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Lecture 8- Corporate restructuring
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1Takeover is general term referring to [blank_start]transfer[blank_end] of [blank_start]control[blank_end] of firm from one [blank_start]group[blank_end] of shareholders to another. Firm that has decided to take over another firm is [blank_start]bidder[blank_end] & other firm is [blank_start]target[blank_end]
- Atransfer
- Bcontrol
- Cgroup
- Dbidder
- Etarget
2Firm can get control of another firm without owning more than [blank_start]51%[blank_end] of [blank_start]shares[blank_end]. Firm can have [blank_start]sufficient[blank_end] amount of [blank_start]share ownership[blank_end] in another firm that enables [blank_start]bidding[blank_end] firm to take control of [blank_start]management[blank_end] of that firm
- A51%
- Bshares
- Csufficient
- Dshare ownership
- Ebidding
- Fmanagement
3Merger- [blank_start]Absorption[blank_end] of one firm by another. Acquiring firm retains [blank_start]name[blank_end] & [blank_start]identity[blank_end], & acquires all [blank_start]assets[blank_end] & [blank_start]liabilities[blank_end] of acquired firm. Acquired firm [blank_start]ceases[blank_end] to [blank_start]exist[blank_end] after merger
- AAbsorption
- Bname
- Cidentity
- Dassets
- Eliabilities
- Fceases
- Gexist
4Consolidation- Similar to [blank_start]merger[blank_end] but [blank_start]new[blank_end] firm is created. Acquiring & acquired firm [blank_start]cease[blank_end] to [blank_start]exist[blank_end] & become part of [blank_start]new[blank_end] firm
- Amerger
- Bnew
- Ccease
- Dexist
- Enew
5One advantage of using merger to acquire firm is it’s [blank_start]legally simple[blank_end] & does not [blank_start]cost[blank_end] as much as other forms of acquisition. This is because firms [blank_start]agree[blank_end] to [blank_start]combine[blank_end] their entire [blank_start]operations[blank_end]
- Alegally simple
- Bcost
- Cagree
- Dcombine
- Eoperations
6One disadvantage of using merger to acquire firm is it must be [blank_start]approved[blank_end] by [blank_start]vote[blank_end] of [blank_start]shareholders[blank_end] of each firm
- Aapproved
- Bvote
- Cshareholders
7Acquisition of shares- Acquirer purchases [blank_start]target[blank_end] firm’s voting [blank_start]shares[blank_end] in exchange for [blank_start]cash[blank_end], [blank_start]equity[blank_end] or other [blank_start]securities[blank_end]. Very often this starts as [blank_start]private[blank_end] approach to buy [blank_start]shares[blank_end] but generally ends up being [blank_start]tender[blank_end] offer ([blank_start]public[blank_end] offer to buy [blank_start]shares[blank_end] of target firm)
- Atarget
- Bshares
- Ccash
- Dequity
- Esecurities
- Fprivate
- Gshares
- Htender
- Ipublic
- Jshares
8Acquisition of shares very often related to [blank_start]hostile takeovers[blank_end] because easiest way for firm to acquire another firm is approach [blank_start]management[blank_end] of [blank_start]target[blank_end] firm & proceed through [blank_start]friendly[blank_end] takeover
- Ahostile takeovers
- Bmanagement
- Ctarget
- Dfriendly
9Advantage of using acquisition of shares to acquire firm is that no [blank_start]shareholder meetings[blank_end] have to be held & no [blank_start]votes[blank_end] are required
- Ashareholder meetings
- Bvotes
10Acquisition of assets- Acquirer buys all of [blank_start]firm’s assets[blank_end]
- Afirm’s assets
11One classification of acquisition is [blank_start]horizontal acquisition[blank_end]. This is acquisition of firm in [blank_start]same industry[blank_end]. [blank_start]Bidder[blank_end] & [blank_start]target[blank_end] firms compete with each other in their [blank_start]product markets[blank_end] i.e. one pharmaceutical company takes over another
- Ahorizontal acquisition
- Bsame industry
- CBidder
- Dtarget
- Eproduct markets
