Global mergers and acquisitions : combining companies across borders PDF
Preview Global mergers and acquisitions : combining companies across borders
THE BUSINESS Global Mergers and S Finance and Financial O EXPERT PRESS O Management Collection Acquisitions F DIGITAL LIBRARIES I • Combining Companies Across Borders Z John A. Doukas, Editor H EBOOKS FOR A Abdol S. Soofi • Yuqin Zhang N BUSINESS STUDENTS G Curriculum-oriented, born- This book explains in detail corporate restructuring through Global digital books for advanced mergers and acquisitions (M&A). It critically examines all func- business students, written tions that must be performed in completing domestic or cross- by academic thought border M&As. Additionally, it covers international finance and Mergers and leaders who translate real- multinational financial management. world business experience Given the increasing importance of China as the second into course readings and largest economy in the world and Chinese companies’ growing reference materials for merger and acquisition activities globally, the authors devote Acquisitions students expecting to tackle the last two chapters to China’s outward foreign direct invest- management and leadership ment, cross-border M&A activities, and include case studies challenges during their regarding Chinese foreign direct investment. Combining professional careers. The authors provide detail-oriented tasks including devel- G L oping a strategy for merger or acquisition, finding a target, con- O POLICIES BUILT B BY LIBRARIANS ducting due diligence, valuing the target company, conducting A Companies Across L • Unlimited simultaneous negotiations, and satisfactorily meeting the most challenging M phase of an M&A transaction—to integrate the acquiring and usage E acquired companies. R Borders • Unrestricted downloading G E and printing Abdol Soofi received his doctoral degree from the Economics R • Perpetual access for a S Department at the University of California, Riverside. He has A one-time fee taught undergraduate courses at University of Wisconsin– N • No platform or D Platteville, and courses for MBA programs at University of maintenance fees A Wisconsin–Milwaukee, California Polytechnic State Uni- C • Free MARC records versity, Pomona, and Golden Gate University in California, Q • No license to execute U Abdol S. Soofi and Upper Iowa University. In addition to publishing over 50 I S The Digital Libraries are a scholarly papers in various learned journals, Dr. Soofi has IT Yuqin Zhang comprehensive, cost-effective published a book on international business and co-edited IO way to deliver practical other successful books. N S treatments of important Dr. Yuqin Zhang received her doctoral degree in Manage- business issues to every ment Science and Engineering in 2004 from Academy of student and faculty member. Mathematics and Systems Science, Chinese Academy of Sciences. She is Assistant Professor in Economics at the University of International Business and Economics, and she has published several research papers in journals For further information, a such as Journal of Economic Studies, Journal of Internal Trade free trial, or to order, contact: (in Chinese), and Journal of Systems Science and Complexity. [email protected] Finance and Financial Management www.businessexpertpress.com/librarians Collection John A. Doukas, Editor ISBN: 978-1-60649-774-6 www.businessexpertpress.com www.businessexpertpress.com Global Mergers and Acquisitions Global Mergers and Acquisitions Combining Companies Across Borders Abdol S. Soofi and Yuqin Zhang Global Mergers and Acquisitions: Combining Companies Across Borders Copyright © Business Expert Press, LLC, 2014. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2014 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 978-1-60649-774-6 (paperback) ISBN-13: 978-1-60649-775-3 (e-book) Business Expert Press Finance and Financial Management Collection Collection ISSN: 2331-0049 (print) Collection ISSN: 2331-0057 (electronic) Cover and interior design by Exeter Premedia Services Private Ltd., Chennai, India First edition: 2014 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America. Abdol Soofi dedicates this book to his wife Xing, to his daughter Rima, to his son Shauheen, and to the loving memory of his son Rosteen. Yuqin Zhang dedicates this book to her father Wenhai Zhang, her h usband Hongbin Dong, and her daughter Yicheng Dong Abstract This book primarily deals with corporate restructuring through mergers and acquisitions (M&As). It critically examines all functions that must be performed in completing an M&A transaction. Domestic and cross- border M&A’s are very similar in many respects even though differences between them also exist. To include discussions of the issues that arise in cross-border M&A transactions, the book also covers discusses such as international finance and multinational financial management. Given the increasing importance of China as the second largest econ- omy in the world and Chinese companies’ growing merger and acquisition (M&A) activities globally, we devote the last two chapters of the book to China’s outward foreign direct investment and cross-border M&A activi- ties. The case studies regarding Chinese foreign direct investment both in Greenfield and acquisition forms give additional insights into challenging tasks of due diligence and post-merger cultural integration that foreign investors face. The knowledge of these topics is absolutely imperative in M&A deci- sion making. Tasks include developing a strategy for merger or acquisition, finding a target, conducting due diligence, valuing the target company, conducting negotiations and structuring the deal, and, finally, satisfactorily meeting the most challenging phase of an M&A transaction; that is, inte- grating the acquiring and acquired companies. In short, the book is written as a concise guideline for those readers who are interested in gaining a clear understanding of what a merger or acquisition entails. The M&A literature is a fragmented field of inquiry. The book brings together important, practical insights from this vast literature in a short, but cohesive form that hopefully has great managerial relevance. Keywords business valuation, cost of capital, cross-border acquisition, cultural integration deal structuring, exchange rate, FDI and national security, foreign direct investment, merger and acquisition, strategy, target selection, real options, regulatory agencies Contents Preface ..................................................................................................xi Part I Cross-Border Mergers, Acquisitions, and Corporate Restructuring... ....................................1 Chapter 1 Internationalization of Economies ...................................3 Chapter 2 Mergers and Acquisitions and Corporate Restructuring ....9 Chapter 3 An Overview of the Merger and Acquisition Process ......19 Chapter 4 Merger and Acquisition Strategy Development ..............27 Chapter 5 Selecting a Potential Target Company for Acquisition ....35 Chapter 6 Accounting for Mergers and Acquisitions ......................53 Chapter 7 Alternative Approaches to Valuation ..............................59 Chapter 8 Cost of Capital ..............................................................71 Chapter 9 Real Option Analysis in Valuation of a Company ..........79 Chapter 10 Valuation of the Target Company Using the Black–Scholes Model ...............................................91 Chapter 11 Target Valuation in Cross-Border Mergers and Acquisitions ..........................................................115 Chapter 12 Negotiations, Deal Structuring, Financing, and Regulatory Considerations ....................................129 Chapter 13 Postmerger Integration and Reorganization .................135 Part II Cross-Border M&A Activities of Chinese Enterprises.. ............................................................161 Chapter 14 China’s Outbound Foreign Direct Investment .............163 Chapter 15 Major Issues in Chinese Cross-Border Mergers and Acquisitions ..........................................................175 Notes..................................................................................................207 References ...........................................................................................211 Index .................................................................................................221
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