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Maximizing Corporate Value through Mergers and Acquisitions: A Strategic Growth Guide

Name: Maximizing Corporate Value through Mergers and Acquisitions: A Strategic Growth Guide
Author: Patrick A. Gaughan
ISBN: 9781118108741

by Patrick A. Gaughan

April 2013

Intermediate to advanced

338 pages

10h 41m

English

Wiley

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Cover
Series Page
Title Page
Copyright
Preface
Chapter 1: Merger Growth Strategy
Strategy and M&AIntroduction to M&ABackground and TerminologyHostile TakeoversTakeover DefenseLeveraged TransactionsRestructuringsTrends in Mergers
Chapter 2: Growth through Mergers and Acquisitions
Is Growth or Increased Return the More Appropriate Goal? The Case of Hewlett-PackardM&A Must Fit the Strategy—Not the Other Way AroundStrategy Should Not Be Just M&AOrganic Growth or Growth through M&AAcquisition and Development versus Research and DevelopmentCan M&A Be Effectively Used to Buy Growth?Success in Core Business Does Not Always Translate to Success with M&A Strategy: Focus on MicrosoftGrowth through Bolt-On AcquisitionsKnowing When to Exit a BusinessFrom Growth through M&A to Growth through Organic ExpansionControlling the Runaway Dealmaker CEOUsing M&A to Achieve Growth in a Slow-Growth IndustrySqueezing Out Growth in a Slow-Growth Industry Using Multiple OptionsDealing with a Slow-Growth Business and IndustryGeographical Expansion through M&AInternational Growth and Cross-Border AcquisitionsTaking Advantage of Currency Fluctuations to Pursue High-Growth M&AFinding Growth in High-Growth MarketsCyclical Companies Achieving Growth in Recessed Markets
Chapter 3: Synergy
What Is Synergy in the Context of M&A?Achievement of Synergy: A Probabilistic EventTypes of SynergyIndustries' Pursuit of Cost EconomiesResearch on Operating Economies in M&AEconomies of ScopeScope Economies and the One-Stop ShopCopyCat Following of Another Firm's Foolish M&A StrategyCost Economies in Banking Mergers: United States versus EuropeInternationalization Theory of Synergy and Information-Based Assets
Chapter 4: Diversification
Diversifying M&A in the Conglomerate EraModern-Day U.S. ConglomeratesPortfolios of CompaniesTheoretical Basis for DiversificationApplying Portfolio Theory to Conglomerates?Diversification and the Acquisition of Leading Industry PositionsAchieving a Number One or Two Ranking Is Not a PanaceaDiversification to Enter More Profitable IndustriesEmpirical Evidence on DiversificationEmpirical Evidence on the Acquisition Programs of the 1960sHow Likely Is It That Diversifying Acquisitions Will End Up Being Sold Off?Is There a Diversification Discount?Focus HypothesisTypes of Focus IncreasesFocus-Increasing Asset Sales Raise ValueExplanation for the Diversification DiscountRelated versus Unrelated DiversificationWhy Are Very Diversified Companies Allowed to Form? Beware of the Empire BuildersDo Managerial Agendas Drive M&A?
Chapter 5: Horizontal Integration and M&A
Advantages of Holding the One and Two Position in the IndustryBenefits of Size: Spotlight on the Mobile Telecommunications IndustryMotivation to Increase SizeCompetitive Pressures of Competitors' M&A ProgramHorizontal Deals: Acquisitions of Competitors and Their Competing BrandsSprint–Nextel Horizontal Deal: One of the Worst in M&A HistoryDeclining Industry Demand Necessitating Industry ConsolidationSynergistic Gains and Horizontal M&ANet Benefits of Horizontal Deals = Synergistic Gains – (Easy to Measure Costs + Hard to Measure Costs)Horizontal Merger Success, Target's Size, and Post-M&A Integration CostsMergers of EqualsMergers of Equals and Challenges of IntegrationMergers-of-Equals Research: Acquirers versus Target GainsCompetitive Advantages of Horizontal Deals: Case Study—InBev and Anheuser-BuschRegulatory Concerns on Merger IntegrationHorizontal M&A and Market Power: An Economic PerspectiveEmpirical Evidence on Whether Firms Pursue M&A to Achieve Market PowerCountervailing Power, Industry Concentration, and M&AHorizontal Integration, Consolidation, and Roll-Up Acquisition Programs

