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Mergers, Acquisitions, and Corporate Restructurings, Fourth Edition

Book Description

Modern restructuring techniques for a global business landscape

Corporate restructurings are an indispensable tool in building a new generation of re-engineered companies with the power and resources to compete on a global playing field. Written from a practical and historical perspective, Mergers, Acquisitions, and Corporate Restructurings, Fourth Edition carefully analyzes the strategies and motives that inspire M&As, the laws and rules that govern the field, as well as the offensive and defensive techniques of hostile acquisitions.

In this thoroughly revised Fourth Edition, author and business valuation expert Patrick Gaughan provides a fresh perspective on M&As in today's global business landscape, and how your company can reap the benefits from the various forms of restructurings available. Packed with the most up-to-date research, graphs, and case studies, Mergers, Acquisitions, and Corporate Restructurings, Fourth Edition explores:
* Recent takeover trends including the role of private equity firms and hedge funds
* Most effective offensive and defensive tactics in hostile bids
* A review of the effect of shareholder wealth on a variety of takeover actions
* Modern, historical, and global perspectives on the field
* The various forms of downsizing including divestitures, spinoffs, and equity carve-outs
* Bankruptcy as an effective restructuring technique
* Latest developments in corporate governance
* Pros and cons of joint ventures and strategic alliances
* Primary methods used to value public and private companies

Table of Contents

