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1、Chapter 23,Mergers and Other Forms of Corporate Restructuring,Pearson Education Limited 2004Fundamentals of Financial Management,12/eCreated by:Gregory A.Kuhlemeyer,Ph.D.Carroll College,Waukesha,WI,拼乙肋晦袍津喝兵桥蛆泅髓胰酸腮雕缅料锥辱汁磕开着沼琼俗沁墨省众必精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,After studying Cha
2、pter 23,you should be able to:,Explain why a company might decide to engage in corporate restructuring.Understand and calculate the impact on earnings and on market value of companies involved in mergers.Describe what benefits,if any,accrue to acquiring company shareholders and to selling company sh
3、areholders.Analyze a proposed merger as a capital budgeting problem.Describe the merger process from its beginning to its conclusion.Describe different ways to defend against an unwanted takeover.Discuss strategic alliances and understand how outsourcing has contributed to the formation of virtual c
4、orporations.Explain what“divestiture”is and how it may be accomplished.Understand what going private means and what factors may motivate management to take a company private.Explain what a leveraged buyout is and what risk it entails.,蔚册剁涎睛辽嵌扫佬嫉削杨涌朽尊烦适禹跨鲁堤促线吃罢枢碌旭靖酗斋磐精品课程财务管理基础英文课件ch23Van Horne/Wacho
5、wicz Tenth Edition,Mergers and Other Forms of Corporate Restructuring,Sources of ValueStrategic Acquisitions Involving Common StockAcquisitions and Capital BudgetingClosing the Deal,孪坑滓掷巷咨沤娟粱唯纠鄂店烛琴下畴怎淌聊歉榜犬档误漆邀弓轿砍迁筒精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Mergers and Other Forms of Corpora
6、te Restructuring,Takeovers,Tender Offers,and DefensesStrategic AlliancesDivestitureOwnership RestructuringLeveraged Buyouts,臂惧刻猖雅毛冀箕社淬豹默崎贫狈闲娘旋锨屑兄烟卢肖非棚证儿捶钝羽召精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,What is Corporate Restructuring?,Any change in a companys:Capital structure,Operations,orOwn
7、ershipthat is outside its ordinary course of business.So where is the value comingfrom(why restructure)?,驱任镁阜疹蕴亥适钟避塌盘唆以共葵确蚁牧乞方迎滇甩清寺芯暂廉县吝版精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Why Engage in Corporate Restructuring?,Sales enhancement and operating economies*Improved managementInformation
8、 effectWealth transfersTax reasonsLeverage gainsHubris hypothesisManagements personal agenda*Will be discussed in more detail in the following two slides.,曳苇筋诉搏忱懈钡富嗜秆退趣廉折孩哲驼喳覆尧攘滴爆肛绒芦沽媒募空倘精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Sales Enhancement and Operating Economies,Sales enhancement c
9、an occur because of market share gain,technological advancements to the product table,and filling a gap in the product line.Operating economies can be achieved because of the elimination of duplicate facilities or operations and personnel.Synergy-Economies realized in a merger where the performance
10、of the combined firm exceeds that of its previously separate parts.,柳癣钒遮装疗睬浸疙盅膜毒降材披烙化坛堰胰笑寇已牵徐寇讼古我它丛并精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Sales Enhancement and Operating Economies,Horizontal merger:best chance for economiesVertical merger:may lead to economiesConglomerate merger:few op
11、erating economiesDivestiture:reverse synergy may occur,Economies of Scale-The benefits of size in which the average unit cost falls as volume increases.,熙出汰翟赵趟视令桑奇脐鸯跃辆遵几琢尹类监署水详头绸建拙咙布酌填皮精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving Common Stock,When the acquisit
12、ion is done for common stock,a“ratio of exchange,”which denotes the relative weighting of the two companies with regard to certain key variables,results.A financial acquisition occurs when a buyout firm is motivated to purchase the company(usually to sell assets,cut costs,and manage the remainder mo
13、re efficiently),but keeps it as a stand-alone entity.,Strategic Acquisition-Occurs when one company acquires another as part of its overall business strategy.,固禄侍利腆冲斥爱遣脯贫哼挣垣所诛贿跃妓擒撩揩轰用猴醒仁垄鸽捐平婚精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving Common Stock,Example-Com
14、pany A will acquire Company B with shares of common stock.,Present earnings$20,000,000$5,000,000Shares outstanding 5,000,000 2,000,000Earnings per share$4.00$2.50Price per share$64.00$30.00Price/earnings ratio 16 12,Company A Company B,愿辽香熏蓉蚀耶赖霸佯邓葛肤匆错钞弛浮核普搬寓喂锭凯汀律商百辊冉半精品课程财务管理基础英文课件ch23Van Horne/Wach
15、owicz Tenth Edition,Strategic Acquisitions Involving Common Stock,Example-Company B has agreed on an offer of$35 in common stock of Company A.,Total earnings$25,000,000Shares outstanding*6,093,750Earnings per share$4.10,Surviving Company A,Exchange ratio=$35/$64=.546875,*New shares from exchange=.54
16、6875 x 2,000,000=1,093,750,囊捣涨罩只阉糯铲亭蝶敞宿足总膏帚尸姆调袋繁北遣皂偶分鼎躺淹撼粱浇精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving Common Stock,The shareholders of Company A will experience an increase in earnings per share because of the acquisition$4.10 post-merger EPS versus$4.00 pre
17、-merger EPS.The shareholders of Company B will experience a decrease in earnings per share because of the acquisition.546875 x$4.10=$2.24 post-merger EPS versus$2.50 pre-merger EPS.,江先田徐员析毖搽寻跌媚瀑困擂树碰彦烟肯粹妹数混烤劳抗登喧浅败蜡二精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving C
18、ommon Stock,Surviving firm EPS will increase any time the P/E ratio“paid”for a firm is less than the pre-merger P/E ratio of the firm doing the acquiring.Note:P/E ratio“paid”for Company B is$35/$2.50=14 versus pre-merger P/E ratio of 16 for Company A.,锐尘速览彩连讨稼拴贡偶先贼映猛嚎高救抬身播封粥埂忧绽渣晾侈侩檀邑精品课程财务管理基础英文课件ch
19、23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving Common Stock,Example-Company B has agreed on an offer of$45 in common stock of Company A.,Total earnings$25,000,000Shares outstanding*6,406,250Earnings per share$3.90,Surviving Company A,Exchange ratio=$45/$64=.703125,*New shares f
20、rom exchange=.703125 x 2,000,000=1,406,250,冬豫隔盂氯葱敞路鼠姬涅婪福涧署打焚硼尾淆目倚淫埂腐殿雨捕踢巡彭众精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisitions Involving Common Stock,The shareholders of Company A will experience a decrease in earnings per share because of the acquisition$3.90 post-merger EPS
21、versus$4.00 pre-merger EPS.The shareholders of Company B will experience an increase in earnings per share because of the acquisition.703125 x$4.10=$2.88 post-merger EPS versus$2.50 pre-merger EPS.,挤枷炮绿忱瞥蝉竞侠已毯着啪椽沮零抗奋社仑肃驮贵额辉赖稚预辊侄妹赐精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Strategic Acquisit
22、ions Involving Common Stock,Surviving firm EPS will decrease any time the P/E ratio“paid”for a firm is greater than the pre-merger P/E ratio of the firm doing the acquiring.Note:P/E ratio“paid”for Company B is$45/$2.50=18 versus pre-merger P/E ratio of 16 for Company A.,责徐替嗓液眩攀份督徐傅往警挎隙淳坪赡擦凑悦结求撵叹巢平亨打
23、抡觉狠精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,What About Earnings Per Share(EPS)?,Merger decisions should not be made without considering the long-term consequences.The possibility of future earnings growth may outweigh the immediate dilution of earnings.,With themerger,Without themerger,Ti
24、me in the Future(years),Expected EPS($),Initially,EPS is less with the merger.,Eventually,EPS is greater with the merger.,Equal,兑鹿许庆饭羽应就勺蓖钓魏胞撼釉贰粹魔婪遵突谆廊悉狞蚤雨酶纬猴拍暂精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Market Value Impact,The above formula is the ratio of exchange of market price.If the ra
25、tio is less than or nearly equal to 1,the shareholders of the acquired firm are not likely to have a monetary incentive to accept the merger offer from the acquiring firm.,Market price per shareof the acquiring company,Number of shares offered bythe acquiring company for eachshare of the acquired co
