Documente Academic
Documente Profesional
Documente Cultură
Corporate Control
June 2007
Recent Mergers
Acquiring Company
American Online
Chevron
JDS Uniphase
Deutsche Telecom
BP Amoco (UK)
Echostar Communications
Hewlett-Packard
American Intl. Group
Phillips Petroleum
Selling Company
Time Warner
Texaco
SDL, Inc.
VoiceStream Wireless
Atlantic Richfield
Hughes Electronics
Compaq Computer
American General Corp.
Conoco
Payment
($ billions)
106.0
42.9
41.1
29.4
27.2
25.8
25.0
24.6
24.2
Definition
Merger: Combination of two firms into one,
with the acquirer assuming assets and
liabilities of the target firm.
Tender Offer
Acquisition
Leveraged
Buy-Out
Merger
Management
Buy-Out
Proxy Contest
Takeover attempt in which outsiders
compete with management for
shareholders votes.
Also called Proxy Fight
Most proxy contests fail because outsiders
use their own limited money while
management can use the corporations
funds and lines of communication with
shareholders to defend itself
Acquicisiton
Takeover of a firm by purchase of that
firms common stock or assets
The acquiring company runs the firm after
merger
Must have the approval of at least 50% of
the shareholders of each firm
Leveraged Buy-Out
Acquisition of the firm by a private group
using substansial borrowed funds.
Management Buy-Out
Acquisition of the firm by its own
management in a leveraged buyout
Tender Offer
Takeover attempt in which outsiders
directly offer to buy the stock of the firms
shareholders.
The acquiring firm can bypass the target
firms management altogether.
If the tender offer is succesful, the buyer
will get control and can replace the
existing management
Reduces costs
(more efficient)
Company
S
S
S
Company
S
S
Firm B
Evaluating Mergers
Questions
Is there an overall economic gain to the
merger?
Do the terms of the merger make the
company and its shareholders better off?
????
Evaluating Mergers
Economic Gain
Economic Gain = PV(increased earnings)