精品課程財務(wù)管理基礎(chǔ)英文課件ch23

1、23-1 pearson education limited 2004fundamentals of financial management, 12/ecreated by: gregory a. kuhlemeyer, ph.d.carroll college, waukesha, wi23-2uexplain why a company might decide to engage in corporate restructuring. uunderstand and calculate the impact on earnings and on market value of comp

2、anies involved in mergers. udescribe what benefits, if any, accrue to acquiring company shareholders and to selling company shareholders. uanalyze a proposed merger as a capital budgeting problem. udescribe the merger process from its beginning to its conclusion. udescribe different ways to defend a

3、gainst an unwanted takeover. udiscuss strategic alliances and understand how outsourcing has contributed to the formation of virtual corporations. uexplain what “divestiture” is and how it may be accomplished. uunderstand what going private means and what factors may motivate management to take a co

4、mpany private. uexplain what a leveraged buyout is and what risk it entails.23-3usources of valueustrategic acquisitions involving common stockuacquisitions and capital budgetinguclosing the deal23-4utakeovers, tender offers, and defensesustrategic alliancesudivestitureuownership restructuringulever

5、aged buyouts23-5any change in a companys:1. capital structure,2. operations, or3. ownershipthat is outside its ordinary course of business.so where is the value comingfrom (why restructure)?23-6usales enhancement and operating economies*uimproved managementuinformation effectuwealth transfersutax re

6、asonsuleverage gainsuhubris hypothesisumanagements personal agenda* will be discussed in more detail in the following two slides.23-7can occur because of market share gain, technological advancements to the product table, and filling a gap in the product line.can be achieved because of the eliminati

7、on of duplicate facilities or operations and personnel. - economies realized in a merger where the performance of the combined firm exceeds that of its previously separate parts.23-8: best chance for economies: may lead to economies: few operating economies: reverse synergy may occur - the benefits

8、of size in which the average unit cost falls as volume increases.23-9uwhen the acquisition is done for common stock, a “ratio of exchange,” which denotes the relative weighting of the two companies with regard to certain key variables, results.uaoccurs when a buyout firm is motivated to purchase the

9、 company (usually to sell assets, cut costs, and manage the remainder more efficiently), but keeps it as a stand-alone entity.- occurs when one company acquires another as part of its overall business strategy.23-10- company a will acquire company b with shares of common stock.present earnings$20,00

10、0,000$5,000,000shares outstanding 5,000,000 2,000,000earnings per share$4.00 $2.50price per share $64.00 $30.00price / earnings ratio 16 12company a company b23-11- company b has agreed on an offer of $35 in common stock of company a.total earnings$25,000,000shares outstanding* 6,093,750earnings per

11、 share$4.10surviving company aexchange ratio = $35 / $64 = * = x 2,000,000 = 23-12uthe shareholders of company a will experience an increase in earnings per share because of the acquisition $4.10 post-merger eps versus $4.00 pre-merger eps.uthe shareholders of company b will experience a decrease in

12、 earnings per share because of the acquisition .546875 x $4.10 = $2.24 post-merger eps versus $2.50 pre-merger eps.23-13usurviving firm eps will increase any time the p/e ratio “paid” for a firm is less than the pre-merger p/e ratio of the firm doing the acquiring. note: p/e ratio “paid” for company

13、 b is $35/$2.50 = 14 versus pre-merger p/e ratio of 16 for company a.23-14- company b has agreed on an offer of $45 in common stock of company a.total earnings$25,000,000shares outstanding* 6,406,250earnings per share$3.90surviving company aexchange ratio = $45 / $64 = * = x 2,000,000 = 23-15uthe sh

14、areholders of company a will experience a decrease in earnings per share because of the acquisition $3.90 post-merger eps versus $4.00 pre-merger eps.uthe shareholders of company b will experience an increase in earnings per share because of the acquisition .703125 x $4.10 = $2.88 post-merger eps ve

15、rsus $2.50 pre-merger eps.23-16usurviving firm eps will decrease any time the p/e ratio “paid” for a firm is greater than the pre-merger p/e ratio of the firm doing the acquiring. note: p/e ratio “paid” for company b is $45/$2.50 = 18 versus pre-merger p/e ratio of 16 for company a.23-17umerger deci

