CHAPTER 10
MERGERS AND ACQUISITIONS
LEARNING OUTCOMES
After completing this chapter, you will be able to do the following:
- Classify merger and acquisition (M&A) activities based on forms of integration and types of mergers.
- Explain common motivations behind M&A activity.
- Explain how earnings per share (EPS) bootstrapping works and calculate a company’s post-merger EPS.
- Explain the relationship among merger motivations and types of mergers based on industry life cycles.
- Contrast merger transaction characteristics by form of acquisition, method of payment, and attitude of target management.
- Distinguish among pre-offer and post-offer takeover defense mechanisms.
- Calculate the Herfindahl–Hirschman Index (HHI) and evaluate the likelihood of an antitrust challenge for a given business combination.
- Compare the discounted cash flow, comparable company, and comparable transaction analyses for valuing a target company, including the advantages and disadvantages of each.
- Calculate free cash flows for a target company and estimate the company’s intrinsic value based on discounted cash flow analysis.
- Estimate the value of a target company using comparable company and comparable transaction analyses.
- Evaluate a merger bid, calculate the estimated post-merger value of an acquirer, and calculate the gains accrued to the target shareholders versus the acquirer shareholders.
- Explain the effects of price and payment method on the distribution of risks and benefits in a merger transaction.
- Describe ...