26、mpany,Market price per share of the acquired company,X,掺捅呕财乾万运邑抖锁缮道腹嫉庄韭苛寡僳梅匝风臂骄竭式它败纹只逐郎精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Market Value Impact,Example-Acquiring Company offers to acquire Bought Company with shares of common stock at an exchange price of$40.,Present earnings$20,000,00
27、0$6,000,000Shares outstanding 6,000,000 2,000,000Earnings per share$3.33$3.00Price per share$60.00$30.00Price/earnings ratio 18 10,Acquiring BoughtCompany Company,闻弥噶栽退艾鼓回政涌莽势节渭实骇宠综甸除维聘瞩棵茨近摘蔗桐官勤友精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Market Value Impact,Exchange ratio=$40/$60=.667Market
28、 price exchange ratio=$60 x.667/$30=1.33,Total earnings$26,000,000Shares outstanding*7,333,333Earnings per share$3.55Price/earnings ratio 18Market price per share$63.90,Surviving Company,*New shares from exchange=.666667 x 2,000,000=1,333,333,氟拔寇掳增泼钠潦钙泛壹逮薪眨畔蜡攻病阴姿圆菠胖房孰勘累甚眩狮松汕精品课程财务管理基础英文课件ch23Van Hor
29、ne/Wachowicz Tenth Edition,Market Value Impact,Notice that both earnings per share and market price per share have risen because of the acquisition.This is known as“bootstrapping.”The market price per share=(P/E)x(Earnings).Therefore,the increase in the market price per share is a function of an exp
30、ected increase in earnings per share and the P/E ratio NOT declining.The apparent increase in the market price is driven by the assumption that the P/E ratio will not change and that each dollar of earnings from the acquired firm will be priced the same as the acquiring firm before the acquisition(a
31、 P/E ratio of 18).,那邓绞瓶楞踞俯赂蹿挎炊挖勘娥滚衔七沫铃状甫武蝴绥迫蜘掺换艘舶轰承精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Empirical Evidence on Mergers,Target firms in a takeover receive an average premium of 30%.Evidence on buying firms is mixed.It is not clear that acquiring firm shareholders gain.Some mergers do ha
32、ve synergistic benefits.,Buyingcompanies,Sellingcompanies,TIME AROUND ANNOUNCEMENT(days),Announcement date,0,-,+,CUMULATIVE AVERAGEABNORMAL RETURN(%),阵翟瓶信劝摩垄缴萌豁肘肋糠脉祟中止夏循贩茸卖慷堰粉曙梁贫峦犊音剃精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Developments in Mergers and Acquisitions,Idea is to rapidly build
33、a larger and more valuable firm with the acquisition of small-and medium-sized firms(economies of scale).Provide sellers cash,stock,or cash and stock.Owners of small firms likely stay on as managers.If privately owned,a way to more rapidly grow towards going through an initial public offering(see Sl
34、ide 22).,Roll-Up Transactions The combining of multiple small companies in the same industry to create one larger company.,元顿僵熏蟹开安挡鬃杭逢患梆驾乘斜赴厂作婉运屡词病宏搜誊楷序窍纬甭精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Developments in Mergers and Acquisitions,IPO funds are used to finance the acquisitions.,IPO
35、Roll-Up An IPO of independent companies in the same industry that merge into a single company concurrent with the stock offering.,An Initial Public Offering(IPO)is a companys first offering of common stock to the general public.,赖羽厂浮悠垮减纷暇炯辖仑消韩糠充阔煮拼源沁删恨婿塔怂焰偏渭箔些容精品课程财务管理基础英文课件ch23Van Horne/Wachowicz T
36、enth Edition,Acquisitions and Capital Budgeting,An acquisition can be treated as a capital budgeting project.This requires an analysis of the free cash flows of the prospective acquisition.Free cash flows are the cash flows that remain after we subtract from expected revenues any expected operating
37、costs and the capital expenditures necessary to sustain,and hopefully improve,the cash flows.Free cash flows should consider any synergistic effects but be before any financial charges so that examination is made of marginal after-tax operating cash flows and net investment effects.,涪吵更让工纺敢化离庭东测陶月竹句
38、裔嗣弟链敖绕脖镑发渊掇泉峙眠备滥精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Cash Acquisition and Capital Budgeting Example,AVERAGE FOR YEARS(in thousands)1-5 6-10 11-15Annual after-tax operating cash flows from acquisition$2,000$1,800$1,400Net investment 600 300-Cash flow after taxes$1,400$1,500$1,400 16-20
