Chapter_3收購(gòu)、兼并和重組課后題目課件

1、The Corporate Takeover MarketCommon Takeover Tactics, Takeover Defenses, and Corporate GovernanceTreat a person as he is, and he will remain as he is. Treat him as he could be, and he will become what he should be. Jimmy JohnsonExhibit 1: Course Layout: Mergers, Acquisitions, and Other Restructuring

2、 ActivitiesPart IV: Deal Structuring and FinancingPart II: M&A ProcessPart I: M&A EnvironmentCh. 11: Payment and Legal ConsiderationsCh. 7: Discounted Cash Flow ValuationCh. 9: Financial Modeling TechniquesCh. 6: M&A Postclosing IntegrationCh. 4: Business and Acquisition PlansCh. 5: Sear

3、ch through Closing ActivitiesPart V: Alternative Business and Restructuring Strategies Ch. 12: Accounting & Tax ConsiderationsCh. 15: Business AlliancesCh. 16: Divestitures, Spin-Offs, Split-Offs, and Equity Carve-OutsCh. 17: Bankruptcy and LiquidationCh. 2: Regulatory ConsiderationsCh. 1: Motiv

4、ations for M&APart III: M&A Valuation and Modeling Ch. 3: Takeover Tactics, Defenses, and Corporate GovernanceCh. 13: Financing the Deal Ch. 8: Relative Valuation MethodologiesCh. 18: Cross-Border TransactionsCh. 14: Valuing Highly Leveraged Transactions Ch. 10: Private Company Valuation Cur

5、rent Lecture Learning ObjectivesProviding students with an understanding of Corporate governance and its role in protecting stakeholders in the firm; Factors external and internal to the firm affecting corporate governance; Common takeover tactics employed in the market for corporate control and whe

6、n and why they are used; and Common takeover defenses employed by target firms and when and why they are used.Alternative Models of Corporate ControlMarket model applies when: Capital markets are liquid Equity ownership is widely dispersed Board members are largely independent Ownership & contro

7、l are separate Financial disclosure is high Shareholder focus more on short-term gainsPrevalent In U.S. and U.K.Control model applies when: Capital markets are illiquid Ownership is heavily concentrated Board members are largely “insiders” Ownership & control overlap Financial disclosure limited

8、 Shareholder focus more on long-term gainsPrevalent in Europe, Asia, & Latin AmericaFactors Affecting Corporate Governance: Market Model Perspective Internal to FirmBoard of DirectorsManagementInternal Controls Incentive SystemsCorporate Culture & ValuesTakeover DefensesBond CovenantsExterna

9、l to Firm External to Firm External to Firm External to Firm Legislation: 1933-34 Securities Acts Dodd-Frank Act of 2010 Sherman Anti-Trust ActRegulators: SEC Justice Department FTC Institutional Activism: Pension Funds (Calpers) Mutual Funds Hedge FundsMarket for Corporate Control: Proxy Contests H

10、ostile TakeoversInternal Factors: Board of Directors and Management Board responsibilities include:-Review management proposals/advise CEO-Hire, fire, and set CEO compensation-Oversee management, corporate strategy, and financial reports to shareholders Good governance practices include:-Separation

11、of CEO and Chairman of the Board-Boards dominated by independent members-Independent members serving on the audit and compensation committeesInternal Factors: Controls & Incentive Systems Dodd-Frank Act (2010):- Gives shareholders of public firms nonbinding right to vote on executive compensatio

12、n packages-Public firms must have mechanism for recovering compensation 3-yrs prior to earnings restatement Alternative ways to align management and shareholder objectives Link stock option exercise prices to firms stock price performance relative to the overall market Key managers should own a sign

13、ificant portion of the firms outstanding sharesInternal Factors: Corporate Culture & Values Corporate culture refers to a common set of values, traditions, and beliefs that influence management and employee behavior within a firm. The desired culture for the new organization can be promoted thro

14、ugh Clear and consistent communication to all employees of what is appropriate and what is not Senior management consistently displaying the desired behaviors Reward systems that foster desired behaviors while penalizing undesirable conduct Trust in a new organization is undermined when there is amb

15、iguity about the new organizations culture/identity.External Factors: Legislation Federal and state securities laws Securities Acts of 1933 and 1934 Williams Act (1968) Insider trading laws Anti-trust laws Sherman Act (1890) Clayton Act (1914) Hart-Scott-Rodino Act (1976) Dodd-Frank Act (2010)Extern

16、al Factors: Regulators Securities and Exchange Commission (SEC) Justice Department Federal Trade Commission (FTC) Public Company Accounting Oversight Board (PCAOB) Financial Accounting Standards Board (FASB) Financial Stability Oversight Council (FSOC)External Factors: Institutional Activism Pension

17、 funds, mutual funds, and insurance companies Ability to discipline management often limited by amount of stock can legally own in a single firm Investors with huge portfolios (e.g., TIAA-CREF, California Employee Pension Fund) can exert significant influence Recent trend has been for institutional

18、investors to simply withhold their votesExternal Factors: Market for Corporate ControlChanges in control can result from hostile takeovers or proxy contestsManagement may resist takeover bids to Increase the purchase price (Shareholders Interests Theory) or Ensure their longevity with the firm (Mana

19、gement Entrenchment Theory)Takeovers may Minimize “agency costs” and Transfer control to those who can more efficiently manage the acquired assetsDiscussion Questions1.Do you believe corporate governance should be narrowly defined to encompass shareholders only or more broadly to incorporate all sta

