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Part I: The Mergers and Acquisitions Environment
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Part I: The Mergers and Acquisitions Environment
by Donald DePamphilis
Mergers, Acquisitions, and Other Restructuring Activities, 10th Edition
Cover image
Title page
Table of Contents
Copyright
Dedication
About the Author
Preface to the Tenth Edition
To The Reader
M&A Environment
M&A Process
M&A Valuation and Modeling
Deal Structuring and Financing Strategies
Alternative Business and Restructuring Strategies
Updated Ancillary Materials
To the Instructor
Acknowledgments
Part I: The Mergers and Acquisitions Environment
Introduction
Chapter 1: An Introduction to Mergers, Acquisitions, and Other Restructuring Activities
Abstract
Inside Mergers and Acquisitions: Centurylink Acquires Level 3 in a Search for Scale
Chapter Overview
Why Do M&As Happen?
Merger and Acquisition Waves
Understanding Corporate Restructuring Activities
Alternative Takeover Strategies
The Role of Holding Companies in Mergers and Acquisitions
The Role of Employee Stock Ownership Plans (ESOPs) in M&As
Business Alliances as Alternatives to M&As
Participants in the Mergers and Acquisitions Process
The Implications of M&As for Shareholders, Bondholders, and Society
Some Things to Remember
Chapter Discussion Questions
Chapter 2: The Regulatory Environment
Abstract
Inside Mergers and Acquisitions: DowDuPont’s Regulatory Nightmare
Chapter Overview
Understanding Federal Securities Laws
Understanding Antitrust Legislation
M&A Implications of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Including 2018 Revisions)
M&A Implications of Data Protection Regulations
State Regulations Affecting Mergers and Acquisitions
Restrictions on Direct Investment in the United States
The US Foreign Corrupt Practices Act
Specific Industry Regulation
Environmental Laws
Labor and Benefit Laws
Cross-Border Transactions
Some Things to Remember
Chapter Discussion Questions
Chapter 3: The Corporate Takeover Market: Common Takeover Tactics, Antitakeover Defenses, and Corporate Governance
Abstract
Inside Mergers and Acquisitions: Auction Euphoria Can Result in Buyer’s Remorse
Chapter Overview
Corporate Governance
Understanding Alternative Takeover Tactics
Other Tactical Considerations
Developing a Bidding Strategy
Activist Investors: Gaining Influence Without Control
Understanding Alternative Takeover Defenses
The Impact of Takeover Defenses on Shareholder Value
Some Things to Remember
Chapter Discussion Questions
Part II: The Mergers and Acquisitions Process: Phases 1–10
Introduction
Chapter 4: Planning: Developing Business and Acquisition Plans—Phases 1 and 2 of the Acquisition Process
Abstract
Inside Mergers and Acquisitions: Home Shopping Feels the Heat From Amazon
Chapter Overview
The Role of Planning in Mergers and Acquisitions
The Merger and Acquisition Process
Phase 1: Building the Business Plan/Model
The Business Plan as a Communication Document
Phase 2: Building the Merger-Acquisition Implementation Plan
Some Things to Remember
Chapter Discussion Questions
Chapter 5: Implementation: Search Through Closing—Phases 3–10 of the Acquisition Process
Abstract
Inside M&A: In the Wake of Industry Consolidation Discovery Communications Buys Scripps Networks
Chapter Overview
Characteristics of High Performing Acquirers
Phase 3: The Search Process
Phase 4: The Screening Process
Phase 5: First Contact
Phase 6: Negotiation
Phase 7: Developing the Integration Plan
Phase 8: Closing
Phase 9: Implementing Postclosing Integration
Phase 10: Conducting a Postclosing Evaluation
The Increasing Application of Data Analytics in M&As
Some Things to Remember
Chapter Discussion Questions
Chapter 6: Postclosing Integration: Mergers, Acquisitions, and Business Alliances
Abstract
Inside Mergers and Acquisitions: Postmerger Integration Challenges
Chapter Overview
The Degree of Integration Varies by Type of Acquirer and Deal
