Dedication
Contents of the Companion Website
Preface to the Seventh Edition
To the Reader
To the Instructor
Online Instructor’s Manual
Student Study Guide
Many Practical, Timely, and Diverse Examples and Current Business Cases
Comprehensive Yet Flexible Organization
Acknowledgments
About the Author
Part I: The Mergers and Acquisitions Environment
Chapter 1. An Introduction to Mergers, Acquisitions, and Other Restructuring Activities
Inside M&A: Brand Management—V.F. Corp. Buys Timberland
Chapter Overview
Why Mergers and Acquisitions Happen
Historical Developments in Mergers and Acquisitions
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 Mergers and Acquisitions
Business Alliances as Alternatives to Mergers and Acquisitions
Participants in the Mergers and Acquisitions Process
The Implications of Mergers and Acquisitions for Shareholders, Bondholders, and Society
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 2. The Regulatory Environment
Inside M&A: AT&T/T-Mobile Deal Short-circuited by Regulators
Chapter Overview
Understanding Federal Securities Laws
Understanding Antitrust Legislation
The Implications for M&A of the Dodd-Frank Wall Street Reform and Consumer Protection Act
State Regulations Affecting Mergers and Acquisitions
Restrictions on Direct Foreign Investment in the United States
The U.S. Foreign Corrupt Practices Act
Fair Disclosure (Regulation FD)
Specific Industry Regulations
Environmental Laws
Labor and Benefit Laws
Cross-Border Transactions
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 3. The Corporate Takeover Market: Common Takeover Tactics, Antitakeover Defenses, and Corporate Governance
Inside M&A: Linkedin IPO Raises Governance Issues
Chapter Overview
Corporate Governance
Understanding Altenative Takeover Tactics
What Makes the Aggressive Approach Successful?
Other Tactical Considerations
Developing a Bidding Strategy
Understanding Alternative Takeover Defenses
The Impact of Takeover Defenses on Shareholder Value
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Part II: The Mergers and Acquisitions Process: Phases 1–10
Chapter 4. Planning: Developing Business and Acquisition Plans: Phases 1 and 2 of the Acquisition Process
Inside M&A: From a Social Media Darling to an Afterthought—The Demise of Myspace
Chapter Overivew
The Role of Planning in Mergers and Acquisitions
The Merger and Acquisition Process
Phase 1: Building the Business Plan
The Business Plan as a Communication Document
Phase 2: Building the Merger-Acquisition Implementation Plan
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 5. Implementation: Search Through Closing: Phases 3 through 10 of the Acquisition Process
Inside M&A: Sony’s Strategic Missteps
Chapter Overview
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
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 6. Postclosing Integration: Mergers, Acquisitions, and Business Alliances
Inside M&A: The Challenges of Integrating United and Continental Airlines
Chapter Overview
The Role of Integration in Successful Mergers and Acquisitions
Integration is A Process, not an Event
Integrating Business Alliances
Some Things to Remember
Discussion Questions
Part III: Mergers and Acquisitions Valuation and Modeling
Chapter 7. Mergers and Acquisitions Cash Flow Valuation Basics
Inside M&A: Valuation Methodologies and Fairness Opinion Letters
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
Putting It All Together
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Prolems and Answers
Chapter 8. Relative, Asset-Oriented, and Real-Option Valuation Basics
Inside M&A: Bristol-Myers Squibb Places a Big Bet on Inhibitex
Chapter Overview
Relative-Valuation Methods
Asset-Oriented Methods
The Weighted-Average Valuation Method
Adjusting Valuation Estimates for Purchase Price Premiums
Real-Options Analysis
Determining when to Use the Different Approaches to Valuation
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Problems and Answers
Chapter 9. Applying Financial Models: To Value, Structure, and Negotiate Mergers and Acquisitions
Inside M&A: HP Buys EDS—The Role of Financial Models in Decision Making
Chapter Overview
Limitations of Financial Data
The Model-Building Process
Assessing Impact of M&A’s on Postacquisition Earnings Per Share
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Problems and Answers
Chapter 10. Analysis and Valuation of Privately Held Firms
Inside M&A: Taking Advantage of a “Cupcake Bubble¿
Chapter Overview
What are Privately Held Companies?
Governance Issues
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
Reverse Mergers
Using Leveraged Employee Stock Ownership Plans (ESOPS) to Buy Private Companies
Empirical Studies of Shareholder Returns
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Problems and Answers
Part IV: Deal-Structuring and Financing Strategies
Chapter 11. Structuring the Deal: Payment and Legal Considerations
Inside M&A: Illustrating How Deal Structure Affects Value—The Facebook/Instagram Deal
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
Form of Acquisition
Some Things to Remember
Discussion Questions
Chapter 12. Structuring the Deal: Tax and Accounting Considerations
Inside M&A: Johnson & Johnson Uses Financial Engineering to Acquire Synthes Corporation
Chapter Overview
Alternative Tax Structures
Taxable Transactions
Tax-Free Transactions
Other Tax Considerations Affecting Corporate Restructuring
Financial Reporting of Business Combinations
Impact of Purchase Accounting on Business Combinations
Recapitalization (“Recap¿) Accounting
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Problems and Answers
Chapter 13. Financing the Deal: Private Equity, Hedge Funds, and Other Sources of Financing
Inside M&A: Lessons from Pep Boys’ Aborted Attempt to Go Private
Chapter Overview
How are M&A Transactions Commonly Financed?
What is the Role of Private Equity, Hedge, and Venture Capital Funds in Deal Financing?
Leveraged Buyouts as Financing Strategies
What Factors are Critical to Successful LBOs?
How do LBOs Create Value?
Common LBO Deal and Capital Structures
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 14. Highly Leveraged Transactions: LBO Valuation and Modeling Basics
Inside M&A: Kinder Morgan’s Takeover of El Paso Raises Ethical Questions
Chapter Overview
How are LBOs Valued?
LBO Valuation and Structuring Model Basics
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Practice Problems
Part V: Alternative Business and Restructuring Strategies
Chapter 15. Business Alliances: Joint Ventures, Partnerships, Strategic Alliances, and Licensing
Inside M&A: Exxon-Mobil and Russia’s Rosneft Create ArCtic Oil and Gas Exploration Joint Venture
Chapter Overview
Motivations for Business Alliances
What Makes Business Alliances Successful?
Alternative Legal Forms of Business Alliances
Strategic and Operational Plans
Resolving Business Alliance Deal-Structuring Issues
Empirical Findings
Some Things to Remember
Discussion Questions
Chapter 16. Alternative Exit and Restructuring Strategies: Divestitures, Spin-Offs, Carve-Outs, Split-Offs, and Tracking Stocks
Inside M&A: The Warner Music Group is Sold at Auction
Chapter Overview
Why do Firms Exit Businesses?
Divestitures
Spin-Offs
Equity Carve-Outs
Split-Offs and Split-Ups
Tracking Stocks, Target Stocks, and Letter Stocks
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
Discussion Questions
Chapter 17. Alternative Exit and Restructuring Strategies: Bankruptcy Reorganization and Liquidation
Inside M&A: Photography Icon Kodak Declares Bankruptcy, a Victim of Creative Destruction
Chapter Overview
Business Failure
Voluntary Settlements Outside of Bankruptcy
Reorganization and Liquidation in Bankruptcy
Alternative Options for Failing Firms
Failing Firms and Systemic Risk
Predicting Corporate Default and Bankruptcy
Valuing Distressed Businesses
Empirical Studies of Financial Distress
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
Chapter 18. Cross-Border Mergers and Acquisitions: Analysis and Valuation
Inside M&A: Sabmiller Acquires Australia’s Foster’s Beer
Chapter Overview
Globally Integrated Markets 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 Cross-Border Transactions
Some Things to Remember
Discussion Questions
Questions from the CFA Curriculum
References
Glossary
Index
