Applied mergers and acquisitions

Section 1: Introduction and Key Themes Chapter 1: Introduction and Executive Summary-- I. An urgent problem: 'How can my team do better than the averages?' 1-- II. A framework for M&A success 2-- III. Seven new big ideas worthy of best practitioners 6-- IV. What this book is not 9-- V. How to use this book 9-- VI. Conclusion 10-- Chapter 2: Ethics in M&A-- I. Introduction 1-- II. Why should one care? 2-- III. In whose interests? 4-- IV. What is 'good'? Consequences, Duties, Virtues 5-- V. Promoting ethical behavior 7-- VI. Mini-case: Greenmail payment by Walt Disney, 1984 10-- VII. Conclusion 14-- Chapter 3: Does M&A Pay?-- I. Introduction 1-- II. The measurement of M&A profitability: Better than what? 4-- III. Findings based on the analysis of returns to shareholders 6-- A. Returns to target firms 6-- B. Returns to buyer firms 7-- C. Returns to buyer and target firms combined 8-- IV. Findings based on the analysis of reported financial performance 8-- V. Findings about the drivers of profitability 10-- VI. Findings from surveys of executives 12-- VII. Findings from clinical studies 14-- VIII. Conclusions of reviewers through time 15-- IX. Viewing the whole mosaic: some conclusions 16-- Section 2: Strategy and the Origination of Transaction Proposals-- Chapter 4: M&A Activity-- I. Introduction 1-- II. M&A activity appears in waves. 1-- III. Explanations of M&A activity 5-- IV. 'Creative destruction' as the driver of M&A activity 12-- V. Implementing the 'creative destruction' view: listen to markets and firms 16-- A. What to look for: the many forms of economic turbulence 16-- B. Where to look for turbulence 17-- VI. Conclusion: economic turbulence drives M&A activity and opportunities 18-- Chapter 5: Cross-Border M&A-- I. Introduction 1-- II. Cross-border M&A activity 1-- III. M&A within regions and trading blocs 3-- IV. Drivers of cross-border M&A 5-- V. Returns from cross-border M&A 9-- VI. Strategic analysis of countries: getting a 'view' 9-- VII. Summary and implications for the practitioner 14-- Chapter 6: Strategy and the Uses of M&A To Grow or Restructure the Firm-- I. Introduction 1-- II. Setting strategy 1-- A. Mission, objectives, and strategy 1-- B. Planning strategy starts with SWOT 3-- C. Assessing competitive position 4-- D. Business definitions are key 8-- E. Classic successful strategies 9-- III. Expansion by inorganic growth 10-- A. Motives for inorganic growth 10-- B. Transactions for inorganic growth 12-- C. Research findings about joint ventures, alliances, and minority equity investments 13-- IV. Restructuring, redeployment, and sale 15-- A. Motives 15-- B. Transactions to restructure, redeploy, or sell 16-- C. Research on the profitability of unit divestitures, asset sales, and liquidations 18-- D. Research on the profitability of spin-offs, carve-outs, split-offs, and tracking stock 19-- V. Framework for choosing a path for inorganic growth 21-- VI. Framework for choosing a path for restructuring 22-- VII. Does it pay to diversify or focus the firm? 23-- A. Value drivers in diversification and focus 23-- B. Summary of research findings 24-- C. Practical implications of the research debate over diversification-versus-focus 27-- VIII. Conclusions 29-- Chapter 7: Acquisition Search and Deal Origination: Some Guiding Principles-- I. Introduction 2-- II. Some principles of acquisition search 3-- A. The currency of acquisition search is information 3-- B. Clarity, privacy, and cost: what the market knows is fully priced 3-- C. Information arrives sequentially and must be filtered 5-- D. Invest in social networks: they make search more efficient and effective 7-- E. The best information is first-hand 9-- F. Navigators affect dissemination and search: gatekeepers and river guides 10-- G. Internal variety should match external variety 11-- H. Persistence and repeated effort pay 11-- III. Case study: Kestrel Ventures LLC 12-- A. Acquisition guidelines 16-- B. Screening criteria 16-- IV. Summary 16-- Section 3: Analysis of Transaction Proposals, Terms and Tactics-- Chapter 8: Due Diligence-- I. Introduction 2-- II. The concept of due diligence 3-- III. Due diligence principles and strategies 4-- IV. Process: timing, team, and outputs 6 -- A. Timing influences on the due diligence process 6-- B. Due diligence team 7-- C. Outputs 8-- V. The target's view: the data room and its pressures 8 -- VI. What to look for: focus on knowledge 9-- A. Legal issues 9-- B. Accounting issues 10-- C. Tax issues 11-- D. Information technology issues 11-- E. Risk and insurance issues 12-- F. Environmental issues 12-- G. Marketing presence and sales issues 13-- H. Operations issues 14-- I. Real and personal property issues 15-- J. Intellectual and intangible assets issues 15-- K. Finance issues 15-- L. Cross-border issues 16-- M. Organization and human resources issues 16-- N. Culture issues 17-- O. Ethics issues 18-- VII. Sourcing information 19-- VIII. Excellence in due diligence 20-- References 26-- Appendix 1: Comprehensive overview of due diligence: knowledge, information, data 28-- Chapter 9: Valuing Firms-- Introduction 2-- Rule #1: Think like an investor 2-- Rule #2: Intrinsic value is unobservable; we can only estimate it 6-- Rule #3: An opportunity to create value exists where price and intrinsic value differ 7-- Rule #4: So many estimators, so little time: it helps to 'have a view' about estimators 8-- A. Accounting book value 9-- B. Liquidation value 9-- C. Replacement cost valuation 11-- D. Current trading value or market value 11-- E. Trading multiples of peer firms 12-- F. Transaction multiples for peer firms 14-- G. Discounted cash flow values 14-- H. Adjusted present value 23-- I. Venture capital/private equity approach 25-- J. Option valuation approach 26-- Rule #5: Exercise estimators of intrinsic value to find key value drivers, and the -- inherent 'bets' in the acquisition 28-- Rule #6: Think critically; triangulate carefully 29-- Rule #7: Excellent valuation analysis results from a focus on process, not product 32-- Rule #8: If you get confused, see Rule #1 34-- Case example of the valuation process: Chrysler Corporation, May 1998 34-- Appendix 1: Value_Merge.xls: When and How to Use the Model 58-- Chapter 10: Valuing Options-- I. Overview 2-- II. Option basics 3-- A. Some terminology 3-- B. Options are pervasive 4-- C. Four simple option positions 4-- D. Identifying and mapping a firm's hidden options 6-- E. Caveats about the option pricing approach 7-- III. Option theory 7-- A. The drivers of an option's value 7-- B. The payoff structure of options 9-- C. The payoff structure of combining positions 10-- D. Put-call parity 11-- E. Value of options at times other than maturity 12-- F. How volatility affects option value 13-- G. Valuation of call options: Black-Scholes Option Pricing Model 14-- IV. Applications 15-- A. Valuing equity 16-- B. Valuing bonds 16-- C. Valuing loan guarantees 17-- D. Valuing subordinated debt 18-- E. Valuing equity-linked debt 18-- F. Designing securities 19-- G. Assessing capital investments 20-- V. A practical guide to valuing financial options, and some caveats 21-- A. Finding parameters 21-- B. How to compute put option values 23-- C. Some caveats 23-- VI. Conclusions 25-- Chapter 11: Valuing Synergies-- I. The concept of synergy when one thinks like an investor 1-- II. Synergy estimates should be a central focus of M&A analysis 2-- III. A framework for synergy analysis: where to look and what to look for 3-- A. Synergies from assets or activities that are in place 3-- B. Contingent synergies 6-- IV. Estimating synergy value 7-- A. Crucial foundation: establish the credibility of the synergy source 7-- B. Everything after corporate taxes 7-- C.

Choose a discount rate consistent with the risk of the synergy 7-- D. Reflect inflation, real growth and a reasonable life 9-- E. Use a terminal value to reflect extended life of synergies 9-- F. Be flexible: X(A+B) = XA + XB 9-- V. Example: valuing cost saving and asset reduction synergies 10-- VI. Example: valuing revenue enhancement synergies 10-- VII. --

Example: valuing financial synergies 10-- VIII. Example: valuing real option synergies 11-- IX. Example: backsolving for the required synergies from the acquisition premium 13-- X. Case Example: Synergies in the Daimler/Chrysler Merger 14-- XI. The size of synergies: few rules of thumb 16-- XII. Conclusion 16-- Chapter 12: Valuing the Firm Across Borders-- I. Introduction 1-- II. How borders affect M&A valuation 1-- A. Inflation 1-- B. Foreign currency exchange rates 2-- C. Tax rates 3-- D. Timing of remittance of cash 4-- E. --

Accounting principles 5-- F. Political risk 6-- G. Segmented markets 8-- H. Rule of law, corruption, corporate governance, and protection of minority shareholders 8-- I. Social issues and culture 9-- III. Strategy for DCF approach: Home versus foreign valuation 9-- IV. Adjusting cash flows 10-- A. Need for internal consistency 10-- B. Valuing real versus nominal cash flows 11-- C. Translating from foreign to home currencies 12-- V. Estimating the discount rate for foreign cash flows 13-- A. Some basic principles 13-- B. An overview of cost of equity models for cross-border investing 16-- C. Multi-factor model 17-- D. Credit risk model 18-- E. Capital Asset Pricing Model and its variants 19-- F. How much difference does the choice of model make? 21-- VI. Recapitulation: valuation process with adjusted CAPM 24-- VII. Example: Westmoreland Energy Inc., Power Project at Zhangzhe, China. 25-- VIII. Example: Continental Cablevision's Investment in Fintelco (Argentina) 26-- IX. Summary 27-- Chapter 13: Valuing the Highly-Levered Firm, Assessing the Highly-Levered Transaction-- I. Introduction 1-- II. The world of highly levered firms 2-- A. Forms of highly levered transactions 2-- B. LBO activity 3-- C. Effects of LBOs 4-- III. The effect of leverage on value of the firm 5-- IV. 'Whole deal' approach to evaluating the highly-levered firm and transaction 7-- V. A leveraged recapitalization: Koppers Company 10-- VI. A leveraged buyout: MediMedia International Ltd. 11-- A. Equityholder's perspective 12-- B. Sources of positive NPV 12-- C. Banker's perspective 13-- D. Mezzanine investor's perspective 14-- E. 'Whole deal' summary 15-- VII. A leveraged buyout: Revco Drug Stores 15-- A. Assessment of the probability of default 17-- B. Some insights about debt capacity 18-- VIII. Summary 18-- Chapter 14: Real Options and their Impact on M&A-- I. Introduction. 1-- II. Generic types of real options 2-- A. Entry or Growth Options 2-- B. Exit or Abandonment Options 3-- C. Timing options: rights to delay or accelerate 4-- D. Switching options 5-- III. Where real options appear in M&A 5-- A. Strategy 5-- B. Deal design 7-- C. Post-merger integration 8-- IV. If optionality is so pervasive, why not value everything as an option? 8-- V. How to assess the impact of real options 9-- A. Find and specify the options 9-- B. Model and value the option 10-- C. Interpret the results and develop implications 12-- VI. Mini-Case studies in the analysis of real options 12-- A. The spin-off value of Lucent: assessing latent optionality 12-- B. Agouron Pharmaceuticals: Valuing the pure research firm 14-- C. NCNB's acquisition of First Republic: Valuing the impact of staged investing 16-- D. EM.TV's partial acquisition of SLEC: The long call and short put 17-- VI. Summary and conclusions 21-- Chapter 15: Valuing Liquidity and Control-- I. Introduction 1-- II. Adjusting values for discounts and premiums 2-- A. Discounts and premiums start from a base 2-- B. The multiplicative model-the 'traditional' approach 3-- C. An example of the 'traditional' approach: three prospective acquisitions 3-- III. Where do illiquidity discounts come from? Liquidity is an option. 6-- A. Liquidity defined 6-- B. Empirical research on illiquidity discounts 6-- C. The concept of liquidity as an option 8-- IV. Where do control premiums come from? Control is an option. 9-- A. 'Control,' and 'control premium' 9-- B. Control right is derived from relative power 10-- C. Potential private benefits may drive the value of control 11-- D. Strategic flexibility may drive the value of control 12-- E. Evidence on the value of control 13-- V. Interaction of Liquidity and control 14-- VI. Mini-case: Volvo/Renault, 1993 16-- VII. Conclusion 18-- Chapter 16: Financial Accounting for Mergers and Acquisitions-- I. Introduction 1-- II. Overview of purchase accounting 2-- A. Financial Accounting Standards 141 and 142 2-- B. Acquisition of 100 percent of the target 3-- C. Acquisition of less than 100 percent of the target 4-- 1. Consolidation method 5-- 2. Equity method 6-- 3. Cost method 6-- 4. Comparison of consolidation and equity methods 6-- III. How to interpret reported financial results from a business combination 7-- A. Accounting dilution and accretion 7-- B. Other measures of performance related to financial statements 8-- C. An illustrative example 8-- D. Practical insights into accounting dilution 11-- IV. Linkage among accounting choices, form of payment, financing and price 11-- V. Dangers of earnings management 12-- A. Categories of earnings management 12-- B. Research on earnings management 14-- C. Financial fraud: mini-case on WorldCom Inc. 16-- D. Sarbanes-Oxley Act 18-- VI. Summary and conclusions 20-- Appendix I: Mechanics of pooling-of-interests accounting 39-- Chapter 17: Momentum Acquisition Strategies: An Illustration of Why Value Creation is the Best Financial Criterion-- I. Introduction: four cautionary tales 1-- A. 'Automatic' Sprinkler 1-- B. Ling-Temco-Vought 2-- C. U.S. Office Products 4-- D. Tyco International, Ltd. 5-- II. Momentum acquisition strategies 7-- III. The argument for momentum acquiring 8-- IV. Arguments against momentum acquiring 9-- A. Evidence that momentum-investing strategies are not superior 9-- B. Momentum is unsustainable indefinitely 9-- C. Momentum invites a focus on accounting cosmetics rather than economic reality 10-- D. Momentum strategies can promote uneconomic deals, and reject good ones 11-- V. Value creation is the best criterion for evaluating acquisition strategies 12-- VI. Conclusion: momentum strategies versus value strategies 13-- Appendix: an analytic model of EPS dilution 21-- Section 4: Design of Detailed Transaction Terms-- Chapter 18: An Introduction to Deal Design-- I. Introduction: Deal Structures Are Solutions to Economic Problems 2-- II. Possible 'Desirables' in Designing a Deal 2-- III. The Design of Terms Can Help Achieve Objectives 5-- IV. Each Deal is a System: the 'Whole Deal' Perspective 9-- V. Some Implications for the Deal Designer 10-- A. There is no single best feasible deal 11-- B. Tradeoffs are driven by constraints and dominance 11-- C. Deal design is a learning process 12-- VI. Summary and conclusions 14-- Chapter 19: Choosing the Form of Acquisitive Reorganization-- I. Introduction: Five key concerns for the deal designer 1 -- II. The form of reorganization has important implications 1-- A. The Internal Revenue Code creates choices 2-- B. How to choose? 3-- III. Deals that are immediately taxable to the selling shareholders 4-- A. Purchase of assets with cash 4-- B. Purchase of stock with cash 5-- C. Triangular cash mergers 5-- IV. Deals that defer tax to the selling shareholders 6-- A. Statutory merger or consolidation 6-- B. Forward triangular merger 7-- C. Reverse triangular merger 8-- D. Stock-for-stock acquisition. 8-- E. Stock-for-assets acquisition 8-- V. Summary and implications for the deal designer and senior executive 9-- Chapter 20: Choosing the Form of Payment and Financing-- I. Introduction 1-- II. Patterns and trends in form of payment 1-- III. Does form of payment matter? 2-- IV. Considerations in selecting the form of payment 4-- V. Assessing the financing aspects of a deal 9-- A. Seven dimensions of M&A transaction financing 9-- B. Key perspectives for analysis. 12-- C. A summary framework: FRICTO 14-- VI. Summary and conclusions 16-- Chapter 21: Framework for Structuring the Terms of Exchange:-- Finding the 'Win-Win' Deal-- I. Introduction 2-- II. A Model for Critically Assessing Exchange Ratios 3-- III. Uses of This Model 4-- IV. An Illustration 4-- V. Extension to Cash-For-Stock Deals 5-- VI. Choosing Exchange Ratio Targets in the 'Win-Win' Zone 6-- VII.

Summary and Implications of the Exchange Ratio Framework 7-- Chapter 22: Structuring and Valuing Contingent Payments in M&A-- I. Overview and Summary 1-- II. Contingent Payments in M&A 2-- III. Earnouts Can Be Useful; But If So, Why Aren't They Ubiquitous? 5-- A. Potential Benefits of Earnouts 5-- B. Potential Disadvantages of Earnouts -- IV. --

Earnouts are Options on Future Performance 6-- V. Structuring an Earnout 8-- A. Earnout Amounts 8-- B. Earnout Period 8-- C. Performance Goals 9-- D. Payment Schedule 10-- E. Operational Integration 11-- F. Accounting Rules and Performance Measurement 11-- G. Additional Issues 12-- VI. Tax and Accounting Considerations of Earnouts 13-- A. Tax Implications of Earnout Structures 13-- B. Earnouts Permitted Only Under Purchase Accounting 14-- VII. A Generic Approach to Valuing Earnout Instruments . 14-- A. --

Valuing an Earnout with Monte Carlo Simulation 15-- B. Valuation Results of the Hypothetical Example 16-- VIII. Case Example: Eli Lilly's Contingent Payment Units 16-- A. The Challenge of Differing Outlooks and its Solution 17-- B. Valuation of the Contingent Payment Units 19-- C. Epilogue 20-- IX. Conclusion: Proposing and Negotiating an Earnout and other Contingent Payments 21-- Chapter 23: Risk Management in M&A-- I. Introduction and summary 2-- II. Value at risk when a deal fails 3-- III. Transaction risk: types and sources 3-- IV. Types of risk management 6-- V. Collars and their analysis 8-- A. Four classic profiles 9-- B. Valuing a collar: the case of AT&T acquiring MediaOne 11-- VI. Contingent value rights: the case of Rhone-Poulenc's acquisition of Rorer Group 13-- VII. Staged acquiring: the case of Genzyme's investment in Geltex 16-- VIII. Conclusion: where and when to manage risk 19-- Chapter 24: Social Issues-- I. Introduction: the importance of social issues in M&A. 2-- II. Survey of social issues 3-- A. Management team of Newco: Who stays, who goes 3-- B. Terms of compensation for continuing managers 4-- C. Severance payments: Terms for departing managers 5-- D. Leadership succession 5-- E. Organization design of Newco 6-- F. Board composition and control options 6-- G. Structure of transaction: 'Merger of Equals' 6-- H. Corporate name of Newco 7-- I. Headquarters location 8-- J. Other 8-- III. Impact of social issues on attractiveness of the deal 8-- A. Impact on shareholders and managers 8-- B. Who pays for social terms? The matter of tradeoffs 9-- IV. Case studies in the role of social issues 10-- A. Daimler and Chrysler: a cross-border merger of equals 10-- B. First Union and Wachovia vs. SunTrust 12-- C. Hewlett-Packard and Compaq: Retention bonuses and CEO compensation 13-- D. Fleet Bank and BankBoston 13-- VIII. Summary and conclusions 14-- Section 5: Rules of the Road: Governance, Laws, and Regulations-- Chapter 25: How a Negotiated Deal Takes Place-- I. Introduction: a timeline 1-- II. Overview of the deal-shaping process 1-- III. Risks to the deal: how the process can get derailed 3-- IV. Transaction planning and preparation 5-- V. Initiating discussions: Gaining an early sense of the possibilities 5-- VI. First-round documents: Term sheet, letter of intent, agreements about confidentiality, standstill, and engagement of advisors 6-- VII. The definitive agreement 7-- VIII. Disclosure: to investors and regulators 9-- IX. Gaining approval for the deal 11-- X. Case study: Daimler-Benz and Chrysler 12-- XI. Summary and conclusions 17-- Chapter 26: Governance in M&A: The Board of Directors and Shareholder Voting-- I. Introduction 1-- II. Governing well is hard to do 2-- III. Good governance pays 5-- IV. How shareholders rule 7-- A. The constitution of shareholder rule 7-- B. Votes per share 8-- C. Proxies 8-- D. Supermajority provisions 9-- E. Cumulative voting for directors 9-- F. Shareholder influence through litigation 10-- G. Shareholder influence through jawboning 10-- V. Fiduciary duties of target directors in considering M&A 11-- A. First standard of review: Business Judgment Rule 11-- B. Second standard of review: Enhanced scrutiny 13-- C. Third standard of review: Entire fairness 15-- VI. Practical implications: preparing for the board's review of a deal 16-- VII. Coda: How can firms be governed better? 18-- Chapter 27: Rules of the Road: Securities Law, Issuance Process, Disclosure, and Insider Trading-- I. Introduction 1-- II. Overview of key securities laws and rules 1-- A. Securities Act of 1933 2-- B. Securities Exchange Act of 1934 2-- C. Williams Amendment to the Securities Exchange Act of 1934 3-- D. Rule 144 4-- E. State securities and takeover regulations 5-- III. International comparison of securities law in M&A 7-- IV. Key implication: disclosure 8-- A. Forward looking statements 9-- B. Caution 9-- C. Manage leaks of information 10-- V. Key implication: insider trading 10-- A. Classical theory of insider trading 11-- B. Misappropriation theory of insider trading 11-- C. Mini-case: McDermott and Gannon 11-- VI. Key implication: observance of process 11-- A. Due process 11-- B. No gun jumping 12-- C. Bespeak caution 12-- D. Say it plainly; make no omissions 13-- VII. Summary and conclusions 14-- Appendix 1: Documents for Filing with the SEC 16-- Chapter 28: Rules of the Road: Antitrust Law-- I. Introduction 1-- II. Antitrust law: history and motives 2-- III. Overview of antitrust regulators and laws affecting mergers and acquisitions 5-- A. Sherman Act of 1890 5-- B. Clayton Act of 1914 6-- C. Hart-Scott-Rodino Antitrust Improvements Act of 1976 7-- IV. U.S. antitrust merger guidelines 8-- A. Horizontal mergers 8-- B. Non-horizontal mergers; vertical and conglomerate 10-- V. U.S. pre-merger review process: Hart-Scott-Rodino and Exon-Florio 11-- A. Hart-Scott-Rodino filing process 11-- B. Exon-Florio: acquisitions by foreigners that affect national defense 12-- VI. Antitrust regulation of M&A in the European Union 12-- A. Dimensions of enforcement 12-- B. Mini-case: General Electric/Honeywell and the European Commission's perspective 13-- C. Mini-case: General Electric/Honeywell and the DOJ's perspective 14-- VII. Critical perspectives on antitrust policy 16-- VIII. Summary and conclusions 19-- Chapter 29: The First Round Documents-- I. Introduction: shaping the deal and managing risk 1-- II. Engagement of advisors 1-- III. Confidentiality agreement 2-- IV. Exclusivity and termination agreements 3-- V. Standstill agreement 4-- VI. Term sheet 4-- VII. Letter of intent 5-- VIII. Summary and conclusions 7-- Appendices 10-- 1. Fee agreement 10-- 2. Confidentiality agreement 12-- 3. Letter of intent 14-- Chapter 30: The Definitive Agreement-- I. Introduction 1-- II. The definitive agreement and the M&A process 1-- III. Overview of common points in the agreement: the case of Pfizer and Pharmacia 2-- IV. Parties to the deal 3-- V. Recitals 4-- VI. Definition of terms 4-- VII. Description of the basic transaction 5-- VIII. Representations and warranties 6-- IX. Covenants 8-- X. Conditions to closing 9-- XI. Termination 9-- XII. Indemnifications 11-- XIII. Miscellaneous items 12-- XIV. Summary and conclusions 12-- For further reading 13-- Appendix 1: Agreement and plan of merger, Pfizer and Pharmacia 15-- Chapter 31: The Merger Proxy Statement: How to Read It and What it Reveals-- I. Introducing the proxy statement 1-- II. A strategy for reading the proxy statement 2-- III. Questions you should aim to answer by reading the proxy statement 3-- IV. Case example of a proxy statement: Maxus Energy merging with YPF S.A. 4-- A. Background to the deal 4-- B. Annotated proxy statement 4-- C. Exhibit of the proxy: Table of Contents of the Merger Agreement 28-- D. Exhibit of the proxy: Conditions to the Offer 30-- E. Exhibit of the proxy: Fairness Opinion from Credit Suisse First Boston 32-- F. Exhibit of the proxy: Shareholder Ballot 34-- V. Conclusion 35-- Section 6: Competition, Hostility, and Behavioral Effects in M&A-- Chapter 32: Negotiating the Deal-- I. Introduction 1-- II. The relevance of negotiation process 2-- III. Behavioral finance 4-- IV. Influencing bargaining outcomes: an overview of the challenge 6-- V. Practical advice: how to prepare for a negotiation 7-- VI. Manage the negotiation process proactively 10-- VII. Summary and conclusions 14-- Chapter 33: Auctions in M&A-- I. Introduction 1-- II. Auction structures and motives. 2-- A. The auction in the spectrum of asset sales 2-- B. How negotiations and auctions compare 3-- C. Types of auctions 4-- III. Advantages and disadvantages of auctions 5-- IV. Auctions in practice: the case of RJR/Nabisco 7-- V.

The 'winner's curse' in M&A: is it real? 11-- VI. Some practical advice to sellers in auctions 12-- VII. Summary and conclusions 12-- Chapter 34: Hostile Takeovers: Preparing a Bid in Light of Competition and Arbitrage-- 1. Introduction: takeovers are games 2-- 2. A profile of hostile takeovers 2-- 3. Beware of the Players, both on the field and off 4-- 4. --

The arb is the consummate economic actor 5-- 5. Interpreting arbitrage spreads 7-- 6. The arb assesses a recapitalization proposal in terms of blended value 7-- 7. Government constraints on the game 8-- 8. Selling shareholders face a prisoner's dilemma 10-- 9. To set a bid price: think like an investor 12-- 10. Conclusion: the game has implications for design and defense of takeovers 15-- Chapter 35: Takeover Attack and Defense-- I. Introduction 1-- II. The prevalence of anti-takeover defenses 2-- III. --

Profile of the target of a hostile bid 3-- IV. Optionality in takeover attack and defense 5-- V. Tactics of takeover attack 8-- VI. Tactics of takeover defense 10-- A. Proactive defenses typically placed in advance of a contest 11-- B. Embedded defenses in a friendly deal 17-- C. Reactive defenses 19-- D. Combinations of defenses 25-- VII. Summary and implications for the practitioner 27-- Chapter 36: The Leveraged Restructuring as a Takeover Defense: The Case of American Standard-- I. Introduction 2-- I. The American Standard Case 3-- II. The Response 5-- III. Parachutes, Pills and Litigation 9-- IV. Restructuring Defenses: Management Buyout and Leveraged Recapitalization 11-- V. When does a Restructuring Make Sense? 14-- VI. Conclusions 17-- Section 7: Communication, Integration and Best Practice-- Chapter 37: Communicating the Deal: Gaining Mandates, Approval, and Support-- I. Introduction 1-- II. Core challenges to effective communication 1-- III. Some guiding principles for communicating the deal 4-- IV. Presenting the 'concept proposal' to senior management of the buying firm 5-- V. Communicating the deal to a board of directors for their approval 7-- VI. Communicating with employees 9-- VII. Announcing the deal to the public 8-- VIII. Conclusions 10-- Chapter 38: Framework for Post-Merger Integration-- I. Introduction 1-- II. Integration strategy 2-- A. Autonomy: culture, leadership, and decision-making 2-- B. Interdependence: business processes and value chain 3-- C. Control: finance, quality, and reporting 4-- D. Framework for integration strategy 4-- D.1. Integration strategies in banking 5-- D.2. Integration strategies in conglomerate firms 7-- III. Implementation of integration strategy 9-- A. Integration planning 9-- B. Integration execution 11-- IV. Integration mini-case: The Merger of Union Bank of Switzerland and Swiss Bank Corporation, 1998 13-- A. Merger motives and integration strategy 13-- B. Implementation of the integration strategy 15-- B.1. Execution of post-merger integration in consumer and corporate banking 18-- B.2. Execution of post-merger integration in investment banking 20-- V. Conclusion: integration is transformation 20-- Chapter 39: Corporate Development as a Strategic Capability: The Approach of GE Power Systems-- I. Introduction 1-- II. Business development at GE Power Systems 1-- III. Deal process at GE Power Systems 3-- A. Setting strategy for M&A: goals and criteria 3-- B. Deal development 4-- C. Post-merger integration 7-- D. Post-audit 8-- E. Mini-case: the acquisition of Alpha Company 8-- IV. The M&A 'Factory': Operationalizing business development 9-- V. Implications for best practice 10-- Chapter 40: M&A Best Practice: Some Lessons and Next Steps-- I. Introduction 1-- II. Some elements of M&A best practice 1-- III. Where the sidewalk ends 4-- IV. Developing best practitioners 6-- V. The end of it all 8-- Answers to End-of-Chapter Problems and Questions-- Overview of Software found on the associated CD-ROM-- Index--

A comprehensive guide to the world of mergers and acquisitions Why do so many M&A transactions fail? And what drives the success of those deals that are consummated? Robert Bruner explains that M&A can be understood as a response by managers to forces of turbulence in their environment. Despite the material failure rates of mergers and acquisitions, those pulling the trigger on key strategic decisions can make them work if they spend great care and rigor in the development of their M&A deals. By addressing the key factors of M&A success and failure, Applied Mergers and Acquisitions can help readers do this. Written by one of the foremost thinkers and educators in the field, this invaluable resource teaches readers the art and science of M&A valuation, deal negotiation, and bargaining, and provides a framework for considering tradeoffs in an effort to optimize the value of any M&A deal. Applied Mergers and Acquisitions is part of a complete suite of resources on M&A that includes a workbook and a CD-ROM with additional spreadsheets. Robert F. Bruner, MBA, DBA (Charlottesville, VA), is the Distinguished Professor of Business Administration at the Darden School at the University of Virginia and Executive Director of the Batten Institute. He directs the Darden School's executive education course on mergers and acquisitions, and teaches the popular MBA elective on that topic. He holds a BA from Yale University, and a MBA and DBA from Harvard University.0471395064 A comprehensive guide to the world of mergers and acquisitions 0471395064 A comprehensive guide to the world of mergers and acquisitions Why do so many M&A transactions fail? And what drives the success of those deals that are consummated? Robert Bruner explains that M&A can be understood as a response by managers to forces of turbulence in their environment. Despite the material failure rates of mergers and acquisitions, those pulling the trigger on key strategic decisions can make them work if they spend great care and rigor in the development of their M&A deals. By addressing the key factors of M&A success and failure, Applied Mergers and Acquisitions can help readers do this. Written by one of the foremost thinkers and educators in the field, this invaluable resource teaches readers the art and science of M&A valuation, deal negotiation, and bargaining, and provides a framework for considering tradeoffs in an effort to optimize the value of any M&A deal. Applied Mergers and Acquisitions is part of a complete suite of resources on M&A that includes a workbook and a CD-ROM with additional spreadsheets. Robert F. Bruner, MBA, DBA (Charlottesville, VA), is the Distinguished Professor of Business Administration at the Darden School at the University of Virginia and Executive Director of the Batten Institute. He directs the Darden School's executive education course on mergers and acquisitions, and teaches the popular MBA elective on that topic. He holds a BA from Yale University, and a MBA and DBA from Harvard University.