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More About This Title Mergers, Acquisitions, and Corporate Restructurings, Sixth Edition
English
Mergers, Acquisitions, and Corporate Restructurings is an all-inclusive guide to M&As that illustrates how restructuring can be used successfully, how each form works, and the laws that govern them. This updated edition includes the latest statistics, research, graphs, and case studies on the private equity market, ethics, legal frameworks, and corporate governance, presented in a more approachable, manageable way. Written from a practical and historical perspective, this book carefully analyzes the strategies and motives that inspire M&As, the legalities involved each step of the way, and the offensive and defensive techniques used during hostile acquisitions.
Corporate restructurings are indispensable in building a new generation of re-engineered companies with the power and resources to compete on the global playing field. This book covers the full spectrum of transactions, from megadeals to downsizing, and takes a fresh look at restructuring and how it is being used to revitalize and supercharge companies.
Learn how corporate restructuring helps companies competeDiscover the common impetus behind M&AsUnderstand the laws and rules that govern the fieldExamine more effective strategies for hostile acquisitionsThe slowdown in the world's economy means that mergers and corporate restructuring will likely increase. It is essential for students and professionals to fully understand the concepts and mechanics behind these transactions, and Mergers, Acquisitions, and Corporate Restructurings is the comprehensive guide to the field.
English
PATRICK A. GAUGHAN is President of Economatrix Research Associates, Inc., an economic and financial consulting firm serving a large number of Fortune 500 companies. The firm specializes in the application of economics and finance to litigated matters. He is often called upon to serve as an expert witness and measure damages in lawsuits, including those involving mergers and acquisitions. He has taught mergers and acquisitions for over twenty years and is a graduate-level professor of economics and finance at the Silberman College of Business, Fairleigh Dickinson University.
English
Preface xi
PART I: BACKGROUND
Chapter 1: Introduction 3
Recent M&A Trends 3
Terminology 12
Valuing a Transaction 15
Types of Mergers 15
Merger Consideration 16
Merger Professionals 17
Merger Arbitrage 20
Leveraged Buyouts and the Private Equity Market 21
Corporate Restructuring 21
Merger Negotiations 23
Merger Agreement 30
Merger Approval Procedures 30
Deal Closing 32
Short-Form Merger 33
Freeze-Outs and the Treatment of Minority Shareholders 33
Reverse Mergers 34
Holding Companies 38
Chapter 2: History of Mergers 41
Merger Waves 41
What Causes Merger Waves? 42
First Wave, 1897–1904 42
Second Wave, 1916–1929 48
The 1940s 49
Third Wave, 1965–1969 49
Trendsetting Mergers of the 1970s 56
Fourth Wave, 1984–1989 62
Fifth Wave 67
Sixth Merger Wave 73
Chapter 3: Legal Framework 75
Laws Governing Mergers, Acquisitions, and Tender Offers 76
Other Specific Takeover Rules in the United States 88
International Securities Laws Relating to Takeovers 89
U.S. State Corporation Laws and Legal Principles 98
State Antitakeover Laws 101
Regulation of Insider Trading 109
Antitrust Laws 111
Measuring Concentration and Defining Market Share 117
European Competition Policy 121
Chapter 4: Merger Strategy 125
Growth 125
Synergy 136
Operating Synergy 138
Diversification 148
Types of Focus Increases 154
Focus Increasing Asset Sales Increase Firm Values 154
Explanation for the Diversification Discount 155
Do Diversified or Focused Firms Do Better Acquisitions? 159
Other Economic Motives 159
Hubris Hypothesis of Takeovers 169
Do Managerial Agendas Drive M&A? 173
Other Motives 177
PART II: HOSTILE TAKEOVERS
Chapter 5: Antitakeover Measures 187
Management Entrenchment Hypothesis versus Stockholder Interests Hypothesis 188
Rights of Targets Boards to Resist: United States Compared to the Rest of the World 189
Preventative Antitakeover Measures 189
Changing the State of Incorporation 214
Active Antitakeover Defenses 214
Information Content of Takeover Resistance 247
Chapter 6: Takeover Tactics 249
Preliminary Takeover Steps 250
Tender Offers 257
Advantages of Tender Offers over Open Market Purchases 272
Proxy Fights 279
Chapter 7: Hedge Funds as Activist Investors 291
