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

Book Description

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.

Table of Contents

  1. Cover
  2. Series Page
  3. Title Page
  4. Copyright
  5. Preface
  6. Chapter 1: Merger Growth Strategy
    1. Strategy and M&A
    2. Introduction to M&A
    3. Background and Terminology
    4. Hostile Takeovers
    5. Takeover Defense
    6. Leveraged Transactions
    7. Restructurings
    8. Trends in Mergers
  7. Chapter 2: Growth through Mergers and Acquisitions
    1. Is Growth or Increased Return the More Appropriate Goal? The Case of Hewlett-Packard
    2. M&A Must Fit the Strategy—Not the Other Way Around
    3. Strategy Should Not Be Just M&A
    4. Organic Growth or Growth through M&A
    5. Acquisition and Development versus Research and Development
    6. Can M&A Be Effectively Used to Buy Growth?
    7. Success in Core Business Does Not Always Translate to Success with M&A Strategy: Focus on Microsoft
    8. Growth through Bolt-On Acquisitions
    9. Knowing When to Exit a Business
    10. From Growth through M&A to Growth through Organic Expansion
    11. Controlling the Runaway Dealmaker CEO
    12. Using M&A to Achieve Growth in a Slow-Growth Industry
    13. Squeezing Out Growth in a Slow-Growth Industry Using Multiple Options
    14. Dealing with a Slow-Growth Business and Industry
    15. Geographical Expansion through M&A
    16. International Growth and Cross-Border Acquisitions
    17. Taking Advantage of Currency Fluctuations to Pursue High-Growth M&A
    18. Finding Growth in High-Growth Markets
    19. Cyclical Companies Achieving Growth in Recessed Markets
  8. Chapter 3: Synergy
    1. What Is Synergy in the Context of M&A?
    2. Achievement of Synergy: A Probabilistic Event
    3. Types of Synergy
    4. Industries' Pursuit of Cost Economies
    5. Research on Operating Economies in M&A
    6. Economies of Scope
    7. Scope Economies and the One-Stop Shop
    8. CopyCat Following of Another Firm's Foolish M&A Strategy
    9. Cost Economies in Banking Mergers: United States versus Europe
    10. Internationalization Theory of Synergy and Information-Based Assets
  9. Chapter 4: Diversification
    1. Diversifying M&A in the Conglomerate Era
    2. Modern-Day U.S. Conglomerates
    3. Portfolios of Companies
    4. Theoretical Basis for Diversification
    5. Applying Portfolio Theory to Conglomerates?
    6. Diversification and the Acquisition of Leading Industry Positions
    7. Achieving a Number One or Two Ranking Is Not a Panacea
    8. Diversification to Enter More Profitable Industries
    9. Empirical Evidence on Diversification
    10. Empirical Evidence on the Acquisition Programs of the 1960s
    11. How Likely Is It That Diversifying Acquisitions Will End Up Being Sold Off?
    12. Is There a Diversification Discount?
    13. Focus Hypothesis
    14. Types of Focus Increases
    15. Focus-Increasing Asset Sales Raise Value
    16. Explanation for the Diversification Discount
    17. Related versus Unrelated Diversification
    18. Why Are Very Diversified Companies Allowed to Form? Beware of the Empire Builders
    19. Do Managerial Agendas Drive M&A?
  10. Chapter 5: Horizontal Integration and M&A
    1. Advantages of Holding the One and Two Position in the Industry
    2. Benefits of Size: Spotlight on the Mobile Telecommunications Industry
    3. Motivation to Increase Size
    4. Competitive Pressures of Competitors' M&A Program
    5. Horizontal Deals: Acquisitions of Competitors and Their Competing Brands
    6. Sprint–Nextel Horizontal Deal: One of the Worst in M&A History
    7. Declining Industry Demand Necessitating Industry Consolidation
    8. Synergistic Gains and Horizontal M&A
    9. Net Benefits of Horizontal Deals = Synergistic Gains – (Easy to Measure Costs + Hard to Measure Costs)
    10. Horizontal Merger Success, Target's Size, and Post-M&A Integration Costs
    11. Mergers of Equals
    12. Mergers of Equals and Challenges of Integration
    13. Mergers-of-Equals Research: Acquirers versus Target Gains
    14. Competitive Advantages of Horizontal Deals: Case Study—InBev and Anheuser-Busch
    15. Regulatory Concerns on Merger Integration
    16. Horizontal M&A and Market Power: An Economic Perspective
    17. Empirical Evidence on Whether Firms Pursue M&A to Achieve Market Power
    18. Countervailing Power, Industry Concentration, and M&A
    19. Horizontal Integration, Consolidation, and Roll-Up Acquisition Programs
  11. Chapter 6: Vertical Integration
    1. Benefits of Vertical Integration
    2. Risk and Vertical Integration
    3. Vertical Integration as a Path to Global Growth
    4. How Owning Your Own Supplier Can Be a Competitive Disadvantage
    5. Vertical Integration as a Natural Outgrowth of a Business