12Reasons for horizontal acquisition include [blank_start]market share[blank_end], [blank_start]elimination[blank_end] or [blank_start]reduction[blank_end] of [blank_start]competition[blank_end], [blank_start]economies of scales[blank_end], [blank_start]access[blank_end] to an [blank_start]under-utilised asset[blank_end] & [blank_start]technology transfer[blank_end]
- Amarket share
- Belimination
- Creduction
- Dcompetition
- Eeconomies of scales
- Faccess
- Gunder-utilised asset
- Htechnology transfer
13Another classification of acquisition is [blank_start]vertical acquisition[blank_end]. This is acquisition of firm in [blank_start]same industry[blank_end] at different [blank_start]stages[blank_end] in [blank_start]production process[blank_end] i.e. oil company takes over company in refining business
- Avertical acquisition
- Bsame industry
- Cstages
- Dproduction process
14Reasons for vertical acquisition include [blank_start]safeguarding[blank_end] sources of [blank_start]supply[blank_end] or [blank_start]sales[blank_end] outlets, access to [blank_start]economies of scale[blank_end], [blank_start]economies[blank_end] of vertical integration & [blank_start]complementary resources[blank_end]
- Asafeguarding
- Bsupply
- Csales
- Deconomies of scale
- Eeconomies
- Fcomplementary resources
15Third classification of acquisition is [blank_start]conglomerate acquisition[blank_end]. This is acquisition of firm that has [blank_start]no relation[blank_end] ([blank_start]bidder[blank_end] & [blank_start]target[blank_end] firm are in [blank_start]unrelated[blank_end] lines of business) i.e. software company takes over supermarket
- Aconglomerate acquisition
- Bno relation
- Cbidder
- Dtarget
- Eunrelated
16Reasons for conglomerate acquisition include spreading [blank_start]risk[blank_end] through [blank_start]diversification[blank_end] & [blank_start]managers’ self-interest[blank_end]
- Arisk
- Bdiversification
- Cmanagers’ self-interest
17Synergy- [blank_start]Positive[blank_end] incremental net [blank_start]gain[blank_end] associated with combination of [blank_start]two firms[blank_end] through [blank_start]merger[blank_end] or [blank_start]acquisition[blank_end]
- APositive
- Bgain
- Ctwo firms
- Dmerger
- Eacquisition
18One source of synergy is [blank_start]revenue enhancement[blank_end]. This includes [blank_start]marketing[blank_end] gains ([blank_start]mergers[blank_end] & [blank_start]acquisitions[blank_end] may produce greater operating revenues than two [blank_start]separate firms[blank_end]), [blank_start]strategic[blank_end] benefits (increase management [blank_start]flexibility[blank_end] by two firms coming together) & market [blank_start]power[blank_end]
- Arevenue enhancement
- Bmarketing
- Cmergers
- Dacquisitions
- Eseparate firms
- Fstrategic
- Gflexibility
- Hpower
19Another source of synergy is [blank_start]cost reduction[blank_end]. This includes [blank_start]economies[blank_end] of [blank_start]scale[blank_end], [blank_start]economies[blank_end] of vertical [blank_start]integration[blank_end], [blank_start]technology[blank_end] transfer, complementary [blank_start]resources[blank_end], elimination of inefficient [blank_start]management[blank_end] & reduced [blank_start]capital[blank_end] requirements
- Acost reduction
- Beconomies
- Cscale
- Deconomies
- Eintegration
- Ftechnology
- Gresources
- Hmanagement
- Icapital
20Third source of synergy is [blank_start]tax gains[blank_end]. This includes use of [blank_start]tax[blank_end] losses, use of unused [blank_start]debt capacity[blank_end], use of surplus [blank_start]funds[blank_end] & ability to write up [blank_start]value[blank_end] of depreciable [blank_start]assets[blank_end]
- Atax gains
- Btax
- Cdebt capacity
- Dfunds
- Evalue
- Fassets