Chapter 6: Vertical Integration
Benefits of Vertical IntegrationRisk and Vertical IntegrationVertical Integration as a Path to Global GrowthHow Owning Your Own Supplier Can Be a Competitive DisadvantageVertical Integration as a Natural Outgrowth of a BusinessVertical Integration: A Growth Strategy?Continually Reevaluating a Vertical Integration StrategyRegulation of Vertical IntegrationCopyCat Vertical Integration
Chapter 7: Growth through Emerging Market M&A
Economic Condition of Major Economies in the Postsubprime WorldLow-Growth Markets' Diminishing ReturnsRole of DemographicsThe Next 11M&A Is Not Always the Best Way of Accessing High-Growth MarketsHigh-Growth Regions and CountriesAfricaRisks of Emerging MarketsEntering Large Slow-Growth Markets Instead of Fast-Growth Emerging MarketsReducing Country M&A Risk: Investing in Local Companies That Engage in Substantial Emerging Market M&AFinding Growth in High-Growth MarketsEmerging Market AcquirerChina and Its Emerging Market Acquirers
Chapter 8: Joint Ventures and Strategic Alliances as M&A Alternatives
Contracts versus Joint VenturesPotential Problems with Joint Ventures and Strategic AlliancesShareholder Wealth Effects of Joint VenturesShareholder Wealth Effects by Type of VentureRelatedness and SizeMarket's Assessment of Risk of Joint VenturesStrategic AlliancesStrategic Alliance ProcessShareholder Wealth Effects of Strategic AlliancesShareholder Wealth Effects by Type of Alliance
Chapter 9: Role of Corporate Governance in M&A
Agency Cost ProblemCEO Compensation and Agency CostsDo Shareholders Get Value for the High Compensation Paid to U.S. CEOs?Board Characteristics and CEO CompensationBenchmarking and How Boards Determine CEO CompensationAre the High Paid Superstar CEOs Simply Worth the Money? NotAre CEOs Paid for Luck?CEO Compensation and M&A ProgramsDo Boards Pay CEOs for Doing M&A?Do Boards Punish CEOs for Doing Bad M&As? Case of Rio TintoGolden Parachutes and M&ACEO Severance PaymentsAre CEOs Evaluating M&A by Thinking, “What's in It for Me?”CEO Overconfidence and M&AAre Overconfident CEOs Good for Anything?Management Compensation and Post-Acquisition PerformanceRole of the Board of DirectorsCEO Tenure, Board Composition, and the Disciplinary Effects of TakeoversAntitakeover MeasuresCorporate Governance and the Divestiture Decision
Chapter 10: Downsizing: Reversing the Error
Analyzing the Strategic Fit of a Business UnitMarket ConditionsRegulatory ConcernsDivestiture Likelihood and Prior AcquisitionsAnother Option: Equity Carve OutAnother Option: SpinoffSpinoff or Equity Carve Out: Which Option Is Better?Another Option: Split-OffTax EffectsShareholder Wealth Effects of SelloffsRound Trip Wealth EffectsSpinoffs as a Means of Increasing FocusDifferences in Types of Focus IncreasesShareholder Wealth Effects of Spinoffs: United States versus EuropeCorporate Governance and SelloffsManagerial Ownership and Selloff GainsActivists and SelloffsMarket Liquidity and the Decision to Sell a UnitInvoluntary SelloffsVoluntary/Involuntary SelloffsVoluntary Defensive SelloffsTracking StocksMore Drastic Solutions: Voluntary Bust-UpsRecent Major Exceptions to Positive Shareholder Wealth Effects of Selloffs
Chapter 11: Valuation and Merger Strategy
Financial versus Nonfinancial BuyersTarget and Bidder Valuation EffectsWhat Types of Acquiring Firms Tend to Perform the Poorest?PremiumsHistorical Trends in Merger PremiumsStock Market Activity and Merger PremiumsStock Market–Driven AcquisitionsDeterminants of Acquisition PremiumsPremiums from Strategic MergersHubris and Merger PremiumsEarly ResearchLater ResearchWinner's Curse Hypothesis of TakeoversCampeau's Mega-BustResearch on Winner's Curse of Takeover ContestsMarket Performance, Valuation, and Takeover ProbabilityDeal Size and Shareholder WealthValuation Analysis and Source of the Flaws in Bad DealsComments of the Residual ValueFree Cash FlowsCost Cutting and Historical Free Cash FlowsGrowth Rate for ProjectionCapitalization Rates and the Exit MultipleDiscount RateWhose Capital Costs Are We Measuring?Using the Build-Up MethodShort-Term Interest Rate TrendsUsing ComparablesPublic versus Private AcquirersPublic versus Private Sellers
About the Author
Index

Overview

Solid guidance for selecting the correct strategic basis for mergers and acquisitions

Examining how M&A fits in corporate growth strategies, Maximizing Corporate Value through Mergers and Acquisitions covers the various strategic reasons for companies entering mergers and acquisitions (M&A), with a look at those that are based on sound strategy, and those that are not.

Helps companies decide whether M&As should be used for growth and increased corporate value
Explores why M&A deals often fail to deliver what their proponents have represented they would
Explains which types of M&A work best and which to avoid

With insider guidance on what boards of directors should be aware of when evaluating proposed deals, Maximizing Corporate Value through Mergers and Acquisitions provides a sound foundation for understanding the risks involved in any mergers and acquisitions deal, before it's too late.

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Mergers and Acquisitions Strategy for Consolidations: Roll Up, Roll Out and Innovate for Superior Growth and Returns

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