Margers

MERGERS, ACQUISITIONS, AND CORPORATE RESTRUCTURINGS
FIFTH EDITION

MERGERS, ACQUISITIONS, AND CORPORATE RESTRUCTURINGS
FIFTH EDITION

PATRICK A. GAUGHAN

JOHN WILEY & SONS, INC.

Copyright # 2011 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may bereproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center,Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 7486011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty:While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. Theadvice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technicalsupport, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library ofCongress Cataloging-in-Publication Data: Gaughan, Patrick A. Mergers, acquisitions, and corporate restructurings / Patrick A. Gaughan. —5th ed. p. cm. Includes index. ISBN: 978-0-470-56196-6 (cloth); 978-0-470-88117-0 (ebk); 978-0-470-88118-7 (ebk); 978-0-470-88121-7 (ebk) 1. Consolidation and merger of corporations. 2. Corporate reorganizations. I. Title. HD2746.5.G38 2011 2010013503 658.106–dc22Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

CONTENTS
Case Study Preface Part 1 Background 1 Introduction
Recent M&A Trends Definitions Valuing a Transaction Types of Mergers Reasons for Mergers and Acquisitions Merger Consideration Merger Professionals Merger Arbitrage Leveraged Buyouts and the Private Equity Market Corporate Restructuring Merger Negotiations Structuring the DealMerger Agreement Merger Approval Procedures Deal Closing Short-Form Merger Freezeouts and the Treatment of Minority Shareholders Purchase of Assets Compared with Purchase of Stock Assumption of the Seller’s Liabilities Advantages of Asset Acquisitions Asset Selloffs Reverse Mergers Holding Companies

xi xv 1 3
3 12 13 13 14 15 16 19 20 21 21 24 24 25 26 26 27 27 28 28 28 29 33

2

Historyof Mergers
Merger Waves What Causes Merger Waves? First Wave, 1897–1904 Second Wave, 1916–1929 The 1940s
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35
35 36 36 42 44

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CONTENTS

Third Wave, 1965–1969 Trendsetting Mergers of the 1970s Fourth Wave, 1984–1989 Fifth Wave Sixth Merger Wave Summary

44 51 57 63 71 73

3

Legal Framework
Laws Governing Mergers, Acquisitions, and Tender Offers Other Specific Takeover...