Financial Analysis. Lesson 33. Mergers, Acquisitions, and Corporate Restructuring

Financial Analysis. Lesson 33. Mergers, Acquisitions, and Corporate Restructuring

1. Mergers and acquisitions (M&A) involve combining companies to create greater value.

2. Corporate restructuring reorganizes a company’s operations or structure for efficiency.

3. Horizontal merger merges companies in the same industry for market expansion.

4. Vertical merger combines companies at different production stages within an industry.

5. Conglomerate merger merges companies in unrelated industries for diversification.

6. Acquisition premium is the excess paid above a company’s fair value.

7. Synergy refers to increased value from merging companies' combined capabilities.

8. Due diligence is a thorough review of a target company's finances.

9. Hostile takeover occurs when acquisition happens without board approval.

10. Leveraged buyout (LBO) uses borrowed funds to acquire a target company.

11. Management buyout (MBO) allows company managers to buy out ownership stakes.

12. Reverse merger enables a private company to go public without an IPO.

13. Divestiture involves selling a subsidiary or division to streamline operations.

14. Spin-off creates an independent company by separating part of the business.

15. Asset sale sells specific assets rather than the whole company.

16. Share swap exchanges target company shares for acquirer company shares.

17. Tender offer proposes to buy shares directly from target shareholders.

18. Golden parachute provides executives with benefits if they lose jobs post-acquisition.

19. White knight is a friendly company that rescues a target from hostile takeover.

20. Breakup fee compensates an acquirer if the deal is terminated.

21. Tax inversion moves a company’s legal domicile to reduce tax obligations.

22. Asset revaluation reassesses asset values to reflect current market conditions.

23. Recapitalization restructures a company’s capital by altering debt or equity ratios.

24. Crown jewel defense sells valuable assets to deter hostile takeovers.

25. Poison pill strategy issues more shares to prevent a hostile acquisition.

26. Greenmail repurchases stock at a premium to prevent a takeover.

27. Restructuring charges are one-time costs incurred during corporate restructuring.

28. Integration costs cover expenses related to merging operations and systems.

29. Operational synergy is efficiency gained from combining similar business functions.

30. Financial synergy results from enhanced access to capital or reduced costs.

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Technical Examples:

1. Due diligence helps assess target company value and identify potential risks.

2. Leveraged buyout (LBO) uses significant debt to finance company acquisitions.

3. Golden parachute protects executives financially if acquired by another firm.