merger and an acquisition?  What are the typical exchange  transactions?  Should there be a difference in how we  account for them?
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Sample exchange txns One company purchases another company’s assets  and liabilities using cash, a debt issue, or the  acquiring company’s stock One company purchases another company’s stock  using cash, a debt issue, or their own company’s  stock (e.g., AT&T buys T-Mobile USA from D.T.)
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Acquisition of operations from  another firm T-Mobile DT T-Mobile DT
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Acquisition of one firm’s net  assets by another Dish Network Block- buster Dish Network
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Complete acquisition of one 
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Unformatted text preview: firms stock by another Microsoft Skype Microsoft Skype Acquisition of a majority of one firms stock by another Walt Disney Company ESPN Walt Disney Company ESPN Hearst Corp. Merger of two companies Burlington Northern Railway Santa Fe Railway BNSF Railway Acquisition of a firms stock: What is control? Firm 1 Firm 2 Investee 60% 40% What is control? Firm 1 Firm 2 Investee 50% 50% What is control? Firm 3 Firm 2 Investee 60% 40% Firm 1 60% Investors in the Market 40% Ralcorp purchased assets and assumed certain liabilities of Post brand cereals from Kraft Foods in a deal finalized in 2008. Ralcorp issued its own stock, valued at $58.70 per share for purposes of the transaction, in exchange for $1,888 million in Post assets and liabilities. (The actual transaction wasnt this simple. But, lets assume that it was as a base case to talk about the major issues in acquisition accounting.)...
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BusinessCombinationsPart1 Compass - firms stock by another...

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