台湾大学：《财务管理》（英文版） Chapter 22 Mergers, Acquisitions,and Corporate Control

Fundamentals of Corporate Finance Third edition Chapter 22 Mergers, Brealey Myers Marcus Acquisitions, and Corporate ndamentals of Corporate Finan Control Brealey Myers Marcus slides by Matthew will IrwinMcGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 1 Irwin/McGraw-Hill Chapter 22 Fundamentals of Corporate Finance Third Edition Mergers, Acquisitions, and Corporate Control Brealey Myers Marcus slides by Matthew Will Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc.,2001

22-2 Topics Covered oThe market for Corporate Control SEnsible Motives for Mergers dUbious reasons for mergers → Evaluating mergers → Merger Tactics LEveraged buy-Outs MErgers and the economy Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 2 Irwin/McGraw-Hill Topics Covered The Market for Corporate Control Sensible Motives for Mergers Dubious Reasons for Mergers Evaluating Mergers Merger Tactics Leveraged Buy-Outs Mergers and the Economy

22-3 The Merger market Methods to Change Management Proxy battle for control of the board of directors )Firm purchased by another firm )Leveraged buyout by a group of investors )Divestiture of all or part of the firms business units Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 3 Irwin/McGraw-Hill The Merger Market ➔Proxy battle for control of the board of directors ➔Firm purchased by another firm ➔Leveraged buyout by a group of investors ➔Divestiture of all or part of the firm’s business units Methods to Change Management

22-4 Recent Mergers Payment Year BI uying company Selling company (Soil) 1999 MCI Worldcom Sprint 115 1999 Viacom CBS 1999AT&T MediaOne Group 54 1999 Travelers Citicorp 83 1999 Exxon Mobil 80 1999 Total Fina(france) Elf Aquitaine(france) 1999 Olivetti (Italy) Telecom Italia (Italy) 58 1999 Vodafone (UK) Air Touc comm 61 1998 British Petroleum(UK) Amoco Corp 48 1998 Daimler-Benz(Germany) Chrysler 38 1998 Zeneca (UK) Astra (Sweden) 1998 Nations bank Corp Bank America Corp 62 1998 WorldCom Inc MCI Communications 42 1998 Norwest Corp Wells Fargo Co 34 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 4 Irwin/McGraw-Hill Recent Mergers Year Buying Company Selling Company Payment ($bil) 1999 MCI WorldCom Sprint 115 1999 Viacom CBS 3 5 1999 AT&T MediaOne Group 5 4 1999 Travelers Citicorp 8 3 1999 Exxon Mobil 8 0 1999 TotalFina (France) Elf Aquitaine (France) 5 5 1999 Olivetti (Italy) Telecom Italia (Italy) 5 8 1999 Vodafone (UK) Air Touc Comm. 6 1 1998 British Petroleum (UK) Amoco Corp. 4 8 1998 Daimler-Benz (Germany) Chrysler 3 8 1998 Zeneca (UK) Astra (Sweden) 3 5 1998 Nationsbank Corp. BankAmerica Corp. 6 2 1998 WorldCom Inc. MCI Communications 4 2 1998 Norwest Corp. Wells Fargo & Co. 3 4

22-5 The Merger market Tools Used To Acquire Companies Proxy Contest Tender offer Acquisition Merger Leveraged Management Buy-Out Buy-Or Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 5 Irwin/McGraw-Hill The Merger Market Tools Used To Acquire Companies Proxy Contest Acquisition Leveraged Buy-Out Management Buy-Out Merger Tender Offer

22-6 Sensible reasons for Mergers Economies of scale a larger firm may be able to reduce its per unit cost by using excess capacity or spreading fixed costs across more units Reduces costs Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 6 Irwin/McGraw-Hill Sensible Reasons for Mergers Economies of Scale A larger firm may be able to reduce its per unit cost by using excess capacity or spreading fixed costs across more units. $ $ $ Reduces costs

22-7 Sensible reasons for Mergers Economies of Vertical Integration ) Control over suppliers" may"reduce costs )Over integration can cause the opposite effect Pre-integration Post-integration (ess efficient more efficient) Company C ompany S S S S LS Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 7 Irwin/McGraw-Hill Sensible Reasons for Mergers Economies of Vertical Integration ➔Control over suppliers “may” reduce costs. ➔Over integration can cause the opposite effect. Pre-integration (less efficient) Company S S S S S S S Post-integration (more efficient) Company S

22-8 Sensible reasons for Mergers Combining Complementary resources Merging may results in each firm filling in the missing pieces of their firm with pieces from the other firm Firm a Firm B Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 8 Irwin/McGraw-Hill Sensible Reasons for Mergers Combining Complementary Resources Merging may results in each firm filling in the “missing pieces” of their firm with pieces from the other firm. Firm A Firm B

22-9 Sensible reasons for Mergers Mergers as a Use for Surplus Funds If your firm is in a mature industry with few if any, positive NPV projects available, acquisition may be the best use of your funds nve tment Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 9 Irwin/McGraw-Hill Sensible Reasons for Mergers Mergers as a Use for Surplus Funds If your firm is in a mature industry with few, if any, positive NPV projects available, acquisition may be the best use of your funds

22.10 Dubious Reasons for Mergers DIversification )Investors should not pay a premium for diversification since they can do it themselves Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 22- 10 Irwin/McGraw-Hill Dubious Reasons for Mergers Diversification ➔Investors should not pay a premium for diversification since they can do it themselves