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chp 9 Merge and acquisition (Motives of MA (Surplus funds:, Eliminating…
chp 9 Merge and acquisition
Merge is combine, Acquisition is purchase
Gain from MA-
SELLER > BUYER
(compare acquisition premium and takeover synergy)
competition and company scale lead to this condition
Types of MA
Vertical merger: supply and demand
increase efficiency,save cost, better control supply chain
loss core competiveness
Conglomerate/ diversifying merge
Diversification
Complex accounting
Horizontal/ strategic merger in the same industry
operating synergy, economic scale
corporate culture, organization structure, low diversification, monopoly
Motives of MA
Surplus funds:
Eliminating efficiency: for replace CEO
Complement resources:
Managerial motives higher pay and prestige
Economic of sale--reduce cost, coordination and administration
Monopoly gains
DIS: Mis-allocate capital, loss information after merge
Takeover process
Tender offer: --must approved by regulator
friendly takeover,
hostile takeover,
proxy fight (use other shareholders)
Free-ride problems: buying shares on the open market / secret share from accumulation by risk arbitrages
Valuation: pay with cash (confidence) or stock
Management defence
Staggered broad terms: some super majority rules
Poison pills
flip-in plan: permit other shareholders buy in premium
flip-out plan: purchase acquiring firm's stock
Greenmail: buyback stocks at an premium
delay or get a higher takeover/ but these defenses only keep manager's power rather practical effect