MERGERS, ACQUISITIONS,

AND OTHER
RESTRUCTURING ACTIVITIES
AN INTEGRATED APPROACH
TO PROCESS, TOOLS, CASES,
AND SOLUTIONS

SIXTH EDITION
DONALD M. DEPAMPHILIS, PH.D.
College of Business Administration
Loyola Marymount University
Los Angeles, California
 Contents

Contents of the Companion Site xvii Discussion Questions 45

Chapter Business Cases 47
List of Business Case Studies xix Case Study 1.1 Xerox Buys ACS to Satisfy
Preface xxiii Shifting Customer Requirements 47
Acknowledgments xxviii Case Study 1.2 Assessing Procter & Gamble’s
About the Author xxix Acquisition of Gillette 49
2. Regulatory Considerations
Inside M&A: The Limitations of Regulation and
Part I the Lehman Brothers Meltdown 51
Chapter Overview 52
THE MERGERS AND Federal Securities Laws 54
ACQUISITIONS Case Study 2.1 A Federal Judge Reprimands Hedge
ENVIRONMENT Funds in Their Effort to Control CSX 57
Antitrust Laws 61
1. Introduction to Mergers and Case Study 2.2 Justice Department Requires
Acquisitions Verizon Wireless to Sell Assets before
Approving Alltel Merger 65
Inside M&A: Dell Moves into Information Dodd-Frank Wall Street Reform and Consumer
Technology Services 3 Protection Act 69
Chapter Overview 4 Case Study 2.3 Google Thwarted in Proposed
Mergers and Acquisitions as Change Agents 4 Advertising Deal with Chief Rival Yahoo! 70
Why Mergers and Acquisitions Happen 5 State Regulations Affecting Mergers and
Merger and Acquisition Waves 13 Acquisitions 75
Why It Is Important to Anticipate Merger Waves 19 National Security-Related Restrictions on Direct
Alternative Forms of Corporate Restructuring 19 Foreign Investment in the United States 76
Friendly versus Hostile Takeovers 22 The U.S. Foreign Corrupt Practices Act 77
The Role of Holding Companies in Mergers and Fair Disclosure (Regulation FD) 77
Acquisitions 24 Regulated Industries 78
The Role of Employee Stock Ownership Plans in Environmental Laws 80
M&As 24 Labor and Benefit Laws 80
Business Alliances as Alternatives to Mergers and Cross-Border Transactions 81
Acquisitions 25 Case Study 2.4 BHP Billiton and Rio Tinto
Participants in the Mergers and Acquisitions Blocked by Regulators in an International Iron
Process 26 Ore Joint Venture 82
Alternative Investors and Lenders 29 Some Things to Remember 83
Activist Investors and M&A Arbitrageurs 32 Discussion Questions 83
Do M&As Pay Off for Shareholders, Bondholders, Chapter Business Cases 84
and Society? 35 Case Study 2.5 Global Financial Exchanges Pose
Why Some M&As Fail to Meet Expectations 44 Regulatory Challenges 84
Long-Term Performance 44 Case Study 2.6 The Legacy of GE’s Aborted
Some Things to Remember 45 Attempt to Merge with Honeywell 86

xi
xii CONTENTS

3. The Corporate Takeover Market: Case Study 4.2 HP Redirects Its Mobile Device
Common Takeover Tactics, Antitakeover Business Strategy with the Acquisition of
Palm 152
Defenses, and Corporate Governance
The Business Plan as a Communication
Inside M&A: Kraft Sweetens Its Offer to Overcome Document 154
Cadbury’s Resistance 91 Phase 2: Building the Merger–Acquisition
Chapter Overview 92 Implementation Plan 156
Alternative Models of Corporate Governance 94 Some Things to Remember 162
Factors That Affect Corporate Governance 94 Discussion Questions 162
Alternative Takeover Tactics in the Corporate Chapter Business Cases 163
Takeover Market 99 Case Study 4.3 Adobe’s Acquisition of
What Makes the Aggressive Approach Successful? 105 Omniture: Field of Dreams Marketing? 163
Other Tactical Considerations 106 Case Study 4.4 BofA Acquires Countrywide
Developing a Bidding or Takeover Strategy 107 Financial Corporation 165
Alternative Takeover Defenses in the Corporate Appendix: