This is a solid guidance for selecting the correct strategic basis for mergers and acquisitions. Examining how M&A fits in corporate growth strategies, "Maximizing Corporate Value through Mergers and Acquisitions" covers the various strategic reasons for companies entering mergers and acquisitions (M&A), with a look at those that are based on sound strategy, and those that are not. It helps companies decide whether M&As should be used for growth and increased corporate value. It explores why M&A deals often fail to deliver what their proponents have represented they would. It explains which types of M&A work best and which to avoid. With insider guidance on what boards of directors should be aware of when evaluating proposed deals, "Maximizing Corporate Value through Mergers and Acquisitions" provides a sound foundation for understanding the risks involved in any mergers and acquisitions deal, before it's too late.
Preface xiii CHAPTER 1 Merger Growth Strategy 1 Strategy and M&A 2 Introduction to M&A 4 Background and Terminology 5 Hostile Takeovers 5 Takeover Defense 8 Leveraged Transactions 10 Restructurings 12 Trends in Mergers 14 Notes 20 CHAPTER 2 Growth through Mergers and Acquisitions 21 Is Growth or Increased Return the More Appropriate Goal? The Case of Hewlett-Packard 21 M&A Must Fit the Strategy--Not the Other Way Around 24 Strategy Should Not Be Just M&A 25 Organic Growth or Growth through M&A 25 Acquisition and Development versus Research and Development 26 Can M&A Be Effectively Used to Buy Growth? 30 Success in Core Business Does Not Always Translate to Success with M&A Strategy: Focus onMicrosoft 31 Growth through Bolt-On Acquisitions 31 Knowing When to Exit a Business 35 From Growth through M&A to Growth through Organic Expansion 36 Controlling the Runaway Dealmaker CEO 38 Using M&A to Achieve Growth in a Slow-Growth Industry 40 Squeezing Out Growth in a Slow-Growth Industry Using Multiple Options 40 Dealing with a Slow-Growth Business and Industry 42 Geographical Expansion through M&A 46 International Growth and Cross-Border Acquisitions 47 Taking Advantage of Currency Fluctuations to Pursue High-Growth M&A 47 Finding Growth in High-Growth Markets 49 Cyclical Companies Achieving Growth in Recessed Markets 50 Notes 52 CHAPTER 3 Synergy 53 What Is Synergy in the Context of M&A? 53 Achievement of Synergy: A Probabilistic Event 55 Types of Synergy 58 Industries' Pursuit of Cost Economies 65 Research on Operating Economies in M&A 69 Economies of Scope 70 Scope Economies and the One-Stop Shop 72 Copycat Following of Another Firm's FoolishM&A Strategy 74 Cost Economies in Banking Mergers: United States versus Europe 75 Internationalization Theory of Synergy and Information-Based Assets 79 Notes 89 CHAPTER 4 Diversification 91 Diversifying M&A in the Conglomerate Era 91 Modern-Day U.S. Conglomerates 92 Portfolios of Companies 95 Theoretical Basis for Diversification 98 Applying Portfolio Theory to Conglomerates? 99 Diversification and the Acquisition of Leading Industry Positions 100 Achieving a Number One or Two Ranking Is Not a Panacea 102 Diversification to Enter More Profitable Industries 102 Empirical Evidence on Diversification 103 Empirical Evidence on the Acquisition Programs of the 1960s 103 How Likely Is It That Diversifying Acquisitions Will End Up Being Sold Off? 104 Is There a Diversification Discount? 105 Focus Hypothesis 106 Types of Focus Increases 106 Focus-Increasing Asset Sales Raise Value 107 Explanation for the Diversification Discount 107 Related versus Unrelated Diversification 108 Why Are Very Diversified Companies Allowed to Form? Beware of the Empire Builders 111 Do Managerial Agendas Drive M&A? 113 Notes 114 CHAPTER 5 Horizontal Integration and M&A 117 Advantages of Holding the One and Two Position in the Industry 117 Benefits of Size: Spotlight on the Mobile Telecommunications Industry 119 Motivation to Increase Size 122 Competitive Pressures of Competitors' M&A Program 122 Horizontal Deals: Acquisitions of Competitors and Their Competing Brands 124 Sprint--Nextel Horizontal Deal: One of the Worst in M&A History 125 Declining Industry Demand Necessitating Industry Consolidation 128 Synergistic Gains and Horizontal M&A 129 Net Benefits of Horizontal Deals = Synergistic Gains -- (Easy to Measure Costs + Hard to Measure Costs) 133 Horizontal Merger Success, Target's Size, and Post-M&A Integration Costs 134 Mergers of Equals 136 Mergers of Equals and Challenges of Integration 137 Mergers-of-Equals Research: Acquirers versus Target Gains 139 Competitive Advantages of Horizontal Deals: Case Study--InBev and Anheuser-Busch 139 Regulatory Concerns on Merger Integration 141 Horizontal M&A and Market Power: An Economic Perspective 143 Empirical Evidence on Whether Firms Pursue M&A to Achieve Market Power 145 Countervailing Power, Industry Conc