  1. Copyright
  2. Preface
  3. About the Web Site
  4. 1. Background
    1. 1. Introduction
      1. Recent M&A Trends
      2. Definitions
      3. Valuing a Transaction
      4. Types of Mergers
      5. Reasons for Mergers and Acquisitions
      6. Merger Financing
      7. Merger Professionals
      8. Merger Arbitrage
      9. Leveraged Buyouts and the Private Equity Market
      10. Corporate Restructuring
      11. Merger Negotiations
        1. Disclosure of Merger Negotiations
      12. Merger Approval Procedures
        1. Special Committees of the Board of Directors
        2. Fairness Opinions
        3. Voting Approval
      13. Short-Form Merger
      14. Freezeouts and the Treatment of Minority Shareholders
      15. Purchase of Assets Compared with Purchase of Stock
      16. Structuring the Deal
      17. Assumption of the Seller’s Liabilities
      18. Advantages of Asset Acquisitions
      19. Asset Selloffs
      20. Reverse Mergers
      21. Holding Companies
        1. Advantages
        2. Disadvantages
        3. Special Purchase Acquisition Vehicles
    2. 2. History of Mergers
      1. Merger Waves
      2. What Causes Merger Waves?
      3. First Wave, 1897–1904
      4. Second Wave, 1916–1929
      5. The 1940s
      6. Third Wave, 1965–1969
        1. Management Science and Conglomerates
        2. Industry Concentration and the Conglomerate Wave
        3. Shareholder Wealth Effects of Diversification During the Conglomerate Wave
        4. Price-Earnings Game and the Incentive to Merge
        5. Accounting Manipulations and the Incentive to Merge
        6. Decline of the Third Merger Wave
        7. Performance of Conglomerates
      7. Trendsetting Mergers of the 1970s
        1. INCO versus ESB Merger
        2. United Technologies versus Otis Elevator
        3. Colt Industries versus Garlock Industries
      8. Fourth Wave, 1984–1989
        1. Role of the Corporate Raider
        2. Other Unique Characteristics of the Fourth Wave
          1. Aggressive Role of Investment Bankers
          2. Increased Sophistication of Takeover Strategies
          3. More Aggressive Use of Debt
          4. Legal and Political Strategies
          5. International Takeovers
          6. Role of Deregulation
          7. Why the Fourth Merger Wave Ended
      9. Fifth Wave
        1. Industry Concentration During the Fifth Wave
        2. Fad of the Fifth Merger Wave: Roll-Ups and Consolidations of Industries
        3. Fifth Merger Wave in Europe, Asia, and Central and South America
        4. Performance of Fifth Merger Wave Acquirers
        5. Privatization of State-Owned Enterprises
        6. Emerging Market Acquirers
        7. European Protectionism During the 2000s
      10. Summary
    3. 3. Legal Framework
      1. Laws Governing Mergers, Acquisitions, and Tender Offers
      2. Securities Laws
        1. Filing of an 8K
        2. Filing of an S-4
        3. Williams Act
        4. Section 13(d) of the Williams Act
        5. Schedule 13D
        6. Amendments Required under Section 13(d)(2)
        7. Remedies for Failure to Comply with Section 13(d)
        8. Schedule 13G
        9. Employee Stock Ownership Plans
        10. Section 14(d) and Regulation M-A
        11. Schedule TO
          1. Information Requested on Schedule TO
        12. Commencement of the Offer
        13. Position of the Target Corporation
        14. Time Periods of the Williams Act
          1. Minimum Offer Period
          2. Withdrawal Rights
        15. Pro Rata Acceptance
        16. Definition of a Tender Offer
        17. Materials That Shareholders Receive
        18. Method of Tendering Shares
        19. Changes in the Tender Offer
        20. Best Price Rule and Other Related Rules
        21. Bidder Purchases Outside of Tender Offer
        22. Payment Following Completion of the Offer
        23. Mini-Tender Offers
        24. Taking Control after a Successful Tender Offer
        25. De-listing the Target
        26. Competing Tender Offers
        27. Applicability of U.S. Tender Offer Rules to Takeovers of Non-U.S. Companies
      3. Other Specific Takeover Rules in the United States
        1. Stock Exchange Regulations
        2. Regulation of Proxy Solicitation
