Chapter 9 Mergers and Acquisitions
Chapter 9 Chapter 9 Mergers and Acquisitions Mergers and Acquisitions
Varieties of Takeovers Merger or consolidation Acquisition Acquisition of Stock Takeovers Proxy Contest Acquisition of Assets Going Private (LBO) slide 1
slide 1 Varieties of Takeovers Varieties of Takeovers Takeovers Acquisition Proxy Contest Going Private (LBO) Merger or consolidation Acquisition of Stock Acquisition of Assets
Going Private and LBOs If the existing management buys the firm from the shareholders and takes it private If it is financed with a lot of debt,it is a leveraged buyout (LBO). The extra debt provides a tax deduction for the new owners,while at the same time turning the pervious managers into owners. This reduces the agency costs of equity slide 2
slide 2 Going Private and Going Private and LBOs If the existing management buys the firm from the shareholders and takes it private. If it is financed with a lot of debt, it is a leveraged buyout (LBO). The extra debt provides a tax deduction for the new owners, while at the same time turning the pervious managers into owners. This reduces the agency costs of equity
The Basic Forms of Acquisitions There are three basic legal procedures that one firm can use to acquire another firm: Merger Acquisition of Stock Acquisition of Assets slide 3
slide 3 The Basic Forms of Acquisitions The Basic Forms of Acquisitions There are three basic legal procedures that one firm can use to acquire another firm: – Merger – Acquisition of Stock – Acquisition of Assets
Takeovers Merger the absorption of one firm Consolidation a new firm is created Acquisition of stock private offer,tender offer Acquisition of asset Proxy contest voting right Going private be purchased by a small group of investors slide 4
slide 4 Takeovers Takeovers Merger – the absorption of one firm Consolidation – a new firm is created Acquisition of stock – private offer, tender offer Acquisition of asset Proxy contest – voting right Going private – be purchased by a small group of investors