Mergers, Acquisitions, and Corporate Restructurings

Patrick A. Gaughan

• Verlag: Wiley
• Jahr: 2017
• ISBN:
  9781119380733
• Auflage: 7
• Thema: Business
• Thema: Corporate Finance

The essential M&A primer, updated with the latest research and statistics

Mergers, Acquisitions, and Corporate Restructurings provides a comprehensive look at the field's growth and development, and places M&As in realistic context amidst changing trends, legislation, and global perspectives. All-inclusive coverage merges expert discussion with extensive graphs, research, and case studies to show how M&As can be used successfully, how each form works, and how they are governed by the laws of major countries. Strategies and motives are carefully analyzed alongside legalities each step of the way, and specific techniques are dissected to provide deep insight into real-world operations. This new seventh edition has been revised to improve clarity and approachability, and features the latest research and data to provide the most accurate assessment of the current M&A landscape. Ancillary materials include PowerPoint slides, a sample syllabus, and a test bank to facilitate training and streamline comprehension.

As the global economy slows, merger and acquisition activity is expected to increase. This book provides an M&A primer for business executives and financial managers seeking a deeper understanding of how corporate restructuring can work for their companies.

• Understand the many forms of M&As, and the laws that govern them
• Learn the offensive and defensive techniques used during hostile acquisitions
• Delve into the strategies and motives that inspire M&As
• Access the latest data, research, and case studies on private equity, ethics, corporate governance, and more

From large megadeals to various forms of downsizing, a full range of restructuring practices are currently being used to revitalize and supercharge companies around the world. Mergers, Acquisitions, and Corporate Restructurings is an essential resource for executives needing to quickly get up to date to plan their own company's next moves.

PART ONE
Background

CHAPTER ONE
Introduction

RECENT M&A TRENDS

The pace of mergers and acquisitions (M&As) picked up in the early 2000s after collapsing in the wake of the subprime crisis. M&A volume was quite strong over the period 2003–2007. This strength was apparent globally, not just in the United States. However, the United States entered the Great Recession in 2008 and the recovery from this strong economic downturn would prove difficult. A number of deals that were planned in 2007 were canceled.

Figure 1.1 shows that the aforementioned strong M&A volume over the years 2003 to 2007 occurred in both Europe and the United States. M&A volume began to rise in 2003 and by 2006–2007 had reached levels comparable to their peaks of the fifth wave. With such high deal volume, huge megamergers were not unusual (see Tables 1.1 and 1.2). In the United States, M&A dollar volume peaked in 2007, whereas in Europe, this market peaked in 2006. Fueled by some inertia, the value of total M&A was surprisingly strong in 2008 when one considers that we were in the midst of the Great Recession. The lagged effect of the downturn, however, was markedly apparent in 2009 when M&A volume collapsed.

FIGURE 1.1 Value of M&As 1980–2016: (a) United States and (b) Europe.

TABLE 1.1 Top 10 Worldwide M&As by Value of Transaction

Source: Thomson Financial Securities Data, January 12, 2017.

Date Announced	Date Effective	Value of Transaction ($ Millions)	Target Name	Target Nation	Acquirer Name	Acquirer Nation
11/14/1999	4/12/2000	202,785.13	Mannesmann AG	Germany	Vodafone AirTouch PLC	United Kingdom
1/10/2000	1/12/2001	164,746.86	Time Warner	United States	America Online Inc	United States
6/26/2015	8/9/2015	145,709.25	Altice SA	Luxembourg	Altice SA	Luxembourg
9/2/2013	2/21/2014	130,298.32	Verizon Wireless Inc	United States	Verizon Communications Inc	United States
8/29/2007	3/28/2008	107,649.95	Philip Morris Intl Inc	Switzerland	Shareholders	Switzerland
9/16/2015	10/4/2016	101,100.89	SABMiller PLC	United Kingdom	Anheuser-Busch Inbev SA/NV	Belgium
4/25/2007	11/2/2007	98,189.19	ABN-AMRO Holding NV	Netherlands	RFS Holdings BV	Netherlands
11/4/1999	6/19/2000	89,167.72	Warner-Lambert Co	United States	Pfizer Inc	United States
12/1/1998	11/30/1999	78,945.79	Mobil Corp	United States	Exxon Corp	United States
1/17/2000	12/27/2000	75,960.85	SmithKline Beecham PLC	United Kingdom	Glaxo Wellcome PLC	United Kingdom

TABLE 1.2 Top 10 European M&As by Value of Transaction

Source: Thomson Financial Securities Data, January 12, 2017.