      4. International Securities Laws Relating to Takeovers
        1. Europe
          1. Great Britain
          2. European Union
          3. France
          4. Germany
          5. Ireland
          6. Netherlands
          7. Spain
        2. Russian Tender Offer Rules
        3. Canada
        4. Asia
          1. Japan
          2. Korea
          3. China
          4. Taiwan
          5. India
        5. Australia
      5. Business Judgment Rule
        1. Unocal Standard
        2. Revlon Duties
      6. State Antitakeover Laws
        1. Genesis of State Antitakeover Laws in the United States
        2. Key Court Decisions Relating to Antitakeover Laws
          1. Edgar v. MITE
          2. Dynamics v. CTS
          3. Amanda Acquisition Corporation v. Universal Foods Corporation
        3. Components of Second-Generation Laws
          1. Fair Price Provision
          2. Business Combination Provision
          3. Control Share Provision
          4. Cash-Out Statute
        4. Delaware Antitakeover Law
        5. Why Do State Antitakeover Laws Get Passed?
        6. Wealth Effects of State Antitakeover Laws
        7. State Antitrust Actions
      7. Regulation of Insider Trading
        1. Who Are Insiders?
        2. Insider Trading Scandals of the 1980s
        3. Do Insider Trading Laws Effectively Deter Insider Trading?
      8. Antitrust Laws
        1. Sherman Antitrust Act
        2. Clayton Act
        3. Federal Trade Commission Act of 1914
        4. Celler-Kefauver Act of 1950
        5. Hart-Scott-Rodino Antitrust Improvements Act of 1976
          1. Size Requirements for Filing
          2. Filing Fees
          3. Who Must File
          4. Type of Information to Be Filed
        6. Antitrust Premerger Review Time Periods
          1. All-Cash Offers
          2. Securities Offers
        7. Impact of Notice of Government Opposition
          1. Deadlines for Filing
          2. Federal Trade Commission Rules on Creeping Acquisitions
          3. FTC Rules for Second Requests and Speed of Takeover Completion
          4. Exemptions to the Hart-Scott-Rodino Act
        8. Antitrust Approval of International Mergers
        9. Enforcement of Antitrust Laws: Justice Department and Federal Trade Commission Interaction
      9. Recent Trends in Antitrust Enforcement in the United States
      10. Measuring Concentration and Defining Market Share
        1. The 1968 Justice Department Merger Guidelines
        2. The 1982 Justice Department Guidelines
        3. Properties of the HH Index
        4. Example of the HH Index
        5. 1984 Justice Department Guidelines
        6. The 1992 Merger Guidelines
      11. European Competition Policy
      12. Antitrust Remedies
      13. Summary
    4. 4. Merger Strategy
      1. Growth
        1. Achieving Growth in a Slow-Growth Industry through Acquisitions
        2. Is Growth or Increased Return the More Appropriate Goal?
        3. International Growth and Cross-Border Acquisitions
      2. Synergy
      3. Operating Synergy
        1. Revenue-Enhancing Operating Synergy
        2. Cost-Reducing Operating Synergies
        3. Cost Economies in Banking Mergers: United States Compared with Europe
        4. Synergy and Acquisition Premiums
        5. Financial Synergy
      4. Diversification
        1. Diversification and the Acquisition of Leading Industry Positions
        2. “Portfolio” Management of Business Units
        3. Diversification to Enter More Profitable Industries
        4. Financial Benefits of Diversification
        5. Empirical Evidence on Acquisition Programs of the 1960s
        6. Positive Evidence of Benefits of Conglomerates
        7. Is There a Diversification Discount?
        8. Related versus Unrelated Diversification
      5. Other Economic Motives
        1. Horizontal Integration
          1. Market Power
          2. Social Costs of Increased Concentration
        2. Empirical Evidence on the Monopoly Hypothesis
        3. Horizontal Integration, Consolidation, and Roll-Up Acquisition Programs
        4. Vertical Integration
          1. Motives for Vertical Integration
      6. Hubris Hypothesis of Takeovers
        1. Empirical Evidence
        2. Winner’s Curse Hypothesis of Takeovers
