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1、外文文献Mergers and Acquisitions Basics :All You Need To KnowIntroduction to Mergers and AcquisitionsThe first decade of the new millennium heralded an era of global mega-mergers. Like the mergers and acquisitions (M&As) frenzy of the 1980s and 1990s, several factors fueled activity through mid-2007: re

2、adily available credit, historically low interest rates, rising equity markets, technological change, global competition, and industry consolidation. In terms of dollar volume, M&A transactions reached a record level worldwide in 2007. But extended turbulence in the global credit markets soon follow

3、ed.The speculative housing bubble in the United States and elsewhere, largely financed by debt, burst during the second half of the year. Banks, concerned about the value of many of their own assets, became exceedingly selective and largely withdrew from financing the highly leveraged transactions t

4、hat had become commonplace the previous year. The quality of assets held by banks through out Europe and Asia also became suspect, reflecting the global nature of the credit markets. As credit dried up, a malaise spread worldwide in the market for highly leveraged M&A transactions.By 2008, a combina

5、tion of record high oil prices and a reduced availability of credit sent most of the worlds economies into recession, reducing global M&A activity by more than one-third from its previous high. This global recession deepened during the first half of 2009despite a dramatic drop in energy prices and h

6、ighly stimulative monetary and fiscal policiesextending the slump in M&A activity.In recent years, governments worldwide have intervened aggressively in global credit markets (as well as in manufacturing and other sectors of the economy) in an effort to restore business and consumer confidence, rest

7、ore credit market functioning, and offset deflationary pressures. What impact have such actions had on mergers and acquisitions? It is too early to tell, but the implications may be significant.M&As are an important means of transferring resources to where they are most needed and of removing underp

8、erforming managers. Government decisions to save some firms while allowing others to fail are likely to disrupt this process. Such decisions are often based on the notion that some firms are simply too big to fail because of their potential impact on the economyconsider AIG in the United States. Oth

9、ers are clearly motivated by politics. Such actions disrupt the smooth functioning of markets, which rewards good decisions and penalizes poor ones. Allowing a business to believe that it can achieve a size “too big t o fail” may create perverse incentives. Plus, there is very little historical evid

10、ence that governments are better than markets at deciding who should fail and who should survive.In this chapter, you will gain an understanding of the underlying dynamics of M&As in the context of an increasingly interconnected world. The chapter begins with a discussion of M&As as change agents in

11、 the context of corporate restructuring. The focus is on M&As and why they happen, with brief consideration given to alternative ways of increasing shareholder value. You will also be introduced to a variety of legal structures and strategies that are employed to restructure corporations.Throughout

12、this book, a firm that attempts to acquire or merge with another company is called an acquiring company, acquirer, or bidder. The target company or target is the firm being solicited by the acquiring company. Takeovers or buyouts are generic terms for a change in the controlling ownership interest o

13、f a corporation.Words in bold italics are the ones most important for you to understand fully;they are all included in a glossary at the end of the book.Mergers and Acquisitions as Change AgentsBusinesses come and go in a continuing churn, perhaps best illustrated by the ever-changing composition of

14、 the so-called Fortune 500the 500 largest U.S. corporations. Only 70 of the firms on the original 1955 list of 500 are on todays list, and some 2,000 firms have appeared on the list at one time or another. Most have dropped off the list either through merger, acquisition, bankruptcy, downsizing, or

15、some other form of corporate restructuring. Consider a few examples: Chrysler, Bethlehem Steel, Scott Paper, Zenith, Rubbermaid, Warner Lambert. The popular media tends to use the term corporate restructuring to describe actions taken to expand or contract a firms basic operations or fundamentally c

16、hange its asset or financial structure.SynergySynergy is the rather simplistic notion that two (or more) businesses in combination will create greater shareholder value than if they are operated separately. It may be measured as the incremental cash flow that can be realized through combination in e

17、xcess of what would be realized were the firms to remain separate. There are two basic types of synergy: operating and financial.Operating Synergy (Economies of Scale and Scope)Operating synergy comprises both economies of scale and economies of scope, which can be important determinants of sharehol

18、der wealth creation. Gains in efficiency can come from either factor and from improved managerial practices.Spreading fixed costs over increasing production levels realizes economies of scale, with scale defined by such fixed costs as depreciation of equipment and amortization of capitalized softwar

19、e; normal maintenance spending; obligations such as interest expense, lease payments, and long-term union, customer, and vendor contracts; and taxes. These costs are fixed in that they cannot be altered in the short run. By contrast, variable costs are those that change with output levels. Consequen

20、tly, for a given scale or amount of fixed expenses, the dollar value of fixed expenses per unit of output and per dollar of revenue decreases as output and sales increase.To illustrate the potential profit improvement from economies of scale, lets consider an automobile plant that can assemble 10 ca

21、rs per hour and runs around the clockwhich means the plant produces 240 cars per day. The plants fixed expenses per day are $1 million, so the average fixed cost per car produced is $4,167 (i.e., $1,000,000/240). Now imagine an improved assembly line that allows the plant t o assemble 20 cars per ho

22、ur, or 480 per day. The average fixed cost per car per day falls to $2,083 (i.e., $1,000,000/480). If variable costs (e.g., direct labor) per car do not increase, and the selling price per car remains the same for each car, the profit improvement per car due to the decline in average fixed costs per

23、 car per day is $2,084 (i.e., $4,167 $2,083).A firm with high fixed costs as a percentage of total costs will have greater earnings variability than one with a lower ratio of fixed to total costs. Lets consider two firms with annual revenues of $1 billion and operating profits of $50 million. The fi

24、xed costs at the first firm represent 100 percent of total costs, but at the second fixed costs are only half of all costs. If revenues at both firms increased by $50 million, the first firm would see income increase to $100 million, precisely because all of its costs are fixed. Income at the second

25、 firm would rise only to $75 million, because half of the $50 million increased revenue would h ave to go to pay for increased variable costs.Using a specific set of skills or an asset currently employed to produce a given product or service to produce something else realizes economies of scope, whi

26、ch are found most often when it is cheaper to combine multiple product lines in one firm than to produce them in separate firms. Procter & Gamble, the consumer products giant, uses its highly regarded consumer marketing skills to sell a full range of personal care as well as pharmaceutical products.

27、 Honda knows how to enhance internal combustion engines, so in addition to cars, the firm develops motorcycles, lawn mowers, and snow blowers. Sequent Technology lets customers run applications on UNIX and NT operating systems on a single computer system. Citigroup uses the same computer center to p

28、rocess loan applications, deposits, trust services, and mutual fund accounts for its banks customers. Each is an example of economies of scope, where a firm is applying a specific set of skills or assets to produce or sell multiple products, thus generating more revenue.Financial Synergy (Lowering t

29、he Cost of Capital)Financial synergy refers to the impact of mergers and acquisitions on the cost of capital of the acquiring firm or newly formed firm resulting from a merger or acquisition. The cost of capital is the minimum return required by investors and lenders to induce them to buy a firms st

30、ock or to lend to the firm.In theory, the cost of capital could be reduced if the merged firms have cash flows that do not move up and down in tandem (i.e., so-called co-insurance), realize financial economies of scale from lower securities issuance and transactions costs, or result in a better matc

31、hing of investment opportunities with internally generated funds. Combining a firm that has excess cash flows with one whose internally generated cash flow is insufficient to fund its investment opportunities may also result in a lower cost of borrowing. A firm in a mature industry experiencing slow

32、ing growth may produce cash flows well in excess of available investment opportunities. Another firm in a high-growth industry may not have enough cash to realize its investment opportunities. Reflecting their different growth rates and risk levels, the firm in the mature industry may have a lower c

33、ost of capital than the one in the high-growth industry, and combining the two firms could lower the average cost of capital of the combined firms.DiversificationBuying firms outside a companys current primary lines of business is called diversification, and is typically justified in one of two ways

34、. Diversification may create financial synergy that reduces the cost of capital, or it may allow a firm to shift its core product lines or markets into ones that have higher growth prospects, even ones that are unrelated to the firms current products or markets. The extent to which diversification i

35、s unrelated to an acquirers current lines of business can have significant implications for how effective management is in operating the combined firms.A firm facing slower growth in its current markets may be able to accelerate growth through related diversification by selling its current products

36、in new markets that are somewhat unfamiliar and, therefore, mor risky. Such was the case when pharmaceutical giant Johnson &Johnson announced its ultimately unsuccessful takeover attempt of Guidant Corporation in late 2004. J&J was seeking an entry point for its medical devices business in the fast-

37、growing market for implantable devices, in which it did not then participate. A firm may attempt to achieve higher growth rates by developing or acquiring new products with which it is relatively unfamiliar and then selling them in familiar and less risky current markets. Retailer JCPenneys acquisit

38、ion of the Eckerd Drugstore chain or J&Js $16 billion acquisition of Pfizers consumer health care products line in 2006 are two examples of related diversification. In each instance, the firm assumed additional risk, but less so than unrelated diversification if it had developed new products for sal

39、e in new markets. There is considerable evidence that investors do not benefit from unrelated diversification.Firms that operate in a number of largely unrelated industries, such as General Electric, are called conglomerates. The share prices of conglomerates often trade at a discountas much as 10 t

40、o 15 percentcompared to shares of focused firms or to their value were they broken up. This discount is called the conglomerate discount or diversification discount. Investors often perceive companies diversified in unrelated areas (i.e., those in different standard industrial classifications) as ri

41、skier because management has difficulty understanding these companies and often fails to provide full funding for the most attractive investment opportunities.Moreover, outside investors may have a difficult time understanding how to value the various parts of highly diversified businesses.Researche

42、rs differ on whether the conglomerate discount is overstated.Still, although the evidence suggests that firms pursuing a more focused corporate strategy are likely to perform best, there are always exceptions.Strategic RealignmentThe strategic realignment theory suggests that firms use M&As to make

43、rapid adjustments to changes in their external environments. Although change can come from many different sources, this theory considers only changes in the regulatory environment and technological innovationtwo factors that, over the past 20 years, have been major forces in creating new opportuniti

44、es for growth, and threatening, or making obsolete, firms primary lines of business.Regulatory ChangeThose industries that have been subject to significant deregulation in recent yearsfinancial services, health care, utilities, media, telecommunications, defensehave been at the center of M&A activit

45、y because deregulation breaks down artificial barriers and stimulates competition. During the first half of the 1990s, for instance, the U.S. Department of Defense actively encouraged consolidation of the nations major defense contractors to improve their overall operating efficiency.Utilities now r

46、equired in some states to sell power to competitors that can resell the power in the utilitys own marketplace respond with M&As to achieve greater operating efficiency. Commercial banks that have moved beyond their historical role of accepting deposits and g ranting loans are merging with securities

47、 firms and insurance companies thanks to the Financial Services Modernization Act of 1999, which repealed legislation dating back to the Great Depression.The CiticorpTravelers merger a year earlier anticipated this change, and it is probable that their representatives were lobbying for the new legis

48、lation. The final chapter has yet t o be written: this trend toward huge financial services companies may yet be stymied by new regulation passed in 2010 in response to excessive risk taking.The telecommunications industry offers a striking illustration. Historically, local and long-distance phone c

49、ompanies were not allowed t o compete against each other, and cable companies were essentially monopolies. Since the Telecommunications Act of 1996, local and long-distance companies are actively encouraged to compete in each others markets, and cable companies are offering both Internet access and local telephone se