Date Announced	Date Effective	Value of Transaction ($mil)	Target Name	Target Nation	Acquirer Name	Acquirer Nation
11/14/99	06/19/00	202,785.13	Mannesmann AG	Germany	Vodafone AirTouch PLC	United Kingdom
6/26/2015	8/9/2015	145,709.25	Altice SA	Luxembourg	Altice SA	Luxembourg
08/29/07	03/28/08	107,649.95	Philip Morris Intl Inc	Switzerland	Shareholders	Switzerland
9/16/2015	10/4/2016	101,100.89	SABMiller PLC	United Kingdom	Anheuser-Busch Inbev SA/NV	Belgium
04/25/07	11/02/07	98,189.19	ABN-AMRO Holding NV	Netherlands	RFS Holdings BV	Netherlands
01/17/00	12/27/00	75,960.85	SmithKline Beecham PLC	United Kingdom	Glaxo Wellcome PLC	United Kingdom
10/28/04	07/20/08	74,558.58	Shell Transport & Trading Co	United Kingdom	Royal Dutch Petroleum Co	Netherlands
04/08/15	02/15/16	69,445.02	BG Group PLC	United Kingdom	Royal Dutch Shell PLC	Netherlands
09/29/14	09/01/15	65,891.51	UBS AG	Switzerland	UBS AG	Switzerland
02/25/06	07/22/08	60,856.45	Suez SA	France	Gaz de France SA	France

The rebound in U.S. M&A started in 2010 and became quite strong in 2011, only to weaken temporarily in 2012 before resuming in 2013. The U.S. M&A market was very strong in 2014, and in 2015 it hit an all-time record, although, on an inflation-adjusted basis, 2000 was the strongest M&A year. In 2016, the M&A market was still strong in the United States, although somewhat weaker than 2015.

The story was quite different in Europe. After hitting an all-time peak in 2006 (it should be noted, though, that on an inflation-adjusted basis, 1999 was the all-time peak in M&A for Europe), the market weakened a little in 2007 and 2008, although it was still relatively strong. However, Europe's M&A business shrank dramatically in 2009 and 2010 as Europe was affected by the U.S. Great Recession and also its financial system also suffered from some of the same subprime-related issues that affected the U.S. financial system.

The M&A business rebounded well in 2011, only to be somewhat blunted by a double-dip recession in Europe, which was partly caused by the European sovereign debt problems. The Eurozone had a 15-month recession from the second quarter of 2008 into the second quarter of 2009, but then had two more downturns from the fourth quarter of 2011 into the second quarter of 2012 (9 months) and again from the fourth quarter of 2012 into the first quarter of 2013 (18 months). M&A volume was more robust in 2015 and 2016 but unlike in the United States, Europe remained well below the level that was set in 2006.

Deal volume in most regions of the world generally tends to follow the patterns in the United States and Europe (see Figure 1.2). Australia, for example, exhibits such a pattern, with deal volume growth starting in 2003 but falling off in 2008 and 2009 for the same reason it fell off in the United States and Europe. Australian deals rebounded in 2013 and have grown since except for a modest decline in 2016.

FIGURE 1.2 Value of M&A 1984–2016: By nation.

Source: Thomson Financial Securities Data, January 12, 2017.

The situation was somewhat different in China and Hong Kong. The value of deals in these economies has traditionally been well below the United States and Europe but had been steadily growing even in 2008, only to fall off sharply in 2009. China's economy has realized double-digit growth for a number of years and is now more than one-half of the size of the U.S. economy (although on a purchasing power parity basis it is approximately the same size). Economic growth slowed in recent years from double-digit levels to just under 7% per year even with significant government efforts to try to return to prior growth levels.

There are many regulatory restrictions imposed on M&As in China that inhibit deal volume from rising to levels that would naturally occur in a less-controlled environment. The Chinese regulatory authorities have taken measures to ensure that Chinese control of certain industries and companies is maintained even as the economy moves to a more free market status. This is why many of the larger Asian deals find their origins in Hong Kong (see Table 1.3). Nonetheless, the M&A business in China over the past few years has been at its highest levels. While Chinese demand for foreign targets rose to impressive heights in 2016, in the second half of 2016 and 2017 the Chinese government took measures to limit capital from leaving China—something that is necessary to complete most foreign deals. Financing for such deals became more difficult, and the Chinese Commerce Ministry began taking a hard line on some large deals.

TABLE 1.3 Top 10 Asian M&A by Value of Transaction

Source: Thomson Financial Securities Data, January 12, 2017.

Date Announced	Date Effective	Target Name	Target Nation	Acquirer Name	Acquirer Nation	Value of Transaction ($mil)
03/26/14	08/25/14...