The Role of Integration in Successful Acquisitions
Integration Is a Process, Not an Event
Integrating Business Alliances
Integrating Family Owned Firms
Some Things to Remember
Chapter Discussion Questions
Part III: Mergers and Acquisitions Valuation and Modeling
Introduction
Chapter 7: Mergers and Acquisitions Cash Flow Valuation Basics
Abstract
Inside M&A: Delaware Supreme Court Rules on the Role of Valuation Methods in Appraisal Rights
Chapter Overview
Estimating Required Financial Returns
Risk Assessment
Calculating Free Cash Flows
Applying Discounted Cash Flow Methods
Using the Enterprise Method to Estimate Equity Value
Valuing Nonoperating Assets
Some Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Chapter 8: Relative, Asset-Oriented, and Real Option Valuation Basics
Abstract
Inside Mergers & Acquisitions: Thyssenkrupp and Tata Steel Combine European Steel Operations
Chapter Overview
Relative-Valuation Methods
Asset-Oriented Methods
The Weighted-Average Valuation Method
Real-Options Analysis
Determining When to Use the Different Approaches to Valuation
Valuing Initial Public Offerings
What Do Valuation Professionals Do in Practice?
Some Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Chapter 9: Financial Modeling Basics
Abstract
Inside M&A: Verizon Discounts the Yahoo Purchase Price
Chapter Overview
What Is Financial Modeling?
Financial Modeling Data Requirements
Common Financial Model Linkages
Modelling Changes in US Corporate Tax Laws
Key Steps in the Valuation Process
Model Balancing Mechanism
Data Sources
Managing the Model
Addressing Valuation Issues in a Near Zero Interest Rate Environment
Some Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Chapter 10: Analysis and Valuation of Privately Held Firms
Abstract
Inside M&A: The Need for Capital Forces Sale of Demand Energy
Chapter Overview
How Family Control Affects M&A Activity
Private Versus Public Company Governance
Challenges of Valuing Privately Held Companies
Process for Valuing Privately Held Businesses
Step 1: Adjusting Financial Statements
Step 2: Applying Valuation Methodologies to Privately Held Companies
Step 3: Developing Discount Rates
Step 4: Applying Control Premiums, Liquidity, and Minority Discounts
Early Stage Investment
Taking Private Companies Public
Using Leveraged Employee Stock Ownership Plans to Buy Private Companies
Empirical Studies of Shareholder Returns
Some Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Part IV: Deal Structuring and Financing Strategies
Introduction
Chapter 11: Structuring the Deal: Payment and Legal Considerations
Abstract
Inside M&A: Getting to Yes on Price
Chapter Overview
The Deal-Structuring Process
Form of Acquisition Vehicle and Postclosing Organization
Legal Form of the Selling Entity
Form of Payment
Managing Risk and Reaching Consensus on Purchase Price
Constructing Collar Arrangements
M&A Options and Warrants Takeover Strategies
Form of Acquisition
Some Things to Remember
Chapter Discussion Questions
Chapter 12: Structuring the Deal: Tax and Accounting Considerations
Abstract
Inside M&A: CVS’s Takeover of Aetna Blurs Traditional Roles in the US Healthcare Industry
Chapter Overview
Understanding Tax Authority Communications
Alternative Tax Structures
Taxable Transactions
Tax-Free Transactions
Tax Cuts and Jobs Act of 2017
State and Local Tax Issues
International Taxes
Tax Inversions
Master Limited Partnerships (MLPs), Real Estate Investment Trusts (REITs), and Yield Cos
Financial Reporting of Business Combinations
Impact of Acquisition Accounting on Business Combinations
Recapitalization (“RECAP”) Accounting
Putting It All Together: Takeover and Deal Structure Strategies
Some Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Chapter 13: Financing the Deal: Private Equity, Hedge Funds, and Other Sources of Financing
Abstract
Inside M&A: Staples Goes Private in Response to the Shift to Online Retailing
Chapter Overview
The Role of Public and Private Financial Markets
How Are M&A Transactions Commonly Financed?
