Class1-BroadOverview_M&As.pptx - BROAD OVERVIEW OF M&A...

This preview shows page 1 - 8 out of 49 pages.

BROAD OVERVIEW OF M&A TRANSACTIONS Mergers and Acquisitions
Topics of Discussion I. Introduction to M&As and glossary of important terms II. Motives behind M&A transactions III. Understanding M&A “waves” IV. Shareholder value implications V. Key M&A players: Introduction to “activist” investors and “M&A arbitrageurs”
I. INTRODUCTION Introduction to M&As and Glossary of Important Terms
Corporate Restructuring Corporate restructuring : Actions taken to fundamentally change a company’s asset-liability structure, ownership structure, or “control”. Control refers to significant influence on the company’s strategic decisions (and may be different from ownership in case of public companies). Many public companies have controlling shareholders who own large amounts of voting stock (>10%). Some examples: Founders of new public companies (e.g., Mark Zuckerberg, Elon Musk, etc.) Powerful families (e.g., Wallenberg family in Sweden) and business groups (e.g., Tata and Samsung) that control multiple companies Governments in case of SOEs; financial institutions in Germany and Japan. Non-controlling shareholders are referred to as minority shareholders .
Mergers and Acquisitions M&As are the most important forms of corporate restructuring, and lead to a change in both ownership structure and control (see the Burger King example on next slide). Therefore, the M&A market is also referred to as the market for corporate control (a.k.a. the takeover market). M&As also include “demerger” transactions that we will cover in M&A-II: divestitures , spin-offs , and equity carve-outs . From the acquirer’s perspective, an M&A may be the most important investment decision in terms of scale and scope.
Example: Burger King (Source: “Seventh Time Lucky?” The Economist, August 30 th 2014) Burger King has had several different parents/ corporate structures in the past 20 years! Pre-1996: Owned by Grand Metropolitan, a British conglomerate. 1997: Grand Metropolitan merged into Guinness, and renamed Diageo 2002: Diageo sold BK to a private equity consortium run by Bain, TPG, and Goldman Sachs. 2006: BK became a public company following an IPO. 2010: BK “taken private” by 3G Group ( Brazilian roots). 2012: BK becomes public again , minus the IPO (by partial sale to “Justice Holdings” which renames itself BKW!). 2014: Merged with Tim Hortons ( Canadian ) in a controversial “tax inversion” deal. Owned by parent company “Restaurant Brands International”. Much of this activity seems driven by “market timing” motives; i.e., investors trying to buy low and sell high.
Takeover Market and Corporate Governance Corporate governance refers to the rules and processes by which a business is controlled, regulated or operated Internal governance: Board of directors, managerial compensation, financial reporting and control systems, etc.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture