Principles of Managerial Finance, 15th Edition
by Scott B. Smart, Chad J. Zutter, Lawrence J. Gitman
Summary
Focus on Value
The financial manager is sometimes involved in corporate restructuring activities, which involve the expansion and contraction of the firm’s operations or changes in its asset or ownership structure. A variety of motives could drive a firm toward a merger, but the overriding goal should be maximization of the owners’ wealth. Occasionally, merger transactions are heavily debt-financed leveraged buyouts (LBOs). In other cases, firms attempt to improve value by divesting themselves of certain operating units that they believe constrain the firm’s value, particularly when the breakup value is deemed greater than the firm’s current value.
Whether the firm makes a cash purchase or uses a stock swap to acquire another firm, the ...
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