        3. Do Bad Bidders Become Good Targets?
        4. Executive Compensation and Corporate Acquisition Decisions
      7. Other Motives
        1. Improved Management
        2. Improve Research and Development
        3. Improve Distribution
      8. Tax Motives
      9. Summary
  5. 2. Hostile Takeovers
    1. 5. Antitakeover Measures
      1. Management Entrenchment Hypothesis versus Stockholder Interests Hypothesis
      2. Preventative Antitakeover Measures
        1. Early Warnings Systems: Monitoring Shareholding and Trading Patterns
        2. Types of Preventative Antitakeover Measures
        3. First-Generation Poison Pills: Preferred Stock Plans
        4. Second-Generation Poison Pills: Flip-Over Rights
        5. Household International and the Legality of Poison Pills
        6. Third-Generation Poison Pills: Flip-In Poison Pills
        7. Back-End Plans
        8. Voting Plans
        9. Mechanics of Issuing Poison Pills
        10. Blank Check Preferred Stock
        11. Dead Hand, Slow Hand, and No Hand Provisions
        12. Shadow Pill
        13. Court Rulings Limiting the Use of Poison Pills
        14. Corporate Governance and “Chewable” Pills
        15. Impact of Poison Pills on Stock Prices
          1. Impact of Poison Pills on Takeover Premiums
          2. Poison Pills and the Auction Process
        16. Conclusion of Research on Shareholder Wealth Effects of Poison Pills
          1. Poison Puts
        17. Corporate Charter Amendments
        18. Staggered Board Amendments
        19. Staggered Board Research
          1. Supermajority Provisions
          2. Legality of Supermajority Provisions
          3. Supermajority Provision Shareholder Wealth Effects
        20. Fair Price Provisions
        21. Shareholder Wealth Effects of Fair Price Provisions
        22. Dual Capitalization
          1. Why Do Dual Class Recapitalizations Get Approved?
          2. Shareholder Wealth Effects of Dual Capitalizations
        23. Antigreenmail Provisions
        24. Restrictions on Ability to Call an Election
        25. Antitakeover Amendments and Managerial Ownership Research
        26. Golden Shares
        27. Golden Parachutes
          1. Shareholder Wealth Effects of Golden Parachute Agreements
          2. Mechanics of Golden Parachutes
          3. Legality of Golden Parachutes
          4. Criticism of Golden Parachutes
          5. Golden Parachutes and Huge Acquisition Payouts of the 2000s
      3. Changing the State of Incorporation
        1. Shareholder Wealth Effects of Reincorporation
      4. Active Antitakeover Defenses
        1. Greenmail
          1. Legality of Differential Payments to Large-Block Shareholders
          2. Shareholder Wealth Effects of Greenmail
          3. Corporate Finance of Share Repurchases
          4. Decline of Greenmail
          5. Evolution of the Greenmailer
        2. Standstill Agreements
          1. Shareholder Wealth Effects of Standstill Agreements
        3. White Knights
        4. Takeover Tactics and Shareholder Concentration: United States Compared with Europe
        5. Shareholder Wealth Effects of White Knight Bids
        6. White Squire Defense
          1. Merger Agreement Provisions
          2. Lockup Transactions
          3. Termination, Breakup, and Topping Fees
          4. No-Shop Provisions
        7. Capital Structure Changes
          1. Recapitalize
          2. Comparison between Recapitalization Plans and LBOs
          3. Use of Recapitalization Plans Protected by Poison Pills
          4. Shareholder Wealth Effects of Recapitalization Plans
          5. Assume More Debt
          6. Issue More Shares
          7. Share Issuance and ESOPs
          8. Buy Back Shares
          9. Implementing a Share Repurchase Program
          10. Discriminatory Self-Tenders: Unocal versus Mesa
          11. Market Reaction to the Unocal Decision
          12. Corporate Restructuring as a Takeover Defense
        8. Litigation as an Antitakeover Defense
          1. Litigation Research
        9. Pac-Man Defense
        10. “Just Say No”
          1. Just Say No Reconciled with Revlon Duties
      5. Information Content of Takeover Resistance
      6. Summary
    2. 6. Takeover Tactics
