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Course Title: Mergers and Acquisitions: A Strategic Valuation Approach
Author: Emery A. Trahan
Provider: American Management Association
Price: $79.95
CEU Credits: 2
Level: Fundamental
Field Of Study: N/A
Prerequisites: None
Purchase This Course

About This Course:....xi
How to Take This Course:....xiii

1 An Overview of Mergers and Acquisitions:....1

Introduction
Methods of Business Combination
    Acquisition
    Merger
    Consolidation
    Leveraged Buyout (LBO)
    Holding Company
    Divestitures
    Hostile versus Friendly Combinations
Motives for Acquisitions
    Growth through Acquisition
Antitrust Considerations
Accounting Methodology: Purchase versus Pooling of Interests
Postmerger Analysis
Overview of This Course
Recap
Review Questions
What about Your Company?

2 Financial Analysis:....17

Introduction
Strategic Analysis
The Basic Structure of Financial Statements
    The Balance Sheet
    The Income Statement
    The Statement of Cash Flows
Ratio Analysis
    Liquidity Ratios
    Debt Ratios
    Activity Ratios
    Profitability Ratios
Cautions on Financial Analysis
A Comprehensive Ratio Analysis
Return on Equity Analysis
BIOPLAS Corporation and TARGON Corporation: An Illustration of Strategic Analysis, Financial Statements, Ratio Analysis, and Return on Equity Analysis
    Strategic Analysis
        Threat of New Entrants
        Industry Rivalry
        Bargaining Power of Suppliers
        Bargaining Power of Buyers
        Threat of Substitutes
    Financial Statements
    Ratio Analysis
    Return on Equity Analysis
    Statement of Cash Flows
Recap
Review Questions
What about Your Company?

3 Securities Markets and Valuation:....41

Introduction
Definitions and Structures of Primary Securities
    Corporate Bonds
    Preferred Stock
    Common Stock
    Junk Bonds
    Convertible Bonds
    Convertible Preferred Stock
    Combinations of Securities
Efficient Capital Markets
Valuing a Company
    Discounting
        Finding the Present Value of an Uneven Stream of Cash Flows
        Finding the Present Value of a Cash Flow Expected to Grow Indefinitely at a
        Constant Rate
Recap
Review Questions
What about Your Company

4 Motives for a Merger or Acquisition:....51

Introduction
Brief History of Recent Merger and Acquisition Activity
Sources of Potential Gain from Acquisitions
    Synergies
        Economies of Scale
        Economies of Scope
        Financial Synergies
    Gaining Market Power
    Eliminating Inefficiencies
    Growth
    Diversification
    Increasing Net Income and Earnings per Share
    Facilitating an Exit Strategy
    Serving Personal Interests
    Defensive Maneuver
Considerations of the Selling Company
Considerations of the Buying Company
Evidence on the Impact of Acquisitions
    The Impact of Mergers and Acquisitions on Value
    Long-Run Value Effects
    Industry Effects
Recap
Review Questions
What about Your Company?

5 Search and Screening of Acquisition Candidates:....69

Introduction
Methods of Searching for Acquisition Candidates
    Internal Acquisition Team
        Standard & Poor's Compustat
       
Disclosure
        Thomson Financial Securities Data
        Dow Jones News/Retrieval Telnet Session
        Mergers and Acquisitions
        Mergerstat Review

        Sources Listed by Sherman (1998)
        Sources Listed by Reed and LaJoux (1995)
        Sources Listed by Copeland, Koller, and Muffin (1996)
        Trade Publications
    Investment Bankers
    Business Brokers
    Outside Consultants
Financial Screens
    Industry Adjustments
    Using Knockout Criteria for Screening
A Strategic Screen
    Restructuring Strategies
    Strategic Analysis of BIOPLAS and TARGON
Recap
Review Questions
What about Your Company?

6 Valuing the Acquisition Target:....85

Introduction
Discounted Cash Flow Valuation
Calculating Free Cash Flows
    Free Cash Flow for TARGON in 1999
    Value of TARGON as an Independent Company
    Free Cash Flow for TARGON if It Is Acquired by BIOPLAS
Determining the Required Rate of Return
    Weighted Average Cost of Capital
        Illustration: Computing the Weighted Average Cost of Capital for BIOPLAS and TARGON
    Adjusted Weighted Average Cost of Capital
        The Pure Play Method
        Illustration: Computing the Adjusted Weighted Average Cost of Capital for TARGON
Valuing an Acquisition Candidate
    Illustration: Estimating the Value of TARGON to BIOPLAS
Additional Methods for Determining Value
Other Valuation Considerations
    Net Working Capital
    Price of a Poorly Managed Company
    Required Premiums
    Assessing Risk
        Dependency on Key Customers
        Dependency on Key Employees
        Litigation
Recap
Review Questions
What about Your Company?

7 The Impact of a Merger on Financial Statements:...103

Introduction
The Exchange Ratio
The Impact on Earnings per Share
Growth in Earnings per Share
Impact on the Price-Earnings Ratio
Financing Impacts of the Acquisition Package
    Financial Position of the Target Company
    Financial Composition of the Exchange Package
Tax Impact of the Acquisition
Recap
Review Questions
What about Your Company?

8 The Campaign to Acquire, Postacquisition Analysis, Special Topics, and Wrap-Up:....117

Introduction
A Review of Some Acquisition Terminology
    Takeover
    White Knight
    White Squire
    Proxy Fights
    Poison Pills
    Corporate Raider
    Leveraged Buyout
    Premium
    Tender Offers
    Golden Parachute
The Campaign to Acquire
    Friendly Acquisitions
    Unfriendly Acquisitions
    Resisting an Unfriendly Takeover
    Due Diligence
Postacquisition Analysis
International Acquisitions
    Reasons for International Mergers and Acquisitions
        Growth
        Technology
        Product Advantages and Product Differentiation
        Government Policy
        Exchange Rates
        Political and Economic Stability
        Differential Labor Costs, Productivity
        To Follow Clients (Especially by Banks)
        Diversification
        To Assure a Source of Raw Materials
    Returns to Shareholders in International Mergers and Acquisitions
Acquisitions of Nonpublicly Traded Companies
    Data Availability for Nonpublicly Traded Companies
    Risk and Required Return for the Nonpublicly Traded Company
    Forecasting Cash Flows for the Nonpublicly Traded Companies
Recap
Review Questions
What about Your Company?

Glossary:....137
Bibliography:....145
Final Exam:....149
Index:....179




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