    6. Vertical Integration: A Growth Strategy?
    7. Continually Reevaluating a Vertical Integration Strategy
    8. Regulation of Vertical Integration
    9. CopyCat Vertical Integration
  12. Chapter 7: Growth through Emerging Market M&A
    1. Economic Condition of Major Economies in the Postsubprime World
    2. Low-Growth Markets' Diminishing Returns
    3. Role of Demographics
    4. The Next 11
    5. M&A Is Not Always the Best Way of Accessing High-Growth Markets
    6. High-Growth Regions and Countries
    7. Africa
    8. Risks of Emerging Markets
    9. Entering Large Slow-Growth Markets Instead of Fast-Growth Emerging Markets
    10. Reducing Country M&A Risk: Investing in Local Companies That Engage in Substantial Emerging Market M&A
    11. Finding Growth in High-Growth Markets
    12. Emerging Market Acquirer
    13. China and Its Emerging Market Acquirers
  13. Chapter 8: Joint Ventures and Strategic Alliances as M&A Alternatives
    1. Contracts versus Joint Ventures
    2. Potential Problems with Joint Ventures and Strategic Alliances
    3. Shareholder Wealth Effects of Joint Ventures
    4. Shareholder Wealth Effects by Type of Venture
    5. Relatedness and Size
    6. Market's Assessment of Risk of Joint Ventures
    7. Strategic Alliances
    8. Strategic Alliance Process
    9. Shareholder Wealth Effects of Strategic Alliances
    10. Shareholder Wealth Effects by Type of Alliance
  14. Chapter 9: Role of Corporate Governance in M&A
    1. Agency Cost Problem
    2. CEO Compensation and Agency Costs
    3. Do Shareholders Get Value for the High Compensation Paid to U.S. CEOs?
    4. Board Characteristics and CEO Compensation
    5. Benchmarking and How Boards Determine CEO Compensation
    6. Are the High Paid Superstar CEOs Simply Worth the Money? Not
    7. Are CEOs Paid for Luck?
    8. CEO Compensation and M&A Programs
    9. Do Boards Pay CEOs for Doing M&A?
    10. Do Boards Punish CEOs for Doing Bad M&As? Case of Rio Tinto
    11. Golden Parachutes and M&A
    12. CEO Severance Payments
    13. Are CEOs Evaluating M&A by Thinking, “What's in It for Me?”
    14. CEO Overconfidence and M&A
    15. Are Overconfident CEOs Good for Anything?
    16. Management Compensation and Post-Acquisition Performance
    17. Role of the Board of Directors
    18. CEO Tenure, Board Composition, and the Disciplinary Effects of Takeovers
    19. Antitakeover Measures
    20. Corporate Governance and the Divestiture Decision
  15. Chapter 10: Downsizing: Reversing the Error
    1. Analyzing the Strategic Fit of a Business Unit
    2. Market Conditions
    3. Regulatory Concerns
    4. Divestiture Likelihood and Prior Acquisitions
    5. Another Option: Equity Carve Out
    6. Another Option: Spinoff
    7. Spinoff or Equity Carve Out: Which Option Is Better?
    8. Another Option: Split-Off
    9. Tax Effects
    10. Shareholder Wealth Effects of Selloffs
    11. Round Trip Wealth Effects
    12. Spinoffs as a Means of Increasing Focus
    13. Differences in Types of Focus Increases
    14. Shareholder Wealth Effects of Spinoffs: United States versus Europe
    15. Corporate Governance and Selloffs
    16. Managerial Ownership and Selloff Gains
    17. Activists and Selloffs
    18. Market Liquidity and the Decision to Sell a Unit
    19. Involuntary Selloffs
    20. Voluntary/Involuntary Selloffs
    21. Voluntary Defensive Selloffs
    22. Tracking Stocks
    23. More Drastic Solutions: Voluntary Bust-Ups
    24. Recent Major Exceptions to Positive Shareholder Wealth Effects of Selloffs
  16. Chapter 11: Valuation and Merger Strategy
    1. Financial versus Nonfinancial Buyers
    2. Target and Bidder Valuation Effects
    3. What Types of Acquiring Firms Tend to Perform the Poorest?
    4. Premiums
    5. Historical Trends in Merger Premiums
    6. Stock Market Activity and Merger Premiums
    7. Stock Market–Driven Acquisitions
    8. Determinants of Acquisition Premiums
    9. Premiums from Strategic Mergers
    10. Hubris and Merger Premiums
    11. Early Research
    12. Later Research
    13. Winner's Curse Hypothesis of Takeovers
    14. Campeau's Mega-Bust
    15. Research on Winner's Curse of Takeover Contests
    16. Market Performance, Valuation, and Takeover Probability
    17. Deal Size and Shareholder Wealth
    18. Valuation Analysis and Source of the Flaws in Bad Deals
    19. Comments of the Residual Value
    20. Free Cash Flows
    21. Cost Cutting and Historical Free Cash Flows
    22. Growth Rate for Projection
    23. Capitalization Rates and the Exit Multiple
    24. Discount Rate
    25. Whose Capital Costs Are We Measuring?
    26. Using the Build-Up Method
    27. Short-Term Interest Rate Trends
    28. Using Comparables
    29. Public versus Private Acquirers
    30. Public versus Private Sellers
  17. About the Author
  18. Index