M&A Outline

Topics: Stock, Stock market, Cash flow Pages: 63 (15996 words) Published: January 13, 2014


Class I David Katz
Mark Gordon

Mergers and Acquisitions

U.S transaction happen in CYCLES
1999-2001 highest point, then dropped considerably.
2007 another peak time for financial deals.

Financial crisis: can’t get Capitalimpact on M&A activity. “synergy” cross savings. No need for two CEOs, recording systems…etc

Leveraged Buyout: lack of capital people become conservative.

FACTORS
+ consolidation makes sense in this economomy
+ private equity firms have $
+ activist investorsshort term outlook (hedge funds)

volatile stock market
credit crunchbanks unwilling to lend $
negative perspective on deals

AOL/Time Warner bought AOL when it was at its peak, then rapidly sunk.

Boston Scientific/J&J

Deals generate unemployment? It may be good business decision, but what about the broader picture, how about for the country itself? What happens when government intervenes?

Commission Foreign Investment: protective, affects M&A activity.

EU Directive on Takeovers: outside EU target company can take defensive actions against takeovers. NOT in the EU.

Public Company Acquisition
1) Merger: 2 companies get merged: most common structure reverse triangular merger 2) T.O: buying stock for cash (combined with a later merger, it gives you control) 3) Exchange use stock or stock and cash.

4) Proxy Fight: take control by controlling BOD. Get the company without putting the equity and without investing: has not been successful in the past. Bay have a brighter future in combination with TO

Private Company Acquisition
Smaller universe of SH
Agreements with them: state law mechanisms.

Asset Acquisition: not the business
Divestures: making accompany public IPO, or Spin Offs
LBO Going private transaction: SEC Rules. If on both sides of the deal, be careful “interested transaction” additional constrains.

Hostile/Friendly

BOD has the power, SH say on the matter is indirect: they elect the BOD, if staggered it may take many years to get control in the BOD.

Government as Acquirer

AIG
Behind scenes pushing for deal to move forwards
Unsettles the market.

Key Players

Public Company
Financial Buyers Fidelity example, short term focus
BOD not responsible for the day to day affairs of the company; oversight role; responsible to hire successful management. Management: caught between BOD and SH; in charge of the day to day operations of the company, implementing the strategy approved by BOD. Wall Street: market perspective

Employees: unions
Government and Regulators: a) politicians, bureaucrats, treasury, congress, b) self regulated organizations (SRO) rating agency. SH retail on decline: through mutual funds today; hedge funds: economic interest in the company SH advisory services: advise how to vote, institutional SH for someone, impact on proxy proposals

SH Constituency:
1) Controlling SH
2) Insiders
3) Institutional investors
4) Mom and Pop retail SH
5) Arb: extremely short focus

Sources
A) Federal Securities Law
B) State
C) SRO
D) Foreign Law

Class II

M& A Theory and Motives

Non Shareholders constituents:
Credit crunch component of the recession: pressed for the importance of these new constituents Lenders and Debt-holders
Relationship banks (Relationship banks provide both debt and equity financing to their clients, have long-lasting ties with them, serve on their boards of directors and in some cases serve as senior managers, and renegotiate debt contracts during periods of financial stress.) Non-relationships banks

Hedge funds
CLO’s
Bank debt: secured, senior, bond: unsecured, junior.
Syndicated: get a loan, that bank will get other banks to participate in that lending. Hedge fund became important players on both debts: bank...
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