Chapter 9 Flashcards
Druckers five golden rules for post acquisition integration
One – acquirer and acquired should share a common core of unity, including shared technology and markets not just financial links.
Two – The acquirer should ask ‘what can we offer them’ as well as ‘what’s in it for us’
Three - the acquirer should treat the products customers etc, with respect, not despairingly
For – the acquirer should provide top management with relevant skills for the acquired company within a year
Five – cross company promotions of staff should happen within one year
Horizontal integration
Acquiring a business in the same industry 
Actions aboard can take before a takeover bid has been made
Revalue nonconcurrent assets
Actions are board can take once a takeover bid has been made
Pacman
White Knight
Refer the bid to the competition authorities 
Boot strapping
Bootstrapping is an increase in value generated when a company acquires a company with a lower P/E ratio
Applies the acquirers P/E ratio to the targets earnings
Using a proxy to derive an appropriate discount rate when evaluating a potential acquisition
It should have the same business risk 
Impact on gearing during share for share take over
Gearing will fall if there is a share of share exchange
Examples of poison pills?
Target company issues additional shares to existing shareholders.
Target company takes on large debts, to make gearing to high to be attractive 
Synergies from a horizontal acquisition
Cheaper debt finance – now the business is larger you will have stronger earnings backing it
Economies of scale are likely to arise
P/E ratio used when valuing an unlisted company
Average PE ratio of businesses in the same sector and recently acquired
Reasons for undertaking an acquisition
Elimination of competitors.
Control of supply channels.
Gaining significant customer base