What Is the Role of Private Equity, Hedge, and Venture Capital Funds in Deal Financing?
Impact of Tax Reform on M&A Financing
Leveraged Buyouts as Financing Strategies
What Factors Are Critical to Successful LBO’s?
How Do LBO’s Create Value?
The Impact on Financial Returns of Alternative Transaction Strategies
Common LBO Deal and Capital Structures
Some Things to Remember
Chapter Discussion Questions
Chapter 14: Applying Financial Models: To Value, Structure, and Negotiate Stock and Asset Purchases
Abstract
Inside M&A: The Anatomy of a M&A Negotiation
Chapter Overview
Understanding and Applying M&A Financial Models
M&A Models: Stock Purchases
M&A Models: Asset Purchases
Quantifying Synergy
Things to Remember
Chapter Discussion Questions
Practice Problems and Answers
Appendix A: Debt Repayment Schedule, Convertible Securities, Interest Rates, and Betas
Part V: Alternative Business and Restructuring Strategies
Introduction
Chapter 15: Domestic and Cross-Border Business Alliances: Joint Ventures, Partnerships, Strategic Alliances, and Licensing
Abstract
Inside M&A: Comcast and Charter Forge Wireless Alliance
Chapter Overview
Motivations for Business Alliances
What Makes Business Alliances Successful?
Alternative Legal Forms of Business Alliances
Bilateral Versus Multilateral Alliances
Strategic and Operational Plans
Resolving Business Alliance Deal-Structuring Issues
Challenges of Cross-Border Joint Ventures
Potential Impediments to Cross-Border Alliances and Minority Investments
Empirical Findings
Some Things to Remember
Chapter Discussion Questions
Chapter 16: Alternative Exit and Restructuring Strategies: Divestitures, Spin-Offs, Carve-Outs, Split-Offs, and Tracking Stocks
Abstract
Inside M&A: Managing Risk Through Restructuring
Chapter Overview
Why Do Firms Exit Businesses?
Divestitures
Spin-Offs
Equity Carve-Outs
Split-Offs and Split-Ups
Tracking, Targeted, and Letter Stocks
Restructuring Implementation Issues
Key Restructure Legal Documents
Comparing Alternative Exit and Restructuring Strategies
Choosing Among Divestiture, Carve-Out, and Spin-Off Restructuring Strategies
Determinants of Returns to Shareholders Resulting From Restructuring Strategies
Some Things to Remember
Chapter Discussion Questions
Chapter 17: Alternative Exit and Restructuring Strategies: Bankruptcy, Reorganization, and Liquidation
Abstract
Inside M&A: SunEdison Exits Bankruptcy Amid Echoes of Enron
Chapter Overview
Business Failure
Voluntary Settlement Outside of Bankruptcy Court
Reorganization and Liquidation in Bankruptcy
Alternative Options for Failing Firms
The Increasing Role of Hedge Funds in the Bankruptcy Process
Failing Firms and Systemic Risk
Predicting Corporate Default and Bankruptcy
Empirical Studies of Financial Distress
Some Things to Remember
Chapter Discussion Questions
Chapter 18: Cross-Border Mergers and Acquisitions: Analysis and Valuation
Abstract
Inside M&A: Shareholder Angst Causes Breakup of Merger and Longstanding Joint Venture
Chapter Overview
Globally Integrated Versus Segmented Capital Markets
Motives for International Expansion
Common International Market Entry Strategies
Structuring Cross-Border Deals
Financing Cross-Border Deals
Planning and Implementing Cross-Border Transactions in Emerging Countries
How Are Cross-Border Transactions Valued?
Empirical Studies of Financial Returns on Cross-Border Transactions
Some Things to Remember
Chapter Discussion Questions
References
Glossary
Index
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Introduction
Part I
The Mergers and Acquisitions Environment
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