16、sions should not be made without considering the long-term consequences.uthe possibility of future earnings growth may outweigh the immediate dilution of earnings.time in the future (years)expected eps ($)initially, eps is less with the merger.eventually, eps is greater with the merger.equal23-18uth

17、e above formula is the ratio of exchange of market price.uif the ratio is less than or nearly equal to 1, the shareholders of the acquired firm are not likely to have a monetary incentive to accept the merger offer from the acquiring firm.x23-19- acquiring company offers to acquire bought company wi

18、th shares of common stock at an exchange price of $40.present earnings$20,000,000$6,000,000shares outstanding 6,000,000 2,000,000earnings per share$3.33 $3.00price per share $60.00 $30.00price / earnings ratio 18 10acquiring boughtcompany company 23-20= $40 / $60 = .667= $60 x .667 / $30 = 1.33total

19、 earnings$26,000,000shares outstanding* 7,333,333earnings per share$3.55price / earnings ratio 18market price per share $63.90surviving company* = x 2,000,000 = 23-21unotice that both earnings per share and market price per share have risen because of the acquisition. this is known as “bootstrapping

20、.”uthe market price per share = (p/e) x (earnings).utherefore, the increase in the market price per share is a function of an expected increase in earnings per share the p/e ratio declining.uthe apparent increase in the market price is driven by the assumption that the p/e ratio will not change and

21、that each dollar of earnings from the acquired firm will be priced the same as the acquiring firm before the acquisition (a p/e ratio of 18).23-22utarget firms in a takeover receive an average premium of 30%.uevidence on buying firms is mixed. it is not clear that acquiring firm shareholders gain. s

22、ome mergers do have synergistic benefits.time around announcement(days)announcement date0-+cumulative averageabnormal return (%)23-23uidea is to rapidly build a larger and more valuable firm with the acquisition of small- and medium-sized firms (economies of scale).uprovide sellers cash, stock, or c

23、ash and stock.uowners of small firms likely stay on as managers.uif privately owned, a way to more rapidly grow towards going through an initial public offering (see slide 22). the combining of multiple small companies in the same industry to create one larger company.23-24uipo funds are used to fin

24、ance the acquisitions. an ipo of independent companies in the same industry that merge into a single company concurrent with the stock offering.an initial public offering (ipo) is a companys first offering of common stock to the general public.23-25uan acquisition can be treated as a capital budgeti

25、ng project. this requires an analysis of the of the prospective acquisition. are the cash flows that remain after we subtract from expected revenues any expected operating costs and the capital expenditures necessary to sustain, and hopefully improve, the cash flows.should consider any synergistic e

26、ffects but be before any financial charges so that examination is made of marginal after-tax operating cash flows and net investment effects.23-26average for years (in thousands) 1 - 5 6 - 10 11 - 15 16 - 2021 - 2523-27uthe appropriate discount rate for our example is the cost of capital for the acq

27、uired firm. assume that this rate is 15% after taxes.uthe resulting present value of is . this represents the maximum acquisition price that the acquiring firm should be willing to pay, if we do not assume the acquired firms liabilities.uif the acquisition price is less than (exceeds) the present va

28、lue of , then the acquisition is expected to enhance (reduce) shareholder wealth over the long run.23-28ugenerally, the eps approach examines the acquisition on a short-run basis, while the cash-flow approach takes a more long-run view.23-29utarget is evaluated by the acquireruterms are agreed uponu

29、ratified by the respective boardsuapproved by a majority (usually two-thirds) of shareholders from both firmsuappropriate filing of paperworkupossible consideration by the antitrust division of the department of justice or the federal trade commission- the combination of two or more firms into an en

30、tirely new firm. the old firms cease to exist.23-30- if payment is made by cash or with a debt instrument.- if payment made with voting preferred or common stock and the transaction has a “business purpose.” (note: to be a tax-free transaction a few more technical requirements must be met that depen

31、d on whether the purchase is for assets or the common stock of the acquired firm.)at the time of acquisition, for the selling firm or its shareholders, the transaction is:23-31- a method of accounting treatment for a merger based on theof the acquired companys assets. the balance sheets of the two c

