Mergers And Acquisitions

Acquisitions and mergers. Introduction. Value creation framework. Valuation created framework. Empirical research and results. Acquisitions occur in waves. Do acquisitions create value for the acquiring's shareholders? Shareholders of the target company. Successful vs unsuccessful deals. Importance of empirical evidence. Archetypes for value creation. Improve the performance of the target company. Consolidate to remove excess capacity from an industry. Create market access for products. Acquire skills or technologies. Pick winners early. Hostile takeover. What is buyout and leveraged buyout (LBO)? Reasons for LBO. Advantages and disadvantages of LBO. Sucess stories. Hilton. Rjr nabisco. Management buyout (MBO) and process of it. Reasons for MBO. Advantages and disadvantages of MBO. Examples of MBO. References.

Introduction Value creation framework Empirical results Archetypes for value creation Hostile takeovers Leveraged buyout (LBO) Management buyout (MBO).

Merger: two firms agree to create one big company instead of continuing with there separately owned and operated companies. The stock of both the companies are turning into a totally new company stock. when a company buys another company with as effect that the target company doesn’t exist anymore and the buying company is the official new owner. the buyers companies stock continues to be traded while this isn’t the case for the target company. WHY?

Stand-alone value of target Value of the performance improvements.

For example: Company A buys company B for 1.3 billion. This includes 30 % of the acquisition premium. The value of the performance improvements is expected to be 40% We subtract 1.4 billion – 1.3 billion and we have an acquirers value of a 100 million.

Why? Better insights about acquisitions & their effect on value creation What? Research based on empirical evidence Observing and documenting patterns and behaviour through experimentation How? Recorded & analysed.

Influence of 3 factors Stock prices: optimism Low interest rates: lower loan costs => higher overall returns for the investors Influence of big acquisitions in an industry.