ch 21 - Mergers and Divestitures Chapter 21 Types of...

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Unformatted text preview: Mergers and Divestitures Chapter 21 Types of Mergers Merger Analysis Role of Investment Bankers Corporate Alliances Private Equity Investments and Divestitures 21-1 What are some good reasons for mergers? Synergy: value of the whole exceeds sum of the parts. Could arise from: Operating economies Financial economies Differential management efficiency Increased market power Taxes (use accumulated losses) Break-up value: assets would be more valuable if sold to some other company. 21-2 What are some questionable reasons for mergers? Diversification Purchase of assets at below replacement cost Get bigger using debt-financed mergers to help fight off takeovers 21-3 What is the difference between a “friendly” and a “hostile” merger? Friendly merger The merger is supported by the managements of both firms. Hostile merger Target firm’s management resists the merger. Acquirer must go directly to the target firm’s stockholders and try to get 51% to tender their shares. Often, mergers that start out hostile end up as friendly when offer price is raised. 21-4 Merger Analysis: Post-Merger Cash Flow Statements 2009 2010 2011 2012 Net sales $60.0 $90.0 $112.5 $127.5- Cost of goods sold 36.0 54.0 67.5 76.5- Selling/admin exp 4.5 6.0 7.5 9.0- Interest expense 3.0 4.5 4.5 6.0 EBT 16.5 25.5 33.0 36.0- Taxes 6.66....
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This note was uploaded on 03/25/2012 for the course FINA 2201 taught by Professor J during the Spring '10 term at Northeastern.

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ch 21 - Mergers and Divestitures Chapter 21 Types of...

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