20、keholders? Explain your answer.2.Of the external factors impacting corporate governance, which do you believe is likely to be the most important? Be specific.Market for Corporate Control: Alternative Takeover1 Tactics Friendly deals (Target board supports bid) Hostile deals (Target board contests bi

21、d). Rare due to Target board flexibility in setting up defenses Impact on bid premiums Impact on postclosing integration The threat of hostile bids often moves target boards toward negotiated settlements.1A corporate takeover refers to a transfer of control from one investor group to another.Market

22、for Corporate Control: “Friendly” Takeover TacticsPotential acquirer obtains support from the targets board and management early in the takeover process before proceeding to a negotiated settlement. The acquirer and target firms often enter into a standstill agreement in which the bidder agrees not

23、to make any further investments for a stipulated period in exchange for a break-up fee from the target firm.Such takeovers are desirable as they avoid an auction environment.If the bidder is rebuffed, the loss of surprise gives the target firm time to mount additional takeover defenses.Rapid takeove

24、rs are less likely today due to FTC and SEC pre-notification and disclosure requirements.11The permitted reporting delay between first exceeding the 5% ownership stake threshold and the filing of a 13D allowed Vornado Realty Trust to accumulate 27% of J. C. Pennys outstanding shares before making th

25、eir holdings public.Market for Corporate Control: Hostile Takeover Tactics Limiting the targets actions through a “bear hug” Proxy contests in support of a takeover Purchasing target stock in the open market Circumventing the targets board through a tender offer Litigation Using multiple tactics con

26、currentlyAlcoa Aluminum Easily Overwhelms Reynolds Takeover DefensesAlcoas offer to Reynolds Metals consisted of $4.3 billion in cash plus the assumption of $1.5 billion in Reynolds outstanding debt. Alcoas offer letter, which it made public, from its chief executive to the Reynolds CEO indicated th

27、at it wanted to pursue a friendly deal but that it would pursue a hostile bid if the two sides could not begin discussions within a week. Reynolds appeared to be highly vulnerable because of its ongoing poor financial performance and because of its weak takeover defenses. Despite pressure from insti

28、tutional shareholders, the Reynolds board rejected Alcoas bid as inadequate. Alcoas response was to say that it would make a formal offer directly to the Reynolds shareholders and simultaneously solicit shareholder support for replacing the Reynolds board and dismantling Reynolds takeover defenses.

29、Reynolds capitulated within two weeks from receipt of the initial solicitation and agreed to be acquired by Alcoa. The agreement contained a thirty-day window during which Reynolds could entertain other bids. However, if Reynolds should choose to go with another offer, it would have to pay Alcoa a $

30、100 million break-up fee. What was the dollar value of the purchase price Alcoa offered to pay for Reynolds?Speculate as to why Alcoa wanted to pursue initially a friendly rather than hostile approach?3. Describe the various takeover tactics Alcoa employed (or threatened) in its successful takeover

31、of Reynolds. Speculate as to why these tactics may have been employed (or threatened) by Alcoa?4. Why did the Reynolds board reject the initial offer only to accept the bid two weeks later?5. What is the purpose of the breakup fee? Market for Corporate Control: Pre-Offer Takeover DefensesPoison pill

32、s to raise the cost of takeover1Shark repellants to strengthen the target boards defenses Staggered or classified board elections Limiting conditions when directors can be removedShark repellants to limit shareholder actions Limitations on calling special meetings Limiting consent solicitations Adva

33、nce notice and super-majority provisionsOther shark repellants Anti-greenmail and fair price provisions Super-voting stock, re-incorporation, and golden parachutes1Note that poison pills could also be classified as post-offer defenses as they may be issued by the board as dividends without sharehold

34、er approval. Poison Pill: Cash for Share PurchaseP1 = Pre-offer equilibrium price/target shareP2 = Poison pill conversion price/target shareP3 = Offer price/target shareQ1 = Pre-offer target shares outstandingQ2 = Target shares outstanding following poison pill conversionABCD = Incremental acquirer

35、cash outlay due to poison pill conversionQ1 Q2 Target Shares OutstandingTarget Price Share D S1 S2DP3P1P2Target shareholder Profit/Share on Poison Pill ConversionA BC DDD reflects relationship between shares outstanding and price/share for given level of expected earnings & interest rates.Poison

36、 Pills: Share for Share ExchangeAcquirer Shareholder Ownership Dilution Due to Poison PillNew Company Shares Outstanding1Ownership Distribution in New Company (%)Without PillWith PillWithout PillWith PillTarget Firm Shareholders Shares Outstanding Total Shares Outstanding1,000,0001,000,0002,000,0002

37、,000,00050673Acquiring Firm Shareholders Shares Outstanding New Shares Issued Total Shares Outstanding41,000,0001,000,0002,000,0001,000,0002,000,00023,000,00050331Acquirer agrees to exchange one share of acquirer stock for each share of target stock. 2Poison pill provisions enable each target shareh

38、older to buy one share of target stock at a nominal price for each share they own. Assume all target shareholders exercise their rights to do so.32,000,000/3,000,0004Target shares are cancelled upon completion of transaction.Market for Corporate Control: Post-Offer Takeover Defenses Greenmail Stands

39、till agreement Pac-man defense White knights Employee stock ownership plans Recapitalization Share buy-back plans Corporate restructuring Litigation “Just say no”Discussion QuestionsDiscuss the advantages and disadvantages of the friendly versus hostile approaches to corporate takeovers. Be specific.Do you believe that corporate takeover defenses are more motivated by the targets managers attempting to entrench themselves or to negotiate a higher price for their shareholders? Be specific.Impact on Sha