Lecture 8- Corporate restructuring

Takeover is general term referring to of of firm from one of shareholders to another. Firm that has decided to take over another firm is & other firm is

Firm can get control of another firm without owning more than of . Firm can have amount of in another firm that enables firm to take control of of that firm

Merger- of one firm by another. Acquiring firm retains & , & acquires all & of acquired firm. Acquired firm to after merger

Consolidation- Similar to but firm is created. Acquiring & acquired firm to & become part of firm

One advantage of using merger to acquire firm is it’s & does not as much as other forms of acquisition. This is because firms to their entire

One disadvantage of using merger to acquire firm is it must be by of of each firm

Acquisition of shares- Acquirer purchases firm’s voting in exchange for , or other . Very often this starts as approach to buy but generally ends up being offer ( offer to buy of target firm)

Acquisition of shares very often related to because easiest way for firm to acquire another firm is approach of firm & proceed through takeover

Advantage of using acquisition of shares to acquire firm is that no have to be held & no are required

Acquisition of assets- Acquirer buys all of

One classification of acquisition is . This is acquisition of firm in . & firms compete with each other in their i.e. one pharmaceutical company takes over another

Reasons for horizontal acquisition include , or of , , to an &

Another classification of acquisition is . This is acquisition of firm in at different in i.e. oil company takes over company in refining business

Reasons for vertical acquisition include sources of or outlets, access to , of vertical integration &

Third classification of acquisition is . This is acquisition of firm that has ( & firm are in lines of business) i.e. software company takes over supermarket

Reasons for conglomerate acquisition include spreading through &

Synergy- incremental net associated with combination of through or

One source of synergy is . This includes gains ( & may produce greater operating revenues than two ), benefits (increase management by two firms coming together) & market

Another source of synergy is . This includes of , of vertical , transfer, complementary , elimination of inefficient & reduced requirements

Third source of synergy is . This includes use of losses, use of unused , use of surplus & ability to write up of depreciable

In friendly takeover, of two firms about takeover. Acquirer decides on firm. Then, it selects to carry out acquisition. After that, it decides on it’s willing to pay. Then, it sets an initial & makes contact with firm. After that, many & occur. Then, firm’s board approves acquisition. Finally, an affirmative by firm’s shareholders is needed

In hostile takeover, of target firm takeover

One strategy that is followed for hostile takeover is . Start to purchase target’s in secret followed by ( made directly to shareholders of target firm to buy shares at over current ). When ends bidder sees whether it has got enough to have i.e. control over board of directors

Another strategy that is followed for hostile takeover is . firm buys shares on until they have enough for

Third strategy that is followed for hostile takeover is . This is an attempt to gain of firm by soliciting number of shareholder to replace existing

One defensive tactic against hostile takeovers (before) is . This involves generous packages paid to firm's in event of

Another defensive tactic against hostile takeovers (before) is . This is device designed to make takeover attempts unappealing, if not impossible

Third defensive tactic against hostile takeovers (before) is . One device of is to election of board members. It involves only of hostile management board getting at a time. This is known as (). Another device is . This is when firm makes acquisition more difficult by of shareholders of record who must approve merger

Two defensive tactics against hostile takeovers (after) are & . involves made by firm to shares of its outstanding equity from an individual in an attempt to potential unfriendly takeover attempt. is contract wherein firm agrees to limit its holdings in firm

Another two defensive tactics against hostile takeovers (after) are & . These occur at same time as . Firm buys amount of its own from individual , usually at

Another two defensive tactics against hostile takeovers (after) are & . is when traded firm becomes group, usually comprised of management, purchases its (delisted so not public/listed anymore). is going-private in which percentage of money used to acquire is borrowed. Normally, price is financed with amounts of debt

Another defensive tactic against hostile takeovers (after) is . This is related to as firm threatens to some of most important to make firm less attractive to firm

Another two defensive tactics against hostile takeovers (after) are & . is suitor that firm turns to as an alternative to bidder. is when firm arranges for entity to acquire large block of

Another defensive tactic against hostile takeovers (after) is . It is move that firm with is to or to its major

Final defensive tactic against hostile takeovers (after) is . This is any designed to unwanted offers

Benefits to managers of bidding firm of takeover are they receive when firms & their & are often related to of firm. Managers are disposed to look on size acquisitions, even those with negative NPV

Managers of target firm employ tactics even if takeover is to shareholders in order to their jobs. Managers that cannot avoid takeover may with taking good deal for themselves at expense of their

Accounting treatment of mergers & acquisitions should recognise of all assets & liabilities on date. , states that it should be presented in such way as to allow to understand of mergers & acquisitions

Two things that create value in leverage buyouts are extra which provides . Leverage buyouts may simply increase level to its optimum. Also, there is increased . They own firm so interested to & because high interest payments need to be made, they have to increase

Divestitures- of , , &/or of business to . Reasons for divestiture are required to meet or regulations, defence against , provides to poor liquidity firms, streamline firm making it easier to value & firms may simply want to sell

One type of divestiture is . This is distribution of in subsidiary to parent company . Reasons for are publicly traded division increases in market making it easier to company & spin-off, equity acts as an incentive for to work harder, consequences of are generally better than from sale because parent receives no from the spin-off

Another type of divestiture is . This is same as but in this entity are sold to via an

Third type of divestiture is . This is of company into or companies