MGST 391 Lecture Notes - Management Buyout, Transfer Pricing, Scrip
28 Apr 2013
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Document Summary
Purchase by a company of a controlling interest in the voting share capital of another company . Merger is a business combination that results in the creation of a new reporting entity formed from the combining parties (mutual sharing of risks and benefits) Reasons for mergers/take overs: synergy (1+1=11, eliminating competition, entry in new market, spread risk (diversification, acquisition is cheaper than internal expansion, assets backing, management acquisition, operating economies (by eliminating duplicate and competing facilities) Risks for shareholders of acquiring company in takeover: decrease in eps of own company, decrease in share price of own company, decrease in assets backing per share (decrease in net assets, entry in risky industry. Introducing a poison-pill , i. e. anti takeover advice. Choice of cash or paper offer or both for payment depends on view of parties: If purchase consideration is in equity shares, eps might fall.