32、ompanies were simply combined.eliminated as an option with sfas 141.- a method of accounting treatment for a merger based on thepaid for the acquired company.23-32usfas 142 eliminated mandatory periodic amortization of goodwill for financial accounting purposes, but requires an impairment test (at l

33、east annually) to goodwill.ugoodwill charges are generally deductible for “tax purposes” over 15 years for acquisitions occurring after august 10, 1993.uan impairment to earnings is recognized when the book value of goodwill exceeds its market value by an amount that equals the difference.- the inta

34、ngible assets of the acquired firm arising from the acquiring firm paying more for them than their book value.23-33uallows the acquiring company to bypass the management of the company it wishes to acquire.- an offer to buy current shareholders stock at a specified price, often with the objective of

35、 gaining control of the company. the offer is often made by another company and usually for more than the present market price.23-34uit is not possible to surprise another company with its acquisition because the sec requires extensive disclosure.uthe tender offer is usually communicated through fin

36、ancial newspapers and direct mailings if shareholder lists can be obtained in a timely manner.ua two-tier offer (next slide) may be made with the first tier receiving more favorable terms. this reduces the free-rider problem.23-35uincreases the likelihood of success in gaining control of the target

37、firm.ubenefits those who tender “early.” occurs when the bidder offers a superior first-tier price (e.g., higher amount or all cash) for a specified maximum number (or percent) of shares and simultaneously offers to acquire the remaining shares at a second-tier price.23-36u(1) persuasion by manageme

38、nt that the offer is not in their best interests, (2) taking legal actions, (3) increasing the cash dividend or declaring a stock split to gain shareholder support, and (4) as a last resort, looking for a “friendly” company (i.e., white knight) to purchase them.- a friendly acquirer who, at the invi

39、tation of a target company, purchases shares from the hostile bidder(s) or launches a friendly counter-bid in order to frustrate the initial, unfriendly bidder(s).23-37this theory implies that contests for corporate control are dysfunctional and take management time away from profit-making activitie

40、s.this theory suggests that barriers are erected to protect management jobs and that such actions work to the detriment of shareholders.23-38ustagger the terms of the board of directorsuchange the state of incorporationusupermajority merger approval provisionufair merger price provisionuleveraged re

41、capitalizationupoison pillustandstill agreementupremium buy-back offer- defenses employed by a company to ward off potential takeover bidders - the “sharks.”23-39uempirical results are mixed in determining if antitakeover devices are in the best interests of shareholders.ustandstill agreements and s

42、tock repurchases by a company from the owner of a large block of stocks (i.e., greenmail) appears to have a negative effect on shareholder wealth.ufor the most part, empirical evidence supports the because of the negative share price effect.23-40ustrategic alliances usually occur between (1) supplie

43、rs and their customers, (2) competitors in the same business, (3) non-competitors with complementary strengths.ua is a business jointly owned and controlled by two or more independent firms. each venture partner continues to exist as a separate firm, and the joint venture represents a new business e

44、nterprise.- an agreement between two or more independent firms to cooperate in order to achieve some specific commercial objective.23-41 - the sale of assets of a firm, either voluntarily or in bankruptcy. - the sale of a division of a company, known as a partial sell-off, or the company as a whole,

45、 known as a voluntary liquidation.- the divestment of a portion of the enterprise or the firm as a whole.23-42 - a form of divestiture resulting in a subsidiary or division becoming an independent company. ordinarily, shares in the new company are distributed to the parent companys shareholders on a

46、 pro rata basis.- the public sale of stock in a subsidiary in which the parent usually retains majority control.23-43ufor liquidation of the entire company, shareholders of the liquidating company realize a +12 to +20% return.ufor partial sell-offs, shareholders selling the company realize a slight

47、return (+2%). shareholders buying also experience a slight gain.ushareholders gain around 5% for spin-offs.ushareholders receive a modest +2% return for equity carve-outs.udivestiture results are consistent with the informational effect as shown by the positive market responses to the divestiture announcements. 23-44uthe most common transaction is paying shareholders cash and merging the company into a shell corporation owned by a private investor management group.utreated as an