      1. Preliminary Takeover Steps
        1. Establishing a Toe Hold
        2. Casual Pass
        3. Bear Hugs
      2. Tender Offers
        1. Open Market Purchases
        2. History of the Tender Offer
        3. Reason for Using a Tender Offer
        4. Success Rate of Tender Offers
        5. Cash versus Securities Tender Offers
        6. Ten-Day Window of the Williams Act
        7. Response of the Target Management
        8. Tender Offers and Keeping Management Honest
        9. Creation of a Tender Offer Team
        10. Two-Tiered Tender Offers
          1. Regulation of Two-Tiered Tender Offers
          2. Effect of Two-Tiered Tender Offers on Stockholder Wealth
        11. Any-and-All versus Partial Tender Offers
        12. Empirical Evidence on the Effects of Tender Offers
        13. Wealth Effects of Unsuccessful Tender Offers
          1. Target
          2. Bidder
        14. Tender Offer Premiums and Director Independence
        15. Are “Bad Bidders” More Likely to Become Targets?
      3. Open Market Purchases and Street Sweeps
      4. Advantages of Tender Offers over Open Market Purchases
        1. Arbitragers and Takeover Tactics
      5. Arbitrage and the Downward Price Pressures Around M&A Announcements
      6. Proxy Fights
        1. Proxy Fight Data
        2. Corporate Elections
        3. Voting by Proxy
          1. Calling a Stockholders’ Meeting
          2. Record Date
          3. Shares Held in Street Names
        4. Different Types of Proxy Contests
        5. Regulation of Proxy Contests
        6. Proxy Contests: From the Insurgents’ Viewpoint
        7. Target Size and Proxy Fight Success
        8. Effectiveness of Shareholder Activism
        9. Proxy Fight Process
        10. Voting Analysis
        11. Costs of a Proxy Fight
        12. Shareholder Wealth Effects of Proxy Contests
          1. Early Research
          2. Later Research
        13. Value of Shareholders’ Votes
        14. Nature of the Dissidents and Dissident Campaigns
        15. Long-Term Effects of Proxy Contests
        16. What Determines the Choice of a Tender Offer versus a Proxy Fight?
        17. Combination of a Proxy Fight and a Tender Offer
      7. Summary
  6. 3. Going Private Transactions and Leveraged Buyouts
    1. 7. Leveraged Buyouts
      1. Terminology
      2. Historical Trends in LBOs
        1. Early Origins of LBOs
        2. Trends in LBOs: 1980s–2005
        3. Globalization of LBOs
      3. Costs of Being a Public Company
      4. Management Buyouts
      5. Conflicts of Interest in Management Buyouts
        1. Post-Buyout Managerial Ownership
        2. Going Private Premiums and P/Es Offered
        3. Sources of LBO Gains
        4. Efficiency Gains
        5. Tax Benefits
        6. Cash Flow versus Asset-based LBOs
        7. Investment Banks and LBOs
        8. Leveraged Recapitalizations as an Alternative to an LBO
      6. Financing for Leveraged Buyouts
        1. Secured LBO Financing
          1. Senior Debt
          2. Intermediate-Term Debt
          3. Desirable Characteristics of Secured Leveraged Buyout Candidates
          4. Costs of Secured Debt
          5. Sources of Secured Financing
          6. Financing Gap
        2. Unsecured LBO Financing
      7. Capital Structure of LBOs
      8. Sources of LBO Financing
        1. Types of LBO Risk
        2. LBOs and the Probability of Bankruptcy
      9. Returns to Stockholders from LBOs
      10. Returns to Stockholders from Divisional Buyouts
        1. Post-LBO Firm Performance
        2. Overall Operating Performance
          1. Employment Effects
          2. Research and Development
          3. Capital Spending
          4. Effect of LBOs on Prices
      11. Reverse LBOs
        1. Reverse LBO Research
        2. LBO Regulation and Disclosure: SEC Rule 13e-3
        3. Leveraged Buyouts as White Knights
        4. Leveraged Buyouts, the Position of Other Debt Holders, and Wealth Transfers
      12. Empirical Research on Wealth Transfer Effects
      13. Protection for Creditors
        1. Bankruptcy Proceedings and Pre-LBO Creditors’ Interests
      14. Summary
    2. 8. Trends in the Financing of Takeovers and Going Private Transactions Including Hedge Funds and Private Equity Funds