Macroeconomic Foundations of the Growth of Activist Funds 294
Hedge Funds as Acquirers 301
PART III: GOING-PRIVATE TRANSACTIONS AND LEVERAGED BUYOUTS
Chapter 8: Going-Private Transactions and Leveraged Buyouts 311
Terminology 311
Historical Trends in LBOs 312
Management Buyouts 319
Conflicts of Interest in Management Buyouts 323
U.S. Courts’ Position on Leveraged Buyout Conflicts 325
Financing for Leveraged Buyouts 332
Returns to Stockholders from LBOs 340
Returns to Stockholders from Divisional Buyouts 341
Empirical Research on Wealth Transfer Effects 346
Protection for Creditors 347
Intra-industry Effects of Buyouts 347
Chapter 9: The Private Equity Market 349
History of the Private Equity and LBO Business 349
Private Equity Market 350
Secondary Market for Private Equity Investments 369
Chapter 10: The Junk Bond and the Leveraged Loan Market and Stapled Financing 371
History of the Junk Bond Market 371
Leveraged Loan Market 382
Stapled Financing 386
PART IV: CORPORATE RESTRUCTURING
Chapter 11: Corporate Restructuring 391
Divestitures 393
Divestiture and Spin-Off Process 404
Market Liquidity and the Decision to Divest a Unit 406
Round-Trip Wealth Effects 406
Wealth Effects of Sell-Offs 407
Managerial Ownership and Sell-Off Gains 410
Activists and Sell-Offs 410
Shareholder Wealth Effects of Spin-Offs: U.S. versus Europe 416
Equity Carve-Outs 421
Voluntary Liquidations or Bust-Ups 427
Tracking Stocks 428
Master Limited Partnerships and Sell-Offs 430
Chapter 12: Restructuring in Bankruptcy 433
Types of Business Failure 434
Causes of Business Failure 435
Bankruptcy Trends 440
U.S. Bankruptcy Laws 444
Reorganization versus Liquidation 445
Reorganization Process 446
Benefits of the Chapter 11 Process for the Debtor 453
Prepackaged Bankruptcy 457
Workouts 461
Corporate Control and Default 469
Liquidation 469
Investing in the Securities of Distressed Companies 471
Chapter 13: Corporate Governance 477
Structure of Corporations and Their Governance 477
Golden Parachutes 486
CEO Severance Payments 490
Reform of Excesses of Golden Parachutes and Severance Payments 491
Managerial Compensation, Mergers, and Takeovers 491
CEO Compensation and Power 493
Compensation Characteristics of Boards That Are More Likely to Keep Agency Costs in Check 496
Role of the Board of Directors 496
Regulatory Standards for Directors 506
Antitakeover Measures and Board Characteristics 507
Disciplinary Takeovers, Company Performance, CEOs, and Boards 510
Merger Strategy and Corporate Governance 511
CEO Compensation and M&A Programs 511
Do Boards Reward CEOs for Initiating Acquisitions and Mergers? 512
CEO Compensation and Diversification Strategies 513
Agency Costs and Diversification Strategies 513
Interests of Directors and M&As 514
Managerial Compensation and Firm Size 516
Corporate Control Decisions and Their Shareholder Wealth Effects 516
Does Better Corporate Governance Increase Firm Value? 518
Corporate Governance and Competition 519
Executive Compensation and Postacquisition Performance 519
Mergers of Equals and Corporate Governance 520
Chapter 14: Joint Ventures and Strategic Alliances 531
Contractual Agreements 531
Comparing Strategic Alliances and Joint Ventures with Mergers and Acquisitions 532
Joint Ventures 532
Strategic Alliances 538
Chapter 15: Valuation 547
Valuation Methods: Science or Art? 549
Managing Value as an Antitakeover Defense 550
Benchmarks of Value 550
How the Market Determines Discount Rates 562
Valuation of the Target’s Equity 575
Marketability of the Stock 575
Takeovers and Control Premiums 578
Valuation of Stock-for-Stock Exchanges 583
Shareholder Wealth Effects and Methods of Payment 583
Exchange Ratio 589
Fixed Number of Shares versus Fixed Value 597
Merger Negotiations and Stock Offers: Halliburton vs Baker Hughes 597
International Takeovers and Stock-for-Stock Transactions 598
Desirable Financial Characteristics of Targets 598
Chapter 16: Tax Issues in M&A 607
Financial Accounting for M&As 608
Taxable versus Tax-Free Transactions 608
Tax Consequences of a Stock-for-Stock Exchange 611
Asset Basis Step-Up 612
Changes in the Tax Laws 613
Role of Taxes in the Merger Decision 614
Role of Taxes in the Choice of Sell-Off Method 616
Organizational Form and M&A Premiums 616
Capital Structure and Propensity to Engage in Acquisitions 617
Leverage and Deal Structure 618
Taxes as a Source of Value in Management Buyouts 618
Miscellaneous Tax Issues 619
Glossary 623
Index 633
