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Mergers, LBOs, Divestitures and Holding Companies (PowerPoint PPT)
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- Provide of What method is used to account for mergers?
- Provides of What are some merger-related activities of investment bankers?
- Provides of What are the advantages and disadvantages of holding companies?
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Mergers, LBOs, Divestitures and Holding Companies
Lecture Outline
1. What are some valid economic justifications for mergers?
2. What are some questionable reasons for mergers?
3. Differentiate between hostile and friendly mergers
4. Do mergers really create value?
5. What method is used to account for mergers?
6. What are some merger-related activities of investment bankers?
7. Reasons why alliances can make more sense than acquisitions
8. APV Valuation Analysis
9. What is the appropriate discount rate to apply to the target's cash flows?
10. What Is the value of the Target Firm's operations to the Acquiring Firm?
11. What is a leveraged buyout (LB0)?
12. What are the advantages and disadvantages of going private?
13. What are the major types of divestitures?
14. What motivates firms to divest assets?
15. What are the advantages and disadvantages of holding companies?
Legally speaking, a merger requires two companies to consolidate into a new entity with a new ownership and management structure (ostensibly with members of each firm). The more common distinction to differentiating a deal is whether the purchase is friendly (merger) or hostile (acquisition) Mergers require no cash to complete but dilute each company's individual power.
In practice, friendly mergers of equals do not take place very frequently. It's uncommon that two companies would benefit from combining forces with two different CEOs agreeing to give up some authority to realize those benefits. When this does happen, the stocks of both companies are surrendered, and new stocks are issued under the name of the new business identity.
Typically, mergers are done to reduce operational costs, expand into new markets, boost revenue and profits. Mergers are usually voluntary and involve companies that are roughly the same size and scope.
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Source: Best Practices in Holding Company, M&A (Mergers & Acquisitions) PowerPoint Slides: Mergers, LBOs, Divestitures and Holding Companies PowerPoint (PPT) Presentation, UJ Consulting
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ABOUT THE AUTHOR
UJ Consulting
Untung Juanto ST. , MM. Founder of UJ Consulting. He is professionally experienced business and management consultant in several local and multinational companies.
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