      1. Trends in Cash versus Stock Percentage of Takeover Financing
        1. Debt Financing and the Cash Component of Offers
        2. International Stock-for-Stock Deals: Currency Issues
      2. Shareholder Wealth Effects and Methods of Payment
        1. Target Companies: Short-Term Effects of Method of Payment
        2. Acquiring Companies: Short-Term Effects of Method of Payment
        3. Acquiring Companies: Long-Term Effects of Method of Payment
          1. Method of Payment and Managerial Ownership
          2. Method of Payment, Managerial Ownership, and Executive Job Retention
        4. Information Asymmetry, Payment Choice, and Announcement Bidder Performance
        5. Institutional Ownership, Blockholders, and Stock Financing
      3. Private Equity Market
        1. Seller versus Private Equity Fund Valuations and Negotiations
        2. Example of a Partial Equity Investment by Private Equity Firm
        3. Example of a Total Acquisition by a Private Equity Firm
        4. M&A Opportunities after Private Equity Cash Out
        5. Leading Private Equity Firms
        6. Private Equity Fund Partnerships and “Club Deals”
        7. Sales to Other Private Equity Buyers
        8. Companies that May be Better in the Hands of “Financial Buyers”
        9. Private Equity Fund Investors
        10. Private Equity Returns and Fees
        11. Financial Engineeering and Private Equity Deals in the 2000s
          1. Dividend Recapitalizations
          2. Management and Termination Fees
        12. Characteristics of Private Equity Returns
      4. Hedge Funds
        1. Hedge Funds and M&As
          1. Hedge Funds as Sources of M&A Debt Financing
          2. Hedge Fund Activism and Corporate Governance
        2. Hedge Fund Regulation
      5. Comparison of Private Equity Funds and Hedge Funds
        1. Hedge Fund Fees
        2. Funds of Hedge Funds
      6. Hedge Fund and Private Equity Fund Convergence
        1. Hedge Fund Returns
      7. Junk Bonds Financing of Takeovers
        1. History of the Junk Bond Market
        2. Why the Junk Bond Market Grew
        3. Historical Role of Drexel Burnham Lambert
        4. Investment Bankers and Highly Confident Letters
        5. Investment Banks and Liquidity of Junk Bond Investments
        6. Junk Bond Refinancing and Bridge Loans
        7. Collapse of the Junk Bond Market in the Late 1980s
          1. LTV Bankruptcy
          2. Financing Failures of 1989
          3. Default of Integrated Resources
          4. Bankruptcy of Drexel Burnham Lambert
          5. Banking Regulation
        8. Fate of the Big Junk Bond Issuers
        9. Decline in the Use of Junk Bonds as a Source of M&A Financing
        10. Role of Junk Bond Research in the Growth of the Market in the Fourth Wave
          1. Junk Bond Defaults and Aging
          2. Other Junk Bond Research
        11. Junk Bond Recovery Rates
        12. Conclusion of the Junk Bond Default Research
        13. Changing Role of Junk Bond Financing in Takeovers and Corporate Finance
        14. Leveraged Loan Market as an Alternative to Junk Bond Deal Financing
          1. Impact of Leveraged Loans on Junk Bond Indenture Contracts
          2. Impact of Sarbanes-Oxley on the Competitiveness of Junk Bond Financing
        15. Default, Recovery, and Loss Rates: Leveraged Loans versus Junk Bonds
          1. Expansion of Banks Originating Leveraged Loans
      8. Stapled Financing
      9. Securitization and M&A Financing
        1. Origins of ABSs for M&As
      10. Summary
    3. 9. Employee Stock Ownership Plans
      1. Historical Growth of ESOPs
      2. Types of Plans
        1. Defined Benefit Plans
        2. Defined Contribution Plans
      3. Characteristics of ESOPs
        1. Average Contribution
      4. Leveraged versus Unleveraged ESOPs
      5. Corporate Finance Uses of ESOPs
        1. Buyouts
        2. Divestitures
        3. Rescue of Failing Companies
        4. Raising Capital
      6. Voting of ESOP Shares
        1. Approval for the Establishment of an ESOP
      7. Cash Flow Implications
      8. Valuation of Stock Contributed into an ESOP
      9. Eligibility of ESOPs
      10. Put Options of ESOPs
      11. Dividends Paid
      12. ESOPs versus a Public Offering of Stock
      13. Employee Risk and ESOPs
      14. Securities Laws and ESOPs
      15. Tax Benefits of LESOPs
        1. Deductibility of Interest and Principal Payments
        2. Other Tax Benefits of ESOPs
          1. Employee/Shareholder Benefits
          2. Employer Corporation Benefits: Dividend Deduction
          3. Ability to Use Loss Carryforwards
      16. Balance Sheet Effects of ESOPs
      17. Drawbacks of LESOPs
        1. Equity Dilution Effects
        2. Distributional Effects of ESOPs
        3. Loss of Control
      18. ESOPs and Corporate Performance
        1. Employee Stock Ownership and Corporate Stability
        2. Fiduciary Responsibilities and ESOPs
      19. ESOPs as an Antitakeover Defense
        1. Effectiveness of ESOPs as an Antitakeover Defense
      20. ESOPs and Shareholder Wealth
      21. ESOPs and LBOs
        1. Leveraged ESOP-LBO Process
        2. ESOPs versus Management Buyouts
      22. Summary
  7. 4. Corporate Restructuring
    1. 10. Corporate Restructuring
      1. Divestitures
        1. Historical Trends
        2. Global Divestiture Trends
        3. Divestiture Likelihood and Prior Acquisitions
        4. Involuntary versus Voluntary Divestitures
