企业财务知识培训资料.pptx

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1、21 - 1Copyright 2001 by Harcourt, Inc.All rights reserved.nTypes of mergersnMerger analysisnRole of investment bankersnCorporate alliances, LBOs, divestitures, and holding companiesCHAPTER 21Mergers, LBOs, Divestitures, and Holding Companies21 - 2Copyright 2001 by Harcourt, Inc.All rights reserved.n

2、Synergy: Value of the whole exceeds sum of the parts. Could arise from:lOperating economieslFinancial economieslDifferential management efficiencylIncreased market powerlTaxes (use accumulated losses)Why do mergers occur?21 - 3Copyright 2001 by Harcourt, Inc.All rights reserved.nBreak-up value: Asse

3、ts would be more valuable if sold to some other company.21 - 4Copyright 2001 by Harcourt, Inc.All rights reserved.nDiversificationnPurchase of assets at below replacement costnGet bigger using debt-financed mergers to help fight off takeoversWhat are some questionable reasons for mergers?21 - 5Copyr

4、ight 2001 by Harcourt, Inc.All rights reserved.Five Largest completed and proposed mergers, as of January 2000BuyerAmerica OnlineVodafone AirTouchMCI WorldComExxonBell AtlanticTargetTime WarnerMannesmannSprintMobilGTEValue$160.0 billion 148.6 billion 128.9 billion 85.2 billion 85.0 billion21 - 6Copy

5、right 2001 by Harcourt, Inc.All rights reserved.nFriendly merger: lThe merger is supported by the managements of both firms.Differentiate between hostile and friendly mergers21 - 7Copyright 2001 by Harcourt, Inc.All rights reserved.nHostile merger:lTarget firms management resists the merger.lAcquire

6、r must go directly to the target firms stockholders try to get 51% to tender their shares.lOften, mergers that start out hostile end up as friendly when offer price is raised.21 - 8Copyright 2001 by Harcourt, Inc.All rights reserved.nAccess to new markets and technologiesnMultiple parties share risk

7、s and expensesn Rivals can often work together harmoniouslynAntitrust laws can shelter cooperative R&D activitiesReasons why alliances can make more sense than acquisitions21 - 9Copyright 2001 by Harcourt, Inc.All rights reserved.Net sales$60.0 $90.0 $112.5$127.5Cost of goods sold (60%) 36.0 54.0 67

8、.5 76.5Selling/admin. expenses 4.5 6.0 7.5 9.0Interest expense 3.0 4.5 4.5 6.0EBT$16.5 $25.5$ 33.0$ 36.0Taxes (40%) 6.6 10.2 13.2 14.4Net income $ 9.9 $15.3 $ 19.8$ 21.6Retentions 0.0 7.5 6.0 4.5Cash flow$ 9.9 $ 7.8 $ 13.8$ 17.1Merger Analysis (In Millions) 2001 2002 2003 2004 Cash Flow Statements a

9、fter Merger Occurs21 - 10Copyright 2001 by Harcourt, Inc.All rights reserved.nEstimated cash flows are residuals which belong to acquirers shareholders.nThey are riskier than the typical capital budgeting cash flows. Because fixed interest charges are deducted, this increases the volatility of the r

10、esidual cash flows.Conceptually, what is the appropriate discount rate to apply to targetscash flows?(More.)21 - 11Copyright 2001 by Harcourt, Inc.All rights reserved.nBecause the cash flows are risky equity flows, they should be discounted using the cost of equity rather than the WACC.nThe cash flo

11、ws reflect the targets business risk, not the acquiring companys.nHowever, the merger will affect the targets leverage and tax rate, hence its financial risk.21 - 12Copyright 2001 by Harcourt, Inc.All rights reserved.Terminal Value Calculation1. First, find the new discount rate:ks(Target) = kRF + (

12、kM kRF)bTarget = 9% + (4%)1.3 = 14.2%.2. Terminal value = = $221.0 million.(2004 Cash flow)(1 + g)ks g $17.1(1.06) 0.142 0.0621 - 13Copyright 2001 by Harcourt, Inc.All rights reserved.Net Cash Flow Stream Used in Valuation Calculation (In Millions) 2001 2002 2003 2004 Annual cash flow$9.9$7.8$13.8 $

13、 17.1Terminal value 221.0Net cash flow$9.9$7.8$13.8 $238.1Value = + + + = $163.9 million. $9.9 (1.142)1 $7.8 (1.142)2 $13.8 (1.142)3 $238.1 (1.142)421 - 14Copyright 2001 by Harcourt, Inc.All rights reserved.nNo. The input estimates would be different, and different synergies would lead to different

14、cash flow forecasts.nAlso, a different financing mix or tax rate would change the discount rate.Would another acquiring company obtain the same value?21 - 15Copyright 2001 by Harcourt, Inc.All rights reserved.Target firm has 10 million shares outstanding at a price P0 of $9.00 per share. What should

15、 the offeringprice be?Maximum price = $16.39/share.Range = $9 to $16.39/share. Value of Acquisition Shares Outstanding$163.9 million10 million21 - 16Copyright 2001 by Harcourt, Inc.All rights reserved.nThe offer could range from $9 to $16.39 per share.nAt $9 all the merger benefits would go to the a

16、cquirers shareholders.nAt $16.39, all value added would go to the targets shareholders.nSee graph on the next slide.21 - 17Copyright 2001 by Harcourt, Inc.All rights reserved.0510 15 20Change in ShareholdersWealthAcquirerTargetBargaining Range = SynergyPrice Paid for Target$9.00$16.3921 - 18Copyrigh

17、t 2001 by Harcourt, Inc.All rights reserved.Points About GraphnNothing magic about crossover price.nActual price would be determined by bargaining. Higher if target is in better bargaining position, lower if acquirer is.nIf target is good fit for many acquirers, other firms will come in, price will

18、be bid up. If not, could be close to $9.(More.)21 - 19Copyright 2001 by Harcourt, Inc.All rights reserved.nAcquirer might want to make high “preemptive” bid to ward off other bidders, or low bid and then plan to go up. Strategy.nDo targets managers have 51% of stock and want to remain in control?nWh

19、at kind of personal deal will targets managers get?21 - 20Copyright 2001 by Harcourt, Inc.All rights reserved.nThe evidence strongly suggests:lAcquisitions do create value as a result of economies of scale, other synergies, and/or better management.lShareholders of target firms reap most of the bene

20、fits, i.e., move to right in merger graph (Slide 21-17), because of competitive bids.Do mergers really create value?21 - 21Copyright 2001 by Harcourt, Inc.All rights reserved.nArranging mergersnAssisting in defensive tacticsnEstablishing a fair valuenFinancing mergersnRisk arbitrageFunctions of Investment Bankers in Mergers