Preface.
Part One Background.
1 Introduction.
Recent M&A Trends.
Definitions.
Valuing A Transaction.
Types of Mergers.
Reasons For Mergers And Acquisitions.
Merger Financing.
Merger Professionals.
Merger Arbitrage.
Leveraged Buyouts And The Private Equity Market.
Corporate Restructuring.
Merger Negotiations.
Merger Agreement.
Merger Approval Procedures.
Short-Form Merger.
Freezeouts And The Treatment of Minority Shareholders.
Purchase of Assets Compared With Purchase of Stock.
Structuring The Deal.
Assumption of The Seller’s Liabilities.
Advantages of Asset Acquisitions.
Asset Selloffs.
Reverse Mergers.
Holding Companies.
2 History of Mergers.
Merger Waves.
What Causes Merger Waves?
First Wave, 1897–1904.
Second Wave, 1916-1929.
The 1940s.
Third Wave, 1965–1969.
Trendsetting Mergers of the 1970s.
Fourth Wave, 1984–1989.
Fifth Wave.
Sixth Merger Wave.
Summary.
3 Legal Framework.
Laws Governing Mergers, Acquisitions, And Tender Offers.
Securities Laws.
Other Specific Takeover Rules In The United States.
International Securities Laws Relating To Takeovers.
Business Judgment Rule.
State Antitakeover Laws.
Regulation of Insider Trading.
Antitrust Laws.
Recent Trends In Antitrust Enforcement In The United States.
Measuring Concentration And Defining Market Share.
European Competition Policy.
Antitrust Remedies.
Summary.
4 Merger Strategy.
Growth.
Synergy.
Operating Synergy.
Diversification.
Other Economic Motives.
Hubris Hypothesis of Takeovers.
Other Motives.
Tax Motives.
Summary.
Part Two Hostile Takeovers.
5 Antitakeover Measures.
Management Entrenchment Hypothesis Versus Stockholder Interests Hypothesis.
Preventative Antitakeover Measures.
Changing The State of Incorporation.
Active Antitakeover Defenses.
Information Content of Takeover Resistance.
Summary.
6 Takeover Tactics.
Preliminary Takeover Steps.
Tender Offers.
Open Market Purchases And Street Sweeps.
Advantages of Tender Offers Over Open Market Purchases.
Arbitrage And The Downward Price Pressures Around M&A Announcements.
Proxy Fights.
Hedge Funds As Activist Investors
Summary.
Part Three Going Private Transactions And Leveraged Buyouts.
7 Leveraged Buyouts.
Terminology.
Historical Trends In LBOS.
Costs of Being A Public Company.
Management Buyouts.
Conflicts of Interest In Management Buyouts.
U.S. Court’s Position On Leveraged Buyouts Conflicts.
Financing For Leveraged Buyouts.
Returns To Stockholders From LBOS.
Returns To Stockholders From Divisional Buyouts.
Empirical Research On Wealth Transfer Effects.
Protection For Creditors.
Summary.
8 Topics In Going Private Transactions.
Private Equity Market.
Junk Bonds Financing of Takeovers.
Stapled Financing.
Securitization And M&A Financing.
Summary.
9 Employee Stock Ownership Plans.
Historical Growth of ESOPS.
Types of Plans.
Characteristics of ESOPS.
Leveraged Versus Unleveraged ESOPS.
Corporate Finance Uses of ESOPS.
Voting of ESOP Shares.
Cash Flow Implications.
Valuation of Stock Contributed Into An ESOP.
Eligibility of ESOPS.
Put Options of ESOPS.
Dividends Paid.
ESOPS Versus A Public Offering of Stock.
Employee Risk And ESOPS.
Securities Laws And ESOPS.
Tax Benefits of LESOPS.
Balance Sheet Effects of ESOPS.
Drawbacks of LESOPS.
ESOPS And Corporate Performance.
ESOPS As An Antitakeover Defense.
ESOPS And Shareholder Wealth.
ESOPS And LBOS.
Summary.
Part Four Corporate Restructuring.
10 Corporate Restructuring.
Divestitures.
Divestiture And Spinoff Process.
Wealth Effects of Selloffs.
Equity Carve-Outs.
Voluntary Liquidations Or Bustups.
Tracking Stocks.
Master Limited Partnerships And Selloffs.
Summary.
11 Restructuring In Bankruptcy.
Types of Business Failure.
Causes of Business Failure.
Bankruptcy Trends.
U.S. Bankruptcy Laws.
Reorganization Versus Liquidation.
Reorganization Process.
Benefits of The Chapter 11 Process For The Debtor.
Prepackaged Bankruptcy.
Workouts.
Corporate Control And Default.
Liquidation.
Investing In The Securities of Distressed Companies.
Summary.
12 Corporate Governance.
Failed Corporate Governance: Accounting Scandals.
Sarbanes-Oxley Act.
Other Regulatory Changes.
Corporate Governance.
Golden Parachutes.
Managerial Compensation, Mergers, and Takeovers.
CEO Compensation and Power.
Compensation Characteristics of Boards That Are More Likely to Keep Agency. Costs in Check.
Role of the Board of Directors.
Interlocking Boards.
Independence of Directors.
Regulatory Standards for Directors.
Antitakeover Measures and Board Characteristics.
Disciplinary Takeovers, Company Performance, CEOs, and Boards.
Merger Strategy and Corporate Governance.
Do Boards Reward CEOs for Initiating Acquisitions and Mergers?
CEO Compensation and Diversification Strategies.
Agency Costs and Diversification Strategies.
Interests of Directors and M&As.
Managerial Compensation and Firm Size.
Corporate Control Decisions and Their Shareholder Wealth Effects.
Does Better Corporate Governance Increase Firm Value?
Executive Compensation and Postacquisition Performance.
Mergers of Equals and Corporate Governance.
SUMMARY.
13 Joint Ventures And Strategic Alliances.
Contractual Agreements.
Comparing Strategic Alliances And Joint Ventures With Mergers And Acquisitions.
Joint Ventures.
Governance of Strategic Alliances.
Summary.
14 Valuation.
Valuation Methods: Science or Art?
Managing Value as an Antitakeover Defense.
Benchmarks of Value.
How the Market Determines Discount Rates.
Valuation of the Target’s Equity.
Takeovers and Control Premiums.
Marketability of the Stock.
Valuation of Stock-for-Stock Exchanges.
Trends in Cash versus Stock Percentage of Takeover Financing.
Shareholder Wealth Effects and Methods of Payment.
Exchange Ratio.
Fixed Number of Shares versus Fixed Value.
International Takeovers and Stock-for-Stock Transactions.
Desirable Financial Characteristics of Targets.
Summary.
Appendix.
15 Tax Issues.
Financial Accounting For M&As.
Taxable Versus Tax-Free Transactions.
Tax Consequences of A Stock-For-Stock Exchange.
Asset Basis Step-Up.
Changes In The Tax Laws.
Role of Taxes In The Merger Decision.
Role of Taxes In The Choice Selloff Method.
Organizational Form And M&A Premiums.
Capital Structure And Propensity To Engage In Acquisitions.
Leverage And Deal Structure.
Taxes As A Source of Value In Management Buyouts.
Miscellaneous Tax Issues.
Summary.
Glossary.
About the Author.
Index.