        5. Reasons for Voluntary Divestitures
          1. Poor Fit of Division
          2. Reverse Synergy
          3. Poor Performance
          4. Capital Market Factors
          5. Cash Flow Factors
          6. Abandoning the Core Business
      2. Divestiture and Spinoff Process
        1. Financial Evaluation of Divestitures
        2. Spinoffs
          1. Trends in Spinoffs
          2. Involuntary Spinoffs
          3. Defensive Spinoffs
          4. Tax Consequences of Spinoffs
          5. Treatment of Warrants and Convertible Securities
          6. Seller Financing Assistance
          7. Allocation of Debt Obligations and Bond Liabilities
          8. Employee Stock Option Plans
      3. Wealth Effects of Selloffs
        1. Early Research
          1. Oppenheimer (1981)
          2. Kudla and McInish (1983)
          3. Miles and Rosenfeld (1983)
        2. Price Effects of Voluntary Selloffs: Summary of Later Research
        3. Shareholder Wealth Effects of Spinoffs: Parent and Subsidiary Effects Evidence
        4. J. P. Morgan’s Spinoffs Studies
        5. Rationale for a Positive Stock Price Reaction to Selloffs
        6. Wealth Effects of Voluntary Defensive Selloffs
        7. Wealth Effects of Involuntary Selloffs
        8. Wealth Effects of Selloffs on Buyers
        9. Corporate Focus and Spinoffs
      4. Equity Carve-outs
        1. Equity Carve-out Transactions Data: J. P. Morgan Study
        2. Characteristics of Equity Carve-out Firms and the Disposition of Carve-out Proceeds
        3. Equity Carve-outs versus Public Offerings
        4. Equity Carve-outs versus Spinoffs
      5. Voluntary Liquidations, or Bustups
        1. Shareholder Wealth Effects of Voluntary Bustups
      6. Tracking Stocks
      7. Master Limited Partnerships and Selloffs
      8. Summary
    2. 11. Restructuring in Bankruptcy
      1. Types of Business Failure
        1. Economic Failure
        2. Financial Failure
        3. Costs of Financial Distress
      2. Causes of Business Failure
        1. Causes of Financial Distress Following Leveraged Recapitalizations
      3. Bankruptcy Trends
        1. Fraud-Related Bankruptcies
        2. Comment on Largest Bankruptcies Data
      4. U.S. Bankruptcy Laws
        1. Changes in the U.S. Bankruptcy Laws
      5. Reorganization versus Liquidation
      6. Reorganization Process
        1. Bankruptcy Petition and the Filing
        2. Filing Location
        3. Debtor in Possession
        4. Automatic Stay
        5. Time Line in the Reorganization Process
        6. Duration of the Chapter 11 Process
        7. Use of Secured Creditors’ Collateral
        8. Duties of the Debtor in Possession
        9. Creditors’ Committees
        10. Debtor’s Actions and Its Supervision
        11. Exclusivity Period
        12. Obtaining Postpetition Credit
        13. Reorganization Plan
        14. Cramdown
        15. Fairness and Feasibility of the Plan
        16. Partial Satisfaction of Prepetition Claims
      7. Benefits of the Chapter 11 Process for the Debtor
      8. Company Size and Chapter 11 Benefits
        1. Projections Done in Chapter 11
        2. Postbankruptcy Capital Structure and Success
      9. Prepackaged Bankruptcy
        1. Benefits of Prepackaged Bankruptcy
        2. Prevoted versus Postvoted Prepacks
        3. Tax Advantages of Prepackaged Bankruptcy
      10. Workouts
        1. Benefits of Workouts
        2. Recognizing Better Workout Candidates
        3. Evidence on Role of Transactions Costs in Voluntary Restructuring versus Chapter 11 Decision
        4. Acquisitions Following Bankruptcy
      11. Corporate Control and Default
        1. Leveraged Buyouts and Bankruptcy Proceedings
        2. Litigation Liabilities and Chapter 11
      12. Liquidation
      13. Investing in the Securities of Distressed Companies
        1. Returns on Distressed Debt Securities
        2. Control Opportunities Using Distressed Debt Securities
        3. Role of Vulture Investors and the Market for Control of Distressed Firms
      14. Summary
    3. 12. Corporate Governance
      1. Failed Corporate Governance: Accounting Scandals
      2. Sarbanes-Oxley Act
      3. Other Regulatory Changes
      4. Corporate Governance
        1. Corporate Democracy
        2. Agency Costs
        3. CEO Compensation and Agency Costs
        4. Managerial Compensation, Mergers, and Takeovers
        5. Compensation Characteristics of Boards That Are More Likely to Keep Agency Costs in Check
          1. Management Perks, Agency Costs, and Firm Value
        6. Interlocking Boards
        7. Independence of Directors
        8. New Bright Line Standards for Directors
        9. Compensation, Board Size, and Corporate Governance
        10. CEO Compensation and Power
        11. Disciplinary Takeovers, Company Performance, CEOs, and Boards
        12. Merger Strategy and Corporate Governance
        13. Do Boards Reward CEOs for Initiating Acquisitions and Mergers?
        14. CEO Compensation and Diversification Strategies
        15. Agency Costs and Diversification Strategies
        16. Interests of Directors and M&As
        17. Managerial Compensation and Firm Size
        18. Corporate Control Decisions and Their Shareholder Wealth Effects
        19. Does Better Corporate Governance Increase Firm Value?
        20. Executive Compensation and Postacquisition Performance
        21. Mergers of Equals and Corporate Governance
      5. Summary
    4. 13. Joint Ventures and Strategic Alliances