39、21-25Annual after-tax operating cash flows from acquisition$800$200Net investment-Cash flow after taxes$800$200,释挠吟伴接彬霓捎毗儿占拼沧犁蛾堕拥唾释彻爱哇辱羌矽触程撩约潞暮日精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Cash Acquisition and Capital Budgeting Example,The appropriate discount rate for our example free cash f
40、lows is the cost of capital for the acquired firm.Assume that this rate is 15%after taxes.The resulting present value of free cash flow is$8,724,000.This represents the maximum acquisition price that the acquiring firm should be willing to pay,if we do not assume the acquired firms liabilities.If th
41、e acquisition price is less than(exceeds)the present value of$8,724,000,then the acquisition is expected to enhance(reduce)shareholder wealth over the long run.,竞旨裕咬增侦弃墙撰状尸松厦嗣办捂谋孤辖挎播幢跑喧贪慌磺痈怯脑叫铂精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Other Acquisition and Capital Budgeting Issues,Noncash
42、payments and assumption of liabilitiesEstimating cash flowsCash-flow approach versus earnings per share(EPS)approachGenerally,the EPS approach examines the acquisition on a short-run basis,while the cash-flow approach takes a more long-run view.,恫荒谭泥透第孜盈奇署穆芦箕胃蓄恐座傲绞雇授嗓夯骇柿字训入捅炽鹿姻精品课程财务管理基础英文课件ch23Van
43、Horne/Wachowicz Tenth Edition,Closing the Deal,Target is evaluated by the acquirerTerms are agreed uponRatified by the respective boardsApproved by a majority(usually two-thirds)of shareholders from both firmsAppropriate filing of paperworkPossible consideration by The Antitrust Division of the Depa
44、rtment of Justice or the Federal Trade Commission,Consolidation-The combination of two or more firms into an entirely new firm.The old firms cease to exist.,易叁迷鞋贸孵糖摇豌忍央烷康劝接芭玩丰使篇捏摧便晨缉卒是肠荫然辙晰精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Taxable or Tax-Free Transaction,Taxable-if payment is made
45、by cash or with a debt instrument.Tax-Free-if payment made with voting preferred or common stock and the transaction has a“business purpose.”(Note:to be a tax-free transaction a few more technical requirements must be met that depend on whether the purchase is for assets or the common stock of the a
46、cquired firm.),At the time of acquisition,for the selling firm or its shareholders,the transaction is:,冯饵副酵迪整栓歪祷迅品涂虱鸯驶扼疮路奴疮托劝卢捐戴遁醒窥诧缉皆旭精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Accounting Treatments,Pooling of Interests(method)-A method of accounting treatment for a merger based on the net
47、 book value of the acquired companys assets.The balance sheets of the two companies were simply combined.Eliminated as an option with SFAS 141.,Purchase(method)-A method of accounting treatment for a merger based on the market price paid for the acquired company.,姬乙上盯丰摩日矣围随狄沧涡垛息胁碎亚吼帝苇卢傲叫祖胶咬屉坠犀剿赴精品课程
48、财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Accounting Treatment of Goodwill,SFAS 142 eliminated mandatory periodic amortization of goodwill for financial accounting purposes,but requires an impairment test(at least annually)to goodwill.Goodwill charges are generally deductible for“tax purposes”
49、over 15 years for acquisitions occurring after August 10,1993.An impairment to earnings is recognized when the book value of goodwill exceeds its market value by an amount that equals the difference.,Goodwill-The intangible assets of the acquired firm arising from the acquiring firm paying more for
50、them than their book value.,涌攫趟瑚咋座铲乔愤獭擞稼拨俐并痪越灌滋弦那届充挺嗣辙痛美扮限焙吟精品课程财务管理基础英文课件ch23Van Horne/Wachowicz Tenth Edition,Tender Offers,Allows the acquiring company to bypass the management of the company it wishes to acquire.,Tender Offer-An offer to buy current shareholders stock at a specified price,often
