经济类课件汇集_FIN2101_Lecture06 Takeovers

FIN2101 BUSINESS FINANCE I Module 5- takeovers

FIN2101 BUSINESS FINANCE II Module 5 - Takeovers

Student Activities Reading Text, Chapter 19 Text Study Guide, Chapter 19 Study Book, Module 5 Selected Reading 5.1 Tutorial Activities Tutoria/ Workbook. Self Assessment Activity 5.1 Text Study Guide, Chapter 19, All

Student Activities Reading • Text, Chapter 19 • Text Study Guide, Chapter 19 • Study Book, Module 5 • Selected Reading 5.1 Tutorial Activities • Tutorial Workbook, Self Assessment Activity 5.1 • Text Study Guide, Chapter 19, All

Terminology A TAKEOVER occurs when a company acquires a controlling interest in another company A MERGER usually involves two or more independent companies coming together by mutual agreement A CoNSOLIDATION is the combination of two or more firms to form a completely new company

Terminology • A TAKEOVER occurs when a company acquires a controlling interest in another company. • A MERGER usually involves two or more independent companies coming together by mutual agreement. • A CONSOLIDATION is the combination of two or more firms to form a completely new company

More Terminology Acquiring company vs target company Hostile vs friendly takeover Strategic vs financial merger

More Terminology • Acquiring company vs target company • Hostile vs friendly takeover • Strategic vs financial merger

Types of Takeovers · Horizonta 2 companies in same line of business Vertical a takeover of either the supplier of goods/raw materials to, or a consumer of goods produced by the acquiring company Congeneric in the same general industry but neither in the same line of business nor a supplier or customer Conglomerate in an unrelated business or industry

Types of Takeovers • Horizontal – 2 companies in same line of business. • Vertical – a takeover of either the supplier of goods/raw materials to, or a consumer of goods produced by, the acquiring company. • Congeneric – in the same general industry but neither in the same line of business nor a supplier or customer. • Conglomerate – in an unrelated business or industry

Reasons for Takeovers Like any other investment- maximise the value of the acquiring company' s shares Must be financial benefits Motivated by a desire for greater returns or reduction in risk profile, or both

Reasons for Takeovers • Like any other investment – maximise the value of the acquiring company’s shares. • Must be financial benefits. • Motivated by a desire for greater returns or reduction in risk profile, or both

Reasons for Takeovers Target company is managed inefficiently Complimentary assets Target company is undervalued

Reasons for Takeovers • Target company is managed inefficiently • Complimentary assets • Target company is undervalued

Reasons for Takeovers Cost reductions Increased market power Excess liquidity free cash flow

Reasons for Takeovers • Cost reductions • Increased market power • Excess liquidity & free cash flow

Reasons for Takeovers Tax benefits continuity-of-ownership test continuity-of-business test Text(pp. 702-6)and Study Book(pp 5.2-5.4)

Reasons for Takeovers • Tax benefits – continuity-of-ownership test – continuity-of-business test • Text (pp. 702-6) and Study Book (pp. 5.2-5.4)

Invalid/ dubious reasons Diversification Risk reduction Increased debt capacity the co-insurance effect ° Higher EPS bootstrapping

Invalid/Dubious Reasons • Diversification – Risk reduction • Increased debt capacity – the co-insurance effect • Higher EPS – bootstrapping