Presentation by Prof.CA. Nitant Trilokekar nptbanking.blogspot.com
Acquisitions and Restructuring <ul><li>Very popular strategy during the 20 th  Century. </li></ul><ul><li>55,000 acquisiti...
Why restructure?
Restructure defined <ul><li>Restructuring may include company reorganisation, closure, insolvency, merger & acquisition, d...
When does the corporate restructure?  <ul><li>When a company is having trouble making payments on its debt, it will often ...
BANKRUPTCY – WHEN RESTRUCTURING FAILS <ul><li>A legal proceeding involving a person or business that is unable to repay ou...
Restructure company reorganisation,  closure, insolvency, downsizing, externalisation and delocalisation.
MERGER <ul><li>The aspect of corporate strategy, corporate finance and management dealing with the buying, selling and com...
Acquisitions and Restructuring <ul><li>Acquisition Types:  </li></ul><ul><li>Mergers: </li></ul><ul><li>Two firms join and...
Rationales for Making Acquisitions Acquisitions Increase market power Overcome entry barriers Cost of new product developm...
Acquisitions and Restructuring <ul><li>Market Power </li></ul><ul><li>Rationales for Making Acquisitions </li></ul><ul><ul...
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NPT A&M lecture 1

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Acquisitions & Mergers Lecture 1

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NPT A&M lecture 1

  1. 1. Presentation by Prof.CA. Nitant Trilokekar nptbanking.blogspot.com
  2. 2. Acquisitions and Restructuring <ul><li>Very popular strategy during the 20 th Century. </li></ul><ul><li>55,000 acquisitions in the 1980s worth $1.3 trillion. </li></ul><ul><li>Pace of acquisitions picked up in the 1990s. </li></ul><ul><li>40-45 of acquisitions in recent years involved cross-border transactions. </li></ul>
  3. 3. Why restructure?
  4. 4. Restructure defined <ul><li>Restructuring may include company reorganisation, closure, insolvency, merger & acquisition, downsizing, externalisation and delocalisation. </li></ul><ul><li>Restructuring is driven by several factors including a more open global economy, downturns in economic growth, an ageing population, introduction of new technologies affecting ways of working and the necessity to combat climate change and to reduce environmental impact. </li></ul>
  5. 5. When does the corporate restructure? <ul><li>When a company is having trouble making payments on its debt, it will often consolidate and adjust the terms of the debt in a debt restructuring. </li></ul>What does it aim to restructure? <ul><li>A company restructures its operations or structure by cutting costs, such as payroll, or reducing its size through the sale of assets. </li></ul><ul><li>After a debt restructuring, the payments on debt are more manageable for the company and the likelihood of payment to bondholders increases. </li></ul>
  6. 6. BANKRUPTCY – WHEN RESTRUCTURING FAILS <ul><li>A legal proceeding involving a person or business that is unable to repay outstanding debts. </li></ul><ul><li>The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). </li></ul><ul><li>All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. </li></ul><ul><li>Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy. </li></ul>
  7. 7. Restructure company reorganisation, closure, insolvency, downsizing, externalisation and delocalisation.
  8. 8. MERGER <ul><li>The aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. </li></ul><ul><li>A merger can resemble a takeover but result in a new company name ( often combining the names of the original companies) and in new branding; in some cases, terming the combination a &quot;merger&quot; rather than an acquisition is done purely for political or marketing reasons. </li></ul>
  9. 9. Acquisitions and Restructuring <ul><li>Acquisition Types: </li></ul><ul><li>Mergers: </li></ul><ul><li>Two firms join and integrate operations as co-equals. </li></ul><ul><li>Chrysler – Diamler Benz example. </li></ul><ul><li>Acquisitions: </li></ul><ul><li>One firm buys a controlling interest in another firm with the intent to </li></ul><ul><li>make the other firm a division or subsidiary of the acquiring firm. </li></ul><ul><li>In general these agreements are friendly but do not result in a co-equal </li></ul><ul><li>relationship. </li></ul><ul><li>Novell’s acquisition of German-based SuSE gives Novell an in-house </li></ul><ul><li>source for Linux desktop and server operating systems. </li></ul><ul><li>Hostile Takeovers: </li></ul><ul><li>Acquisition bid is unsolicited. </li></ul><ul><li>Generally results in incumbent management being removed. </li></ul><ul><li>Yahoo’s takeover bid for HotJobs to thwart TMP Worldwide </li></ul><ul><li>(a rival of Yahoo). </li></ul><ul><li>Microsoft’s alliance with Yahoo to thwart entry of Google is NOT a merger </li></ul>
  10. 10. Rationales for Making Acquisitions Acquisitions Increase market power Overcome entry barriers Cost of new product development Increase speed to market Increase diversification Reshape firm’s competitive scope Lower risk compared to developing new products Learn and develop new capabilities
  11. 11. Acquisitions and Restructuring <ul><li>Market Power </li></ul><ul><li>Rationales for Making Acquisitions </li></ul><ul><ul><ul><li>Gain size to exploit core competencies. </li></ul></ul></ul><ul><ul><ul><li>Usually a horizontal acquisition but may involve vertical or related </li></ul></ul></ul><ul><ul><ul><li>acquisitions (Disney – Fox Family Worldwide). </li></ul></ul></ul><ul><ul><ul><li>Time-Warner merger, financial and banking industry consolidation </li></ul></ul></ul><ul><li>Overcome Entry Barriers </li></ul><ul><li>Overcome barriers by acquiring firm in the industry. </li></ul><ul><li>Whirlpool’s acquisition of Phillips Electronics appliance business </li></ul><ul><li>Cost and speed of new product development and introduction </li></ul><ul><li>Acquisitions can provide access to new products much more quickly </li></ul><ul><li>and at a lower cost than internal development of new products. </li></ul><ul><li>Many firms in the pharmaceutical industry use acquisitions to enter </li></ul><ul><li>markets quickly, to overcome the high costs of developing products </li></ul><ul><li>internally, and to increase the predictability of returns on their </li></ul><ul><li>investments. </li></ul>

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