What is corporate restructuring?
It involves decisions about the future form and size of a business, including decisions regarding mergers and acquisitions, divestitures, and the legal form the company should take.
What are mergers and acquisitions?
Processes where companies combine to form a larger entity or one company purchases another, often to achieve growth or expansion.
What is a statutory merger?
In a statutory merger, one corporation absorbs another. The survivor issues its stock in exchange for the merged corporation’s stock, and the merged corporation ceases to exist.
What is a statutory consolidation?
It involves forming a new corporation that issues stock in exchange for the stock of the merging companies, which then cease to exist as separate entities.
What is an acquisition of shares?
Occurs when one company takes control of another by purchasing a voting majority of the other company’s common voting shares. It is often used in hostile takeovers.
What is an acquisition of assets?
It involves purchasing only the assets of another company, not its stock, and does not require assumption of the other company’s liabilities.
What is a horizontal merger?
Occurs between companies in the same line of business.
What is a vertical merger?
Occurs between companies at different stages of production and distribution of a product.
What is a conglomerate merger?
It involves companies in unrelated lines of business.
What are economies of scale?
They refer to cost savings achieved by a larger business through shared services and consolidated operations.
What is synergy in business combinations?
Synergy is the concept that the combined value and performance of two companies will be greater than the sum of the separate companies.
What are pre-offer defenses in a takeover?
They include strategies like staggered board elections, supermajority merger approval, fair merger price provisions, golden parachutes, and poison pills.
What is a staggered board election?
(Type of pre-offer defense in a takeover)
Board members are elected in staggered terms, making it harder for a takeover to achieve a majority on the board quickly.
What is a supermajority merger approval provision?
(Type of pre-offer defense in a takeover)
A supermajority merger approval provision in a company’s charter requires more than a simple majority of shareholder votes to approve a merger, often two-thirds or three-fourths.
What is a golden parachute?
(Type of pre-offer defense in a takeover)
A provision requiring a large payment to executives if the company is taken over, making the company less attractive as an acquisition target.
What is a poison pill?
(Type of pre-offer defense in a takeover)
A provision in a corporation’s charter, bylaws, or contracts that reduces the value of the company to potential acquirers, such as terms of a contract that require its termination upon a specific form of change of ownership.
What is a Pacman defense?
(Type of post-offer defense in a takeover)
It involves the target company attempting a hostile takeover of the acquirer by issuing new shares and using cash to buy the acquirer’s shares. It may cause the potential acquirer to call off its bid for more shares.
What is a white knight?
(Type of post-offer defense in a takeover)
A company more favorable to management than another company attempting a hostile takeover. The white knight bids for the target company in a competing tender offer to defeat the hostile acquirer.
What is a crown jewel lockup provision?
(Type of post-offer defense in a takeover)
It involves offering major assets or controlling shares to a white knight to deter a hostile acquirer.
What is a leveraged recapitalization?
(Type of post-offer defense in a takeover)
It involves borrowing money to pay a large dividend to shareholders, increasing the corporation’s debt to discourage potential acquirers.
What is a divestiture?
The process of selling or otherwise disposing of an asset or part of a company.
Asset sales can enhance shareholder value for both the purchasing company and the selling company, possibly because the assets are transferred to a company that can manage them better.
What is a corporate spin-off?
A form of corporate divestiture where a subsidiary or division becomes an independent company, and shares are distributed to existing shareholders on a pro-rata basis.
Spin-offs can incentivize management by offering stock or stock options in the new company.
A corporate spin-off and an equity carve-out both involve the divestiture of a part of the company. How does an equity carve-out differ from a spin-off?
In an equity carve-out, shares in the new company are sold to the public in an IPO, while in a spin-off, shares are distributed to existing shareholders.
In an equity carve-out, the parent company usually retains the majority of the stock in the carved-out company.
What is tracking stock?
A separate class of common stock created within the same company and tied to the performance of a particular company division. It does not involve a divestiture.
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A.1. Comparative Financial Statement Analysis11
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A.2. Financial Ratio Analysis150
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A.3. Profitability Analysis37
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A.4. Advanced Financial Topics60
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B.1. Risk and Return Fundamentals57
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B.2. Long-Term Financial Management124
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B.3. Raising Capital and Financial Markets38
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B.4. Working Capital Management105
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B.5. Corporate Restructuring and Valuation39
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B.6. International Finance68
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C.1. Cost-Volume-Profit (CVP) Analysis52
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C.2. Marginal Analysis and Decision Making57
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C.3. Pricing Decisions86
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D.1. Enterprise Risk Management (ERM)80
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E.1. Capital Investment Analysis and Cash Flows34
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E.2. Capital Investment Methods and Risk97
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F.1. Business Ethics and Fraud30
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F.2. IMA Code of Ethics and Fraud Triangle14
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F.3. Organizational Ethics and Culture64
