Documente Academic
Documente Profesional
Documente Cultură
Chapter Overview
Brief overview of M&A The target firm Takeover defenses Assessments of takeover defenses International perspective
Billions
$800 $600
6,000
1980
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Synergistic M&A
To improve operational or financial synergies. e.g., Exxon and Mobil To diversify by expanding into new businesses. e.g., the AOL and Time Warner
Both synergistic and diversifying. e.g., the Morgan Stanley and Dean Witter Extremely diversifying e.g., General Electrics acquisition of NBC
Most of the recent mergers have occurred for growth and for increased market power. e.g., Oracle and PeopleSoft, HP and Compaq.
Therefore, target firms usually enjoy a share price increase when its acquisition is announced to the public.
Hostile Takeover
Hostile takeover happens
First, when the target firms management balks at a takeover bid, acquirer may take their takeover bid directly to the target firms large shareholders. Second, an interested acquirer circumvents the target firms management and effectively takes control of the target firm.
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Takeover Defenses
There are two categories of takeover defenses: Pre-emptive defenses (1) Firm-level defenses
Reactionary defenses
(2) U.S. state-level defensesstate laws that regulate and limit takeovers
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Federal Acts
There are also federal acts that prevent mergers that would significantly reduce competition. The Bureau of Competition of the FTC and the Antitrust Division of the DOJ uphold antitrust policy. These two government agencies focus on anti-competitive business practices and ensure a competitive industry environment.
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International Perspective
The U.K. experiences its own merger wave since the early 1990s. In bank-centered financial systems, banks seem to play a significant role in which firms merge. Many Asian governments relaxed the foreign ownership restrictions of their firms. Many countries have their own unique set of circumstances that make M&As difficult.
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United Kingdom
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Percent of Total Deal Value
10% 15% 20% 25% 30% 35% 40% 45% 50% 0%
United States France Germany Netherlands Canada Bermuda Italy Ireland Japan Spain Sweden Belgium Bulgaria Switzerland Australia South Korea China Czech Republic Finland Other
5%
Summary
M&As have been viewed as a corporate governance device. Firm-level and state-level takeover defenses weaken disciplinary takeovers. Besides the U.S., takeover activity is only common in the U.K. However, we may see a world-wide increase in M&A activity in the near future.
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