Mergers
define mergers
mergers : 2 into 1
define acquisition and types
one buys another
friendly and hostile
what is globalization
remove free trade barriers
bid-ask rate
bid rate : rate dealer buy foreign
ask rate : rare dealer sell foreign
dealers spread : ask - bid price
bid ask spread : (ask rate - bid rate)/ask rate
types of merger
vertical
horizontal
conglomerate
ownership %
early warning = 10%
takeover bid = 20%
control = 50.1%
amalgamation = 66.7%
minority squeeze out = 90%
what is a multinational corporation
headquarters = home
cross rates
exchange rates between two currencies
#1 motive of mergers
synergy
1) scale economy
2) scope economy
3) complementary strength
takeover bid process
1) takeover offer sent to all shareholder
2) 15 days to circulate - includes yes or no recommendation
3) bid open 105 days after public announcement (shortened to 35 max) (compete bid = 10 days +)
factors that affect int financial management
1) tax codes/legal system
2) future exchange rate uncertainty
3) english = not social language
4) cultural views
5) policial uncertainty
6) economies use resources differently
how to determine cash flow
hard due to foreign rates
- gov restrict cash returned to parent company
other motives for mergers
- increase efficiency
- finance synergy
- tax benefit
- strategic realignment
hostile takeover steps
1) work up to 10%
2) file statement quietly
3) 20% over time (open market)
4) make offer (for control or amalgamation)
spot vs forward rate
spot : current price it can be bought/sold
forward : future price agreed to
exchange rate risk
- must convert project future cash flows
- calculate projected exchange rate
general intent of legislation
transparency
fairness
**to protect investors intrest**
defence tactics
rights plan
selling the crown jewels
white knight
currency rate quotes
currency exchange rate : 1 v 1
direct quotation method : how much home needs to buy one unit of foreign
indirect quotation method : how much foreign to buy one unit of home