Rational for Mergers - external capital budgeting decision Benefits associated with mergers
- Synergy
- Tax Consideration
- Purchase of Assets below their Replacement Cost
- Diversification
- Manager’s Personal Incentives
- Breakup Value
Types of Mergers
- Horizontal
- Vertical
- Conglomerate
Level of Merger Activity - merger waves Hostile vs. Friendly Takeovers
- Kummer-Hoffmeister Takeover Study
- Both the acquired firm’s shareholders and acquiring firm’s shareholders benefited.
- Thwarted takeovers lost value subsequent to failured merger.
- Incumbent management was often the reason behind the efforts - significant undervaluation of assets relative to the norm.
Merger Regulation Role of Investment Bankers
- Arranging Mergers
- Developing Defensive Tactics
- White Knights
- Greenmail
- Poison Pills
- Golden Parachutes
Divestitures and Spinoffs and Rollups
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