Merger and Acquisition: Current Issues

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Mergers and Acquisitions
Current Issues

Edited by

Greg N. Gregoriou and Karyn L. Neuhauser

MERGERS AND ACQUISITIONS

Also edited by Greg N. Gregoriou ADVANCES IN RISK MANAGEMENT ASSET ALLOCATION AND INTERNATIONAL INVESTMENTS DIVERSIFICATION AND PORTFOLIO MANAGEMENT OF MUTUAL FUNDS PERFORMANCE OF MUTUAL FUNDS

Mergers and Acquisitions
Current Issues

Edited by
GREG N. GREGORIOU and KARYN L. NEUHAUSER

Selection and editorial matter © Greg N. Gregoriou and Karyn L. Neuhauser 2007 Individual chapters © contributors 2007 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2007 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978-0230-55379-8 ISBN-10: 0-230-55379-6 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Mergers and acquisitions : current issues / edited by Greg N. Gregoriou and Karyn L. Neuhauser. p. cm. Includes index. ISBN 0-230-55379-6 (alk. paper) 1. Consolidation and merger of corporations. I. Gregoriou, Greg N., 1956– II. Neuhauser, Karyn L. HD2746. 5. M4365 2007 338.8’3—dc22 2007021799 10 16 9 15 8 14 7 13 6 12 5 11 4 10 3 09 2 08 1 07

Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

To my mother Evangelia and in loving memory of my father Nicholas (GNG) To my mother, Helen Lieck, and in remembrance of my father, Arthur Louis Lieck, who together taught me what was important in life (KLN)

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Contents

Acknowledgments Notes on the Contributors Introduction

xi xiii xxi

1 Mergers and Acquisitions: A Global View
Karyn L. Neuhauser

1

2

What Drives Acquisitions? A Market-Manager Rationality Framework Antonios Antoniou and Huainan Zhao 2.1 2.2 2.3 2.4 2.5 2.6 Introduction Hypothesis development Data and descriptive statistics Methodology Empirical results Conclusion

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5 7 8 10 11 24

3

Misadventure and the Form of Payment in Corporate Acquisitions Tyrone M. Carlin, Guy Ford and Nigel Finch 3.1 Introduction 3.2 Factors influencing the form of consideration in acquisitions 3.3 A price too far? The acquisition of Howard Smith Ltd by Wesfarmers Ltd 3.4 Financial analysis

27
27 31 33 35
vii

viii

CONTENTS

3.5 3.6

Assessment of the transaction Conclusion

38 40

4

An Essay on the History of a Merger: The Case of the National Bank of Canada Raymond Théoret and François-Éric Racicot 4.1 4.2 4.3 4.4 4.5 Introduction The structures of the two merged banks The new merged bank A low P/E ratio for the stock of national bank Conclusion

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42 43 50 53 54...
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