Mergers, acquisitions, and corporate restructurings / Patrick A. Gaughan.

Format:

Book

Author/Creator:

Gaughan, Patrick A.

Contributor:

Elizabeth Kelsey Memorial Fund.

Language:

English

Subjects (All):

Consolidation and merger of corporations.

Corporate reorganizations.

Physical Description:

xii, 636 pages : illustrations ; 26 cm

Edition:

Second edition.

Place of Publication:

New York : John Wiley & Sons, [1999]

Summary:

As a practical and comprehensive reference, this book focuses on nearly every type of corporate restructuring available today. From mergers and acquisitions, to divestitures and joint ventures, to leveraged buyouts and recapitalizations--this book covers it all. Throughout the text can be found the latest research and completely updated case studies in the field, which analyze and explain not only the financial aspects of these transactions, but the economic, legal, tax, and regulatory considerations as well. Dr. Gaughan takes an expert look at the motives that inspire mergers and acquisitions, along with the offensive and defensive tactics of hostile acquisitions, by analyzing the various methods which can be used to initiate a hostile takeover, and how to thwart them. He explains thes methods from both management and shareholder viewpoints, with an emphasis on shareholder impact through a review of the wealth effects of these different tactics.

Contents:

Definitions 7

Types of Mergers 7

Reasons for Mergers and Acquisitions 8

Merger Financing 8

Merger Professionals 9

Leveraged Buyouts 9

Corporate Restructuring 10

Merger Approval Process 11

Merger Negotiations 12

Merger Approval Procedures 13

Short-Form Merger 14

Freezeouts and the Treatment of Minority Shareholders 15

Purchase of Assets Compared with Purchase of Stock 15

Assumption of the Seller's Liabilities 15

Advantages of Asset Acquisitions 16

Asset Selloffs 16

Holding Companies 17

Joint Ventures 18

Strategic Alliances 19

2 History of Mergers 21

The First Wave, 1897-1904 21

The Second Wave, 1916-29 26

The 1940s 29

The Third Wave, 1965-69 30

Trendsetting Mergers of the 1970s 38

The Fourth Wave, 1981-89 43

The Fifth Wave 50

3 Legal Framework 61

Laws Governing Mergers, Acquisitions, and Tender Offers 61

Securities Laws 62

Business Judgment Rule 84

Antitrust Laws 86

Changing Patterns of Antitrust Enforcement in the United States 96

Measuring Concentration and Defining Market Share 99

State Antitakeover Laws 103

Regulation of Insider Trading 109

A Company's Obligation to Disclose Merger Negotiations 112

4 Merger Strategy 116

Growth 116

Synergy 117

Diversification 128

Economic Motives 144

Hubris Hypothesis of Takeovers 158

Improved Management Hypothesis 161

Tax Motives 164

Part 2 Hostile Takeovers 173

5 Antitakeover Measures 175

Management Entrenchment Hypothesis versus Stockholder Interests Hypothesis 176

Preventative Antitakeover Measures 177

Changing the State of Incorporation 203

Active Antitakeover Defenses 204

Information Content of Takeover Resistance 236

6 Takeover Tactics 243

Preliminary Takeover Steps 245

Tender Offers 247

Open Market Purchases and Street Sweeps 264

Advantages of Tender Offers Over Open Market Purchases 266

Proxy Fights 268

Role of the Independent Election Corporation of America 277

Combination of a Proxy Fight and a Tender Offer 283

Proxy Fights and Takeovers in the 1990s 283

Part 3 Leveraged Transactions 289

7 Leveraged Buyouts 291

LBO Data 291

Costs of Being a Public Company 293

Management Buyouts 294

Leveraged Buyout Process 296

Financing for Leveraged Buyouts 299

Capital Structure of Unsecured LBO Firms 305

Sources of LBO Financing 306

LBO Funds 307

LBO Firms 307

Financial Analysis of LBO Candidates 310

Returns to Stockholders from LBOs 311

Returns to Stockholders from Divisional Buyouts 312

Efficiency Gains from LBOs 312

Reverse LBOs 314

Conflicts of Interest in Management Buyouts 317

Empirical Research on Wealth Transfer Effects 321

Protection for Bondholders 322

8 Junk Bonds 330

History 330

Investment Bankers 334

The Evolutionary Growth of the Junk Bond Market 337

Rating System for Bonds 342

Z Scores and Zeta Analysis: Credit Evaluation Alternative to Bond Ratings 346

Junk Bond Research 347

Junk Bond Returns: 1980-94 358

Diversification of Junk Bond Investments 360

Risk of a Junk Bond Portfolio 360

Underwriting Spreads 361

Bank Loan Financing versus Junk Bond Financing 365

Junk Bonds and Greenmail 365

Regulations Affecting Junk Bond Financing 366

9 Employee Stock Ownership Plans 372

Historical Growth of ESOPs 372

Types of Plans 374

Characteristics of ESOPs 375

Leveraged versus Unleveraged ESOPs 375

Corporate Finance Uses of ESOPs 376

Voting of ESOP Shares 376

Cash Flow Implications 377

Valuation of Stock Contributed into an ESOP 377

Eligibility of ESOPs 378

Put Options of ESOPs 378

Dividends Paid 378

ESOPs versus a Public Offering of Stock 379

Employee Risk and ESOPs 380

Securities Laws and ESOPs 380

Tax Benefits of Leveraged ESOPs 381

Balance Sheet Effects of ESOPs 381

Drawbacks of Leveraged ESOPs 382

ESOPs and Corporate Performance 383

ESOPs as an Antitakeover Defense 385

ESOPs and Shareholder Wealth 386

ESOPs and LBOs 387

Part 4 Corporate Restructuring 395

10 Corporate Restructuring 397

Divestitures 398

Divestiture and Spin-Off Process 404

Wealth Effects of Sell-Offs 410

Equity Carve-Outs 420

Voluntary Liquidations, or Bustups 423

Master Limited Partnerships 425

Restructuring of the 1990s 426

11 Restructuring in Bankruptcy 432

Types of Business Failure 432

Causes of Business Failure 433

Bankruptcy Data 435

Bankruptcy Laws 437

Reorganization versus Liquidation 439

Chapter 11 Reorganization Process 439

Benefits of the Chapter 11 Process for the Debtor 444

Company Size and Chapter 11 Benefits 445

Prepackaged Bankruptcy 446

Workouts 449

Corporate Control and Default 450

Liquidation 450

Investing in the Securities of Distressed Companies 452

Part 5 Valuation for Mergers and Acquisitions 459

12 Financial Analysis 461

Hostile versus Friendly Deals: Access to Financial Data 462

Balance Sheet 463

Income Statement 468

Statement of Cash Flows 470

Analysis of Financial Statements and Computer Programs 472

Financial Ratio Analysis 473

13 Valuation of a Publicly Held Company 491

Valuation Methods: Science or Art? 492

Managing Value as an Antitakeover Defense 493

Stock Valuation Methods 493

Marketability of the Stock 498

Defining the Earnings Base 499

Forecasting Methods 507

Financial Valuation Methodologies 512

Cost of Preferred Stock 517

Cost of Common Stock 517

How the Market Determines Discount Rates 518

Control Premium 519

Valuation of Stock-for-Stock Exchanges 529

Exchange Ratio 533

Stock Price Variability and Collar Agreements 540

Benchmarks of Value 540

Desirable Financial Characteristics of Targets 541

14 Valuation of Privately Held Businesses 557

Differences in Valuation of Public and Private Businesses 557

Differences in Reporting of Income 560

Recasting the Income Statement: An Example of the Addback Process 562

Most Commonly Used Valuation Methods 565

15 Tax Issues 589

Financial Accounting 589

Taxable versus Tax-Free Transactions 593

Tax Consequences of a Stock-for-Stock Exchange 595

Asset Basis Step-Up 598

Changes in the Tax Laws 598

Role of Taxes in the Merger Decision 600

Taxes as a Source of Value in Management Buyouts 602.

Notes:

Includes bibliographical references and index.

Local Notes:

Acquired for the Penn Libraries with assistance from the Elizabeth Kelsey Memorial Fund.

From the parents and sisters of Elizabeth Kelsey, WG'97, in her memory; 1999/2000

ISBN:

0471316709

OCLC:

40610728