Mergers and Acquisitions: Current Issues

293 Pages·2008·1.54 MB·English

Mergers and Acquisitions
Current Issues
Edited by
Greg N. Gregoriou and
Karyn L. Neuhauser
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MERGERS AND ACQUISITIONS
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Also edited by Greg N. Gregoriou
ADVANCES IN RISK MANAGEMENT
ASSET ALLOCATION AND INTERNATIONAL INVESTMENTS
DIVERSIFICATION AND PORTFOLIO MANAGEMENT OF MUTUAL FUNDS
PERFORMANCE OF MUTUAL FUNDS
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Mergers and
Acquisitions
Current Issues
Edited by
GREG N. GREGORIOU
and
KARYN L. NEUHAUSER
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Selection and editorial matter © Greg N.Gregoriou and Karyn L.Neuhauser 2007
Individual chapters © contributors 2007
All rights reserved.No reproduction,copy or transmission of this
publication may be made without written permission.
No paragraph of this publication may be reproduced,copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright,Designs and Patents Act 1988,or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
90 Tottenham Court Road,London W1T 4LP.
Any person who does any unauthorized act in relation to this publication may be liable
to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of this work in
accordance with the Copyright,Designs and Patents Act 1988.
First published 2007 by
PALGRAVE MACMILLAN
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PALGRAVE MACMILLAN is the global academic imprint of the Palgrave
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ISBN-13:978-0230-55379-8
ISBN-10:0-230-55379-6
This book is printed on paper suitable for recycling and made from fully
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processes are expected to conform to the environmental regulations of the
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A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Mergers and acquisitions:current issues/edited by
Greg N.Gregoriou and Karyn L.Neuhauser.
p. cm.
Includes index.
ISBN 0-230-55379-6 (alk.paper)
1.Consolidation and merger of corporations. I.Gregoriou,Greg N.,
1956– II.Neuhauser,Karyn L.
HD2746.5.M4365 2007
338.8’3—dc22 2007021799
10 9 8 7 6 5 4 3 2 1
16 15 14 13 12 11 10 09 08 07
Printed and bound in Great Britain by
Antony Rowe Ltd,Chippenham and Eastbourne
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To my mother Evangelia and in loving memory of
my father Nicholas (GNG)
To my mother, Helen Lieck, and in remembrance of my father,
Arthur Louis Lieck, who together taught me
what was important in life (KLN)
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Contents
Acknowledgments xi
Notes on the Contributors xiii
Introduction xxi
1 Mergers and Acquisitions: A Global View 1
Karyn L. Neuhauser
2 What Drives Acquisitions? A Market-Manager
Rationality Framework 5
Antonios Antoniou and Huainan Zhao
2.1 Introduction 5
2.2 Hypothesis development 7
2.3 Data and descriptive statistics 8
2.4 Methodology 10
2.5 Empirical results 11
2.6 Conclusion 24
3 Misadventure and the Form of Payment in
Corporate Acquisitions 27
Tyrone M. Carlin, Guy Ford and Nigel Finch
3.1 Introduction 27
3.2 Factors influencing the form of consideration
in acquisitions 31
3.3 Aprice too far? The acquisition of Howard Smith Ltd
by Wesfarmers Ltd 33
3.4 Financial analysis 35
vii
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viii CONTENTS
3.5 Assessment of the transaction 38
3.6 Conclusion 40
4 An Essay on the History of a Merger:
The Case of the National Bank of Canada 42
Raymond Théoret and François-Éric Racicot
4.1 Introduction 42
4.2 The structures of the two merged banks 43
4.3 The new merged bank 50
4.4 Alow P/E ratio for the stock of national bank 53
4.5 Conclusion 54
5 Corporate Diversification: The Costs and
Benefits of Synergy 56
Felipe Balmaceda
5.1 Introduction 56
5.2 Related literature 58
5.3 The model 60
5.4 The analysis 64
5.5 Robustness 67
5.6 Conclusion 73
6 The Influence of M&As on Firm Value:
The Turkish Experience 83
M. Nihat Solakog˘lu and Mehmet Orhan
6.1 Introduction 83
6.2 Data and methodology 85
6.3 Discussion of results 87
6.4 Conclusion 93
7 Price Volatility in Stocks Subject to Tender Offers 96
Elaine Hutson
7.1 Introduction 96
7.2 Previous research and theoretical background 97
7.3 The econometric analysis: market effect
and volatility 101
7.4 Data and preliminary results 102
7.5 Econometric results 106
7.6 Trading volumes 110
7.7 Conclusion 114
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CONTENTS ix
8 Merger Arbitrage: An Introduction 118
Greg N. Gregoriou and François-Serge Lhabitant
8.1 Introduction 118
8.2 Merger arbitrage: the strategy 119
8.3 Key sources of merger arbitrage risk 128
8.4 Historical performance 132
8.5 Conclusion 136
9 The Impact of Cross-Border Mergers and
Acquisitions on Financial Analysts’ Forecasts:
Evidence from the Canadian Stock Market 139
Alain Coën, Aurélie Desfleurs and Claude Francoeur
9.1 Introduction 139
9.2 Conceptual framework 141
9.3 Measures of financial analysts’
forecast errors and data 142
9.4 Empirical results and analysis 145
9.5 Conclusion 151
10 The Economic Analysis of US Antitrust Merger Law 155
Germán Coloma
10.1 Introduction 155
10.2 Theoretical literature 156
10.3 Statute and case law 160
10.4 Empirical studies 163
10.5 Conclusion 165
11 Ethical Issues in Mergers and Acquisitions 168
Robert W. McGee
11.1 Introduction 168
11.2 Ethical approaches 168
11.3 Review of the literature 173
11.4 Conclusion 175
12 The Use of Equity Swaps in Mergers 178
Paul U. Ali
12.1 Introduction 178
12.2 Equity swaps 179
12.3 Hedging of swap exposure 180
12.4 “Fear and loathing” in takeover battles 180
12.5 Conclusion 185