21In friendly takeover, [blank_start]management[blank_end] of two firms [blank_start]agree[blank_end] about takeover. Acquirer decides on [blank_start]target[blank_end] firm. Then, it selects [blank_start]tactic[blank_end] to carry out acquisition. After that, it decides on [blank_start]highest price[blank_end] it’s willing to pay. Then, it sets an initial [blank_start]bid price[blank_end] & makes contact with [blank_start]target[blank_end] firm. After that, many [blank_start]meetings[blank_end] & [blank_start]negotiations[blank_end] occur. Then, [blank_start]target[blank_end] firm’s board approves acquisition. Finally, an affirmative [blank_start]vote[blank_end] by [blank_start]target[blank_end] firm’s shareholders is needed
- Amanagement
- Bagree
- Ctarget
- Dtactic
- Ehighest price
- Fbid price
- Gtarget
- Hmeetings
- Inegotiations
- Jtarget
- Kvote
- Ltarget
22In hostile takeover, [blank_start]management[blank_end] of target firm [blank_start]resists[blank_end] takeover
- Amanagement
- Bresists
23One strategy that is followed for hostile takeover is [blank_start]toehold[blank_end]. Start to purchase target’s [blank_start]equity[blank_end] in secret followed by [blank_start]tender offer[blank_end] ([blank_start]offer[blank_end] made directly to shareholders of target firm to buy shares at [blank_start]premium[blank_end] over current [blank_start]market price[blank_end]). When [blank_start]tender offer[blank_end] ends bidder sees whether it has got enough [blank_start]shares[blank_end] to have [blank_start]control[blank_end] i.e. control over board of directors
- Atoehold
- Bequity
- Ctender offer
- Doffer
- Epremium
- Fmarket price
- Gtender offer
- Hshares
- Icontrol
24Another strategy that is followed for hostile takeover is [blank_start]street sweep[blank_end]. [blank_start]Bidding[blank_end] firm buys shares on [blank_start]open market[blank_end] until they have enough for [blank_start]control[blank_end]
- Astreet sweep
- BBidding
- Copen market
- Dcontrol
25Third strategy that is followed for hostile takeover is [blank_start]proxy fight[blank_end]. This is an attempt to gain [blank_start]control[blank_end] of firm by soliciting [blank_start]sufficient[blank_end] number of shareholder [blank_start]votes[blank_end] to replace existing [blank_start]management[blank_end]
- Aproxy fight
- Bcontrol
- Csufficient
- Dvotes
- Emanagement
26One defensive tactic against hostile takeovers (before) is [blank_start]golden parachutes[blank_end]. This involves generous [blank_start]compensation[blank_end] packages paid to firm's [blank_start]top management[blank_end] in event of [blank_start]takeover[blank_end]
- Agolden parachutes
- Bcompensation
- Ctop management
- Dtakeover
27Another defensive tactic against hostile takeovers (before) is [blank_start]poison pills[blank_end]. This is [blank_start]financial[blank_end] device designed to make [blank_start]unfriendly[blank_end] takeover attempts [blank_start]financially[blank_end] unappealing, if not impossible
- Apoison pills
- Bfinancial
- Cunfriendly
- Dfinancially
28Third defensive tactic against hostile takeovers (before) is [blank_start]corporate charters[blank_end]. One device of [blank_start]corporate charters[blank_end] is to [blank_start]stagger[blank_end] election of board members. It involves only [blank_start]fraction[blank_end] of hostile management board getting [blank_start]replaced[blank_end] at a time. This is known as [blank_start]staggered board[blank_end] ([blank_start]classified board[blank_end]). Another device is [blank_start]supermajority provision[blank_end]. This is when firm makes acquisition more difficult by [blank_start]increasing percentage[blank_end] of shareholders of record who must approve merger
- Acorporate charters
- Bcorporate charters
- Cstagger
- Dfraction
- Ereplaced
- Fstaggered board
- Gclassified board
- Hsupermajority provision
- Iincreasing percentage
29Two defensive tactics against hostile takeovers (after) are [blank_start]greenmail[blank_end] & [blank_start]standstill agreements[blank_end]. [blank_start]Greenmail[blank_end] involves [blank_start]payments[blank_end] made by firm to [blank_start]repurchase[blank_end] shares of its outstanding equity from an individual [blank_start]investor[blank_end] in an attempt to [blank_start]eliminate[blank_end] potential unfriendly takeover attempt. [blank_start]Standstill agreements[blank_end] is contract wherein [blank_start]bidding[blank_end] firm agrees to limit its holdings in [blank_start]target[blank_end] firm
