Section 15 Flashcards
Name the phases of an evolution of a deal
indication of interest; letter of intent executed; negotiation; closing; post-closing
Elaborate on efficiency theory:
synergies
what do financial synergies result in?
lower costs of capital
what do operational synergies result in?
stem from combining operations of hitherto separate units (joint sales force) from knowledge transfers
explain managerial synergies
realized when bidders managers posses superior planning and monitoring abilities that benefit the targets’ performance
define monopoly theory in relation to mergers
believes mergers are planed to achieve market power, gaining market share, wealth transfer from customers to shareholders (beatrice)
explain disturbance theory
changing macroeconomic circumstances and economic conditions (internet, digitalization, e-business (time warner AOL, google, motorola); financial crisis (constellation-midamerican)
describe valuation theory
argues that mergers are planned and executed by mangers who have better information about targets value than stock market (underpriced target, like constellation and midamerican)
what is the first rule of successful acquisitions?
based on business, not financial or strategy
what is the second rule about acquisitions?
acquirer must consider what it can contribute to acquisition, not reverse
what is third rule of mergers?
acquisition requires common core of unity between acquiring and acquired company
what is fourth rule of mergers?
acquirer must respect the business, products, and customers of the acquired company, as well as its values
Beatrice company founded when?
1891 as small creamery
beatrice growth was led by what?
acquisition
beatrice after growth turned into?
diversified consumer and industrial products firm