Ⅰ THE MERGERS AND ACQUISITIONS ENVIRONMENT 6
1.An Introduction to Mergers，Acquisitions，and Other Restructuring Activities 6
Inside Mergers and Acquisitions：PC Maker Lenovo Moves to Diversify Its Core Business 6
Chapter Overview 8
Why M＆As Happen 8
Historical Developments in M＆As 17
Understanding Corporate Restructuring Activities 20
Alternative Takeover Strategies 24
The Role of Holding Companies in M＆As 26
The Role of Employee Stock Ownership Plans（ESOPs）in M＆As 27
Business Alliances as Alternatives to M＆As 27
Participants in the M＆A Process 28
The Implications of M＆As for Shareholders，Bondholders，and Society 35
Some Things to Remember 42
Chapter Discussion Questions 42
Case Study：Microsoft Acquires Nokia 44
Additional Case Study Recommendations 48
2.The Regulatory Environment 50
Inside Mergers and Acquisitions：Gaining Regulatory Approval Often Requires Concessions by Merger Partners 50
Chapter Overview 51
Understanding Federal Securities Laws 52
Understanding Antitrust Legislation 61
The Implications for M＆A of the Dodd—Frank Wall Street Reform and Consumer Protection Act 69
State Regulations Affecting M＆As 70
Restrictions on Direct Foreign Investment in the United States 74
The U.S.Foreign Corrupt Practices Act 74
Fair Disclosure（Regulation FD） 75
Specific Industry Regulations 76
Environmental Laws 77
Labor and Benefit Laws 78
Cross-Border Transactions 78
Some Things to Remember 79
Chapter Discussion Questions 80
Case Study：Regulators Approve Merger 81
Additional Case Study Recommendations 86
3.The Corporate Takeover Market 88
Inside Mergers and Acquisitions：Clothiers Men’s Wearhouse and Jos.A.Bank Reach Agreement After Lengthy Battle 88
Chapter Overview 90
Corporate Governance 91
Understanding Alternative Takeover Tactics 98
Other Tactical Considerations 103
Developing a Bidding Strategy 104
Activist Investors：Gaining Influence Without Control 106
Understanding Alternative Takeover Defenses 108
The Impact of Takeover Defenses on Shareholder Value 120
Some Things to Remember 123
Chapter Discussion Questions 124
Case Study：Dell Goes Private 125
Additional Case Study Recommendations 131
Ⅱ THE MERGERS AND ACQUISITIONS PROCESS：PHASES 1—10 138
4.Planning：Developing Business and Acquisition Plans 138
Inside Mergers and Acquisitions：Consolidation in the Supermarket Industry 138
Chapter Overview 139
The Role of Planning in M＆As 140
The Merger and Acquisition Process 141
Phase 1：Building the Business Plan 142
The Business Plan as a Communication Document 158
Phase 2：Building the Merger-Acquisition Implementation Plan 160
Some Things to Remember 164
Chapter Discussion Questions 164
Case Study：Facebook Buys Whatsapp 166
Additional Case Study Recommendations 171
5.Implementation：Search Through ClosingInside M＆A：When Patience Pays—Signet Jewelers to Buy Zales 174
Chapter Overview 175
Phase 3：The Search Process 175
Phase 4：The Screening Process 178
Phase 5：First Contact 179
Phase 6：Negotiation 183
Phase 7：Developing the Integration Plan 191
Phase 8：Closing 193
Phase 9：Implementing Postclosing Integration 197
Phase 10：Conducting a Postclosing Evaluation 198
Some Things to Remember 199
Chapter Discussion Questions 200
Case Study：Google’s Foray Into Device Makers 201
Additional Case Study Recommendations 206
6.Postclosing Integration 210
Inside Mergers and Acquisitions：The Challenges of Airline Integration 210
Chapter Overview 212
The Role of Integration in Successful M＆As 212
Integration Is a Process，Not an Event 215
Integrating Business Alliances 229
Integrating Family Owned Firms 230
Some Things to Remember 231
Chapter Discussion Questions 231
Case Study：Has Procter ＆Gamble Fully Recovered 232
Additional Case Study Recommendations 236
Ⅲ MERGERS AND ACQUISITIONS VALUATION AND MODELING 240
7.Mergers and Acquisitions Cash Flow Valuation Basics 240