- Agreenmail
- Bstandstill agreements
- CGreenmail
- Dpayments
- Erepurchase
- Finvestor
- Geliminate
- HStandstill agreements
- Ibidding
- Jtarget
30Another two defensive tactics against hostile takeovers (after) are [blank_start]recapitalisations[blank_end] & [blank_start]repurchases[blank_end]. These occur at same time as [blank_start]standstill agreements[blank_end]. Firm buys [blank_start]certain[blank_end] amount of its own [blank_start]equity[blank_end] from individual [blank_start]investor[blank_end], usually at [blank_start]premium[blank_end]
- Arecapitalisations
- Brepurchases
- Cstandstill agreements
- Dcertain
- Eequity
- Finvestor
- Gpremium
31Another two defensive tactics against hostile takeovers (after) are [blank_start]going private[blank_end] & [blank_start]leverage buy-out[blank_end]. [blank_start]Going private[blank_end] is when [blank_start]publicly[blank_end] traded firm becomes [blank_start]private[blank_end] group, usually comprised of [blank_start]existing[blank_end] management, purchases its [blank_start]equity[blank_end] (delisted so not public/listed anymore). [blank_start]Leverage buyouts[blank_end] is going-private [blank_start]transaction[blank_end] in which [blank_start]large[blank_end] percentage of money used to acquire [blank_start]equity[blank_end] is borrowed. Normally, [blank_start]cash offer[blank_end] price is financed with [blank_start]large[blank_end] amounts of debt
- Agoing private
- Bleverage buy-out
- CGoing private
- Dpublicly
- Eprivate
- Fexisting
- Gequity
- HLeverage buyouts
- Itransaction
- Jlarge
- Kequity
- Lcash offer
- Mlarge
32Another defensive tactic against hostile takeovers (after) is [blank_start]asset restructurings[blank_end]. This is related to [blank_start]crown jewel[blank_end] as firm threatens to [blank_start]sell[blank_end] some of most important [blank_start]assets[blank_end] to make [blank_start]target[blank_end] firm less attractive to [blank_start]bidding[blank_end] firm
- Aasset restructurings
- Bcrown jewel
- Csell
- Dassets
- Etarget
- Fbidding
33Another two defensive tactics against hostile takeovers (after) are [blank_start]white knight[blank_end] & [blank_start]white squire[blank_end]. [blank_start]White knight[blank_end] is [blank_start]friendly[blank_end] suitor that [blank_start]target[blank_end] firm turns to as an alternative to [blank_start]hostile[blank_end] bidder. [blank_start]White squire[blank_end] is when firm arranges for [blank_start]friendly[blank_end] entity to acquire large block of [blank_start]equity[blank_end]
- Awhite knight
- Bwhite squire
- CWhite knight
- Dtarget
- Ehostile
- FWhite squire
- Gfriendly
- Hfriendly
- Iequity
34Another defensive tactic against hostile takeovers (after) is [blank_start]crown jewel[blank_end]. It is [blank_start]defensive[blank_end] move that firm [blank_start]threatened[blank_end] with [blank_start]takeover[blank_end] is to [blank_start]sell[blank_end] or [blank_start]threatened[blank_end] to [blank_start]sell[blank_end] its major [blank_start]assets[blank_end]
- Acrown jewel
- Bdefensive
- Cthreatened
- Dtakeover
- Esell
- Fthreatened
- Gsell
- Hassets
35Final defensive tactic against hostile takeovers (after) is [blank_start]shark repellent[blank_end]. This is any [blank_start]tactic[blank_end] designed to [blank_start]discourage[blank_end] unwanted [blank_start]merger[blank_end] offers
- Ashark repellent
- Btactic
- Cdiscourage
- Dmerger
36Benefits to managers of bidding firm of takeover are they receive [blank_start]bonuses[blank_end] when [blank_start]acquiring[blank_end] firms & their [blank_start]pay[blank_end] & [blank_start]prestige[blank_end] are often related to [blank_start]size[blank_end] of firm. Managers are disposed to look [blank_start]favourable[blank_end] on size [blank_start]increase[blank_end] acquisitions, even those with negative NPV
