Scribd
Upload
100 views8 pages

Mergers & Divestitures Overview

This document discusses mergers and divestitures. It defines friendly and hostile mergers, and explains the reasons mergers may occur such as synergy where the whole is greater than the sum of the parts. It also discusses why alliances can be preferable to acquisitions in some cases. Investment bankers play roles in arranging, financing, and establishing fair value in mergers. The document gives examples of recent mergers that have occurred in Jamaica.

Uploaded by

Huế Thùy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
100 views8 pages

Mergers & Divestitures Overview

This document discusses mergers and divestitures. It defines friendly and hostile mergers, and explains the reasons mergers may occur such as synergy where the whole is greater than the sum of the parts. It also discusses why alliances can be preferable to acquisitions in some cases. Investment bankers play roles in arranging, financing, and establishing fair value in mergers. The document gives examples of recent mergers that have occurred in Jamaica.

Uploaded by

Huế Thùy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

CHAPTER 21

Mergers and Divestitures


 Types of mergers
 Merger analysis
 Role of investment bankers
 Corporate alliances
 LBOs, divestitures, and holding
companies
21-1
Why do mergers occur?
 Synergy: Value of the whole exceeds sum
of the parts. Could arise from:
 Operating economies
 Financial economies
 Differential management efficiency
 Increased market power
 Taxes (use accumulated losses)
 Break-up value: Assets would be more
valuable if sold to some other company.
21-2
What are some questionable
reasons for mergers?
 Diversification
 Purchase of assets at below
replacement cost
 Get bigger using debt-financed
mergers to help fight off takeovers

21-3
What is the difference between a
“friendly” and a “hostile” takeover?
 Friendly merger:
 The merger is supported by the managements of
both firms.
 Hostile merger:
 Target firm’s management resists the merger.
 Acquirer must go directly to the target firm’s
stockholders try to get 51% to tender their
shares.
 Often, mergers that start out hostile end up as
friendly when offer price is raised.

21-4
Reasons why alliances can make
more sense than acquisitions
 Access to new markets and
technologies
 Multiple parties share risks and
expenses
 Rivals can often work together
harmoniously
 Antitrust laws can shelter cooperative
R&D activities

21-5
Do mergers really create value?
 The evidence strongly suggests:
 Acquisitions do create value as a result
of economies of scale, other synergies,
and/or better management.
 Shareholders of target firms reap most
of the benefits, because of competitive
bids.

21-6
Functions of Investment Bankers
in Mergers
 Arranging mergers
 Assisting in defensive tactics
 Establishing a fair value
 Financing mergers
 Risk arbitrage

21-7
Recent Mergers in Jamaica
 CIBC + Barclays = FCIB
 Pan Jam's Hardware & Lumber + Grace Kennedy's Rapid & Sheffield
= ????
 DB&G + Issa Trust & Merchant Bank = ????
 Sagicor + LOJ = ????
 LOJ + First Life = ????
 First Global + George & Branday = ????
 Pan Caribbean Financial Services + Manufacturers Sigma Merchant
Bank = ????
 Sigma Unit Trust + MMB = MSMB
 NEMWIL + Caribbean Home Insurance Company in Trinidad merged
= Guardian General Insurance Limited
 Globe Insurance + Jamaica General Insurance Company = ????
 Supreme Ventures Ltd. + Jamaica Lottery Company = ????
 First Global + George & Branday = ????

21-8

You might also like