      1. Contractual Agreements
      2. Comparing Strategic Alliances and Joint Ventures with Mergers and Acquisitions
      3. Joint Ventures
        1. Motives for Joint Ventures
        2. Regulation and Joint Ventures
        3. Shareholder Wealth Effects of Joint Ventures
        4. Shareholder Wealth Effects by Type of Venture
        5. Restructuring and Joint Ventures
        6. Potential Problems with Joint Ventures
        7. Strategic Alliances
      4. Governance of Strategic Alliances
        1. Shareholder Wealth Effects of Strategic Alliances
        2. Shareholder Wealth Effects by Type of Alliance
        3. What Determines the Success of Strategic Alliances?
      5. Summary
    5. 14. Valuation
      1. Valuation Methods: Science or Art?
      2. Managing Value as an Antitakeover Defense
      3. Benchmarks of Value
        1. Book Value
        2. Liquidation Value
        3. Discounted Future Cash Flows or Net Present Value Approach
        4. Continuing Value
        5. Adjustments to DCF Enterprise Value
        6. Arriving at Equity Value Using Enterprise Value
        7. Defining Free Cash Flows
        8. Free Cash Flow Theory of Mergers, Acquisitions, and Leveraged Buyouts
        9. Accuracy of Discounted Cash Flows: Evidence from Highly Leveraged Transactions
        10. Choice of the Discount Rate
        11. Cost of Capital and the Discount Rate
        12. Cost of Debt
        13. Cost of Preferred Stock
        14. Cost of Common Stock
        15. Acquirer’s Hurdle Rate
      4. How the Market Determines Discount Rates
        1. Discount Rate and Risk
        2. Cross-Border Acquisitions and Risk
        3. Changing Interest Rates and Acquisition Prices: Evidence from the Fifth Merger Wave
        4. Real Options in Valuation
        5. Comparable Multiples
        6. Establishing Comparability
        7. Dealing with Outliers
        8. Using P/E Multiples
      5. Valuation of the Target’s Equity
      6. Takeovers and Control Premiums
        1. Supply and Demand Factors and Takeover Prices
      7. Marketability of the Stock
        1. Data Reliability and Fraudulent Inaccuracies
        2. Role of Arbitragers and Impact on Prices
        3. Valuation Effects of Mergers and Acquisitions
        4. What Types of Acquiring Firms Tend to Perform the Poorest?
        5. Control Premiums and Target Shareholder Returns
        6. Historical Trends in Merger Premiums
        7. Stock Market Activity and Merger Premiums
        8. Determinants of Acquisition Premiums
        9. Premiums from Strategic Mergers
        10. Premiums and Mergers of Equals
        11. Does the Market Value Control Independent of Takeovers?
      8. Valuation of Stock-for-Stock Exchanges
        1. Stock-for-Stock Exchanges and Auctions
        2. Tax Incentives for Stock versus Cash Transactions
        3. Risk Effects: Stock versus Cash
        4. Legal Issues in Stock-Financed Transactions
      9. Exchange Ratio
        1. Earnings per Share of the Surviving Company
        2. Criteria for Dilution in EPS
        3. Highest Offer Price without Dilution in EPS
        4. Factors That Influence Initial Changes in Earnings per Share
        5. Bootstrapping Earnings per Share
        6. Postmerger P/E Ratio
      10. Fixed Number of Shares versus Fixed Value
      11. International Takeovers and Stock-for-Stock Transactions
      12. Desirable Financial Characteristics of Targets
        1. Valuation of Private Businesses
        2. Reported Taxable Income
        3. Public Corporations and the Reporting of Income
        4. Factors to Consider When Valuing Closely Held Businesses
        5. Acquisition Multiples
        6. Adjustments to Valuation Methods
        7. Minority Discounts
        8. Applying Marketability and Minority Discounts
        9. Valuation Research on Takeovers of Privately Held Companies
      13. Summary
      14. Appendix
        1. Discounted Cash Flow Analysis
        2. Other Factors
          1. Sum-of-the-Parts Breakup Analysis
        3. Sale of Business Information U.S. for Cash
          1. Acquiror Targets
        4. Public Market Valuation for Media Measurement and Information
          1. Public Market Valuation for Marketing Information
    6. 15. Tax Issues
      1. Financial Accounting
        1. Purchase Method
        2. Effect of Accounting Treatment on Stock Prices
      2. Taxable versus Tax-Free Transactions
        1. Tax-Free Reorganizations
          1. Type A Reorganization
          2. Type B Reorganization
          3. Type C Reorganization
          4. Type D Reorganization
      3. Tax Consequences of a Stock-for-Stock Exchange
        1. Taxable Purchases of Stock
        2. Taxable Purchases of Assets
        3. Taxable versus Partially Taxable Transactions
        4. Tax Loss Carryforwards
        5. Tax Loss Carryforward Research
        6. Acquiring Firm’s Treatment of Target’s Tax Benefits
      4. Asset Basis Step-Up
      5. Changes in the Tax Laws
        1. General Utilities Doctrine
        2. Elimination of the Morris Trust
        3. Real Estate Investment Trusts
      6. Role of Taxes in the Merger Decision
        1. Effects of Increased Leverage
      7. Taxes as a Source of Value in Management Buyouts
        1. Leveraged Buyouts and Tax Revenues
      8. Miscellaneous Tax Issues
        1. Taxes and Golden Parachutes
        2. Taxes and Termination Fees
        3. Taxes and Greenmail
      9. Summary
  8. Glossary