- Abonuses
- Bacquiring
- Cpay
- Dprestige
- Esize
- Ffavourable
- Gincrease
37Managers of target firm employ [blank_start]defensive[blank_end] tactics even if takeover is [blank_start]beneficial[blank_end] to shareholders in order to [blank_start]safeguard[blank_end] their jobs. Managers that cannot avoid takeover may [blank_start]bargain[blank_end] with [blank_start]bidder[blank_end] taking good deal for themselves at expense of their [blank_start]shareholders[blank_end]
- Adefensive
- Bbeneficial
- Csafeguard
- Dbargain
- Ebidder
- Fshareholders
38Accounting treatment of mergers & acquisitions should recognise [blank_start]fair value[blank_end] of all assets & liabilities on [blank_start]acquisition[blank_end] date. [blank_start]IFRS 3 (Business Combinations)[blank_end], states that it should be presented in such way as to allow [blank_start]shareholders[blank_end] to understand [blank_start]true value[blank_end] of mergers & acquisitions
- Afair value
- Bacquisition
- CIFRS 3 (Business Combinations)
- Dshareholders
- Etrue value
39Two things that create value in leverage buyouts are extra [blank_start]debt[blank_end] which provides [blank_start]tax deduction[blank_end]. Leverage buyouts may simply increase [blank_start]debt[blank_end] level to its optimum. Also, there is increased [blank_start]efficiency[blank_end]. They own firm so interested to [blank_start]work harder[blank_end] & because high interest payments need to be made, they have to increase [blank_start]efficiency[blank_end]
- Adebt
- Btax deduction
- Cefficiency
- Ddebt
- Ework harder
- Fefficiency
40Divestitures- [blank_start]Sale[blank_end] of [blank_start]assets[blank_end], [blank_start]operations[blank_end], [blank_start]divisions[blank_end] &/or [blank_start]segments[blank_end] of business to [blank_start]third party[blank_end]. Reasons for divestiture are required to meet [blank_start]monopolies[blank_end] or [blank_start]competition[blank_end] regulations, defence against [blank_start]hostile takeovers[blank_end], provides [blank_start]cash[blank_end] to poor liquidity firms, [blank_start]sell-offs[blank_end] streamline firm making it easier to value & firms may simply want to sell [blank_start]unprofitable divisions[blank_end]
- ASale
- Bassets
- Coperations
- Ddivisions
- Esegments
- Fthird party
- Gmonopolies
- Hcompetition
- Ihostile takeovers
- Jcash
- Ksell-offs
- Lunprofitable divisions
41One type of divestiture is [blank_start]spin-off[blank_end]. This is distribution of [blank_start]shares[blank_end] in subsidiary to [blank_start]existing[blank_end] parent company [blank_start]shareholders[blank_end]. Reasons for [blank_start]spin-off[blank_end] are publicly traded division increases [blank_start]transparency[blank_end] in market making it easier to [blank_start]value[blank_end] company & spin-off, equity acts as an incentive for [blank_start]managers[blank_end] to work harder, [blank_start]tax[blank_end] consequences of [blank_start]spin-off[blank_end] are generally better than from sale because parent receives no [blank_start]cash[blank_end] from the spin-off
- Aspin-off
- Bshares
- Cexisting
- Dshareholders
- Espin-off
- Ftransparency
- Gvalue
- Hmanagers
- Itax
- Jspin-off
- Kcash
42Another type of divestiture is [blank_start]carve-out[blank_end]. This is same as [blank_start]spin-offs[blank_end] but [blank_start]shares[blank_end] in this entity are sold to [blank_start]public[blank_end] via an [blank_start]IPO[blank_end]
- Acarve-out
- Bspin-offs
- Cshares
- Dpublic
- EIPO
43Third type of divestiture is [blank_start]split-up[blank_end]. This is [blank_start]splitting[blank_end] of company into [blank_start]two[blank_end] or [blank_start]more[blank_end] companies
- Asplit-up
- Bsplitting
- Ctwo
- Dmore
Informationen
- Beschreibung
- Der Nutzer hat seine Fachbereichs-Information gelöscht. Quiz am Lecture 8- Corporate restructuring, erstellt von Gelöschter Nutzer am 12/07/2021.
- Autor
- Gelöschter Nutzer
- Sprache
- English
- Aufrufe
- 12
- Schlagwörter