33:620:492 Lecture Notes - Lecture 9: Due Diligence, Control Premium, Market Power
2 Apr 2016
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Document Summary
M&a"s track record: the objecive of m&a: create value for shareholders, track record: Shareholders of acquired irms oten earn above-average returns. Shareholders of acquiring irms typically earn returns close to zero. In approximately 2/3 of acquisiions, the acquiring irm"s stock falls ater the deal is announced. Two irms agree to integrate operaions on relaive co-equal basis. One irm buys a controlling, or 100%, interest in another irm with intent of making the target a subsidiary. More common than mergers or takeovers: takeover. Target company has not solicited the acquiring irm"s bid. Reasons for acquisiions: increased market power, overcoming entry barriers, subsitute for organic product development. Lower risk: lower risk compared to developing new products, increased diversiicaion, reshape irm"s compeiive scope (reduce dependence on one product or market, learn and develop new capabiliies. Acquisiion of a target in the same industry as the acquiring irm. Exploit cost and revenue synergies: verical acquisiion.