Inside M＆A：Valuation Methodologies，Fairness Opinions，and Verizon’s Buyout of Vodafone’s Share of Verizon Wireless 240
Chapter Overview 241
Estimating Required Financial Returns 241
Risk Assessment 247
Calculating Free Cash Flows 251
Applying Discounted Cash Flow Methods 254
Using the Enterprise Method to Estimate Equity Value 261
Valuing Nonoperating Assets 266
Putting It All Together 268
Some Things to Remember 268
Chapter Discussion Questions 272
Practice Problems and Answers 272
Case Study：Hewlett-Packard Outbids Dell 276
Additional Case Study Recommendations 278
8.Relative，Asset-Oriented，and Real Option Valuation Basics 280
Inside Mergers and Acquisitions：China’s CNOOC Acquires Canadian Oil and Gas Producer Nexen Inc. 280
Chapter Overview 281
Relative Valuation Methods 281
Asset-Oriented Methods 291
The Weighted Average Valuation Method 296
Adjusting Valuation Estimates for Purchase Price Premiums 296
Real Options Analysis 297
Determining When to Use the Different Approaches to Valuation 307
Some Things to Remember 307
Chapter Discussion Questions 307
Practice Problems and Answers 309
Case Study：Valuing The Twitter IPO 312
Additional Case Study Recommendations 315
9.Financial Modeling Basics 318
Inside Mergers and Acquisitions：The Role of Financial Models in Executive Decision Making 318
Chapter Overview 319
What Is Financial Modeling？ 319
Financial Modeling Data Requirements 320
Common Financial Model Linkages 322
Key Steps in the Valuation Process 324
Model Balancing Mechanism 338
Data Sources 338
Managing the Model 344
Some Things to Remember 344
Chapter Discussion Questions 345
Practice Problems and Answers 345
Case Study：Life Technologies Undertakes a Strategic Review 346
Additional Case Study Recommendations 355
10.Analysis and Valuation of Privately Held Firms 358
Inside M＆A：Privately Owned La Boulange Cafe＆Bakery Goes Nationwide 358
Chapter Overview 359
What Are Privately Held Companies？ 360
Governance Issues 361
Challenges of Valuing Privately Held Companies 361
Process for Valuing Privately Held Businesses 363
Step 1：Adjusting Financial Statements 363
Step 2：Applying Valuation Methodologies to Privately Held Companies 369
Step 3：Developing Discount Rates 371
Step 4：Applying Control Premiums，Liquidity，and Minority Discounts 377
Reverse Mergers 384
Using Leveraged ESOPs to Buy Private Companies 385
Empirical Studies of Shareholder Returns 386
Some Things to Remember 387
Chapter Discussion Questions 387
Practice Problems and Answers 388
Case Study：STK Steakhouse Chain Goes Public 389
Additional Case Study Recommendations 394
Ⅳ DEAL STRUCTURING AND FINANCING STRATEGIES 398
11.Structuring the Deal 398
Inside Mergers and Acquisitions：Illustrating Bidding Strategies——Apollo’s Takeover of CEC Entertainment 398
Chapter Overview 400
The Deal Structuring Process 400
Form of Acquisition Vehicle and Postclosing Organization 403
Legal Form of the Selling Entity 405
Form of Payment 405
Managing Risk and Reaching Consensus on Purchase Price 409
Constructing Collar Arrangements 414
Form of Acquisition 416
Some Things to Remember 426
Chapter Discussion Questions 426
Case Study：T -Mobile and MetroPCS Complete Merger 427
Additional Case Study Recommendations 433
12.Structuring the Deal 436
Inside M＆A：Johnson ＆ Johnson Uses Financial Engineering to Acquire Synthes Corporation 436
Chapter Overview 437
Alternative Tax Structures 437
Taxable Transactions 437
Tax-Free Transactions 441
Other Tax Considerations Affecting Corporate Restructuring 447
Financial Reporting of Business Combinations 451
Impact of Purchase Accounting on Business Combinations 453
Recapitalization（“Recap”）Accounting 458
Some Things to Remember 459
Chapter Discussion Questions 460
Practice Problems and Answers 460
Case Study：Softbank Places a Big Bet 461
Additional Case Study Recommendations 467
13.Financing the DealInside M＆A：Verizon Finances Its $130 Billion Buyout of Vodafone’s Stake in Verizon Wireless 470
Chapter Overview 471
How Are M＆A Transactions Commonly Financed？ 472
What Is the Role of Private Equity，Hedge，and Venture Capital Funds in Deal Financing？ 477
LBOs as Financing Strategies 483
What Factors Are Critical to Successful LBOs？ 489
How Do LBOs Create Value？ 492
Common LBO Deal and Capital Structures 496
Some Things to Remember 500
Chapter Discussion Questions 500
Case Study：Berkshire Hathaway and 3G Buy Heinz 501
Additional Case Study Recommendations 504
14.Applying Financial Models 506
Inside Mergers and Acquisitions：Comcast Bids for Time Warner Cable——Evaluating Proposals and Counterproposals 506
Chapter Overview 508
Understanding and Applying M＆A Financial Models 510
M＆A Models：Stock Purchases 515
M＆A Model：Asset Purchase 537
Quantifying Synergy 539
Things to Remember 541
Chapter Discussion Questions 541
Practice Problems and Answers 543
Case Study：Thermo Fisher Acquires Life Technologies 546
Additional Case Study Recommendations 551
Appendix A：Debt Repayment Schedule，Convertible Securities，Interest Rates，and Betas 551
Ⅴ ALTERNATIVE BUSINESS AND RESTRUCTURING STRATEGIES 558
15.Business Alliances 558
Inside Mergers and Acquisitions：Coke Moves from the Vending Machine into the “In-Home” Market 558
Chapter Overview 559
Motivations for Business Alliances 561
What Makes Business Alliances Successful？ 565
Alternative Legal Forms of Business Alliances 567
Strategic and Operational Plans 575
Resolving Business Alliance Deal Structuring Issues 575
Empirical Findings 584
Some Things to Remember 585
Chapter Discussion Questions 586
Case Study：Comcast Completes the Takeover of NBCUniversal 587
Additional Case Study Recommendations 590
16.Alternative Exit and Restructuring Strategies 592
Inside M＆A：General Electric Downsizes Its Financial Services Unit 592
Chapter Overview 593
Why Do Firms Exit Businesses？ 594
Divestitures 597
Spin-Offs 604
Equity Carve-Outs 607
Split-Offs and Split-Ups 609
Tracking，Targeted，and Letter Stocks 611
Comparing Alternative Exit and Restructuring Strategies 612
Choosing Among Divestiture，Carve-Out，and Spin-Off Restructuring Strategies 613
Determinants of Returns to Shareholders Resulting from Restructuring Strategies 614
Some Things to Remember 622
Chapter Discussion Questions 622
Case Study：Anatomy of a Spin-Off 623
Additional Case Study Recommendations 626
17.Alternative Exit and Restructuring Strategies 628
Inside M＆A：American Airlines Emerges from the Protection of Bankruptcy Court 628
Chapter Overview 630
Business Failure 631
Voluntary Settlements Outside of Bankruptcy 632
Reorganization and Liquidation in Bankruptcy 634
Alternative Options for Failing Firms 643
The Increasing Role of Hedge Funds in the Bankruptcy Process 645
Failing Firms and Systemic Risk 646
Predicting Corporate Default and Bankruptcy 647
Empirical Studies of Financial Distress 650
Some Things to Remember 652
Chapter Discussion Questions 652
Case Study：Hostess Brands Liquidates in Bankruptcy 653
Additional Case Study Recommendations 657
18.Cross-Border Mergers and Acquisitions 660
Inside Mergers and Acquisitions：European Mobile Phone and Cable Industry Shows Signs of Consolidation 660
Chapter Overview 662
Globally Integrated Markets Versus Segmented Capital Markets 662
Motives for International Expansion 663
Common International Market Entry Strategies 666
Structuring Cross-Border Deals 667
Financing Cross-Border Deals 670
Planning and Implementing Cross-Border Transactions in Emerging Countries 671
How Are Cross-Border Transactions Valued？ 672
Empirical Studies of Cross-Border Transactions 686
Some Things to Remember 688
Chapter Discussion Questions 689
Case Study：Actavis Buys Forest Labs 689
Additional Case Study：Recommendations 692
References 693
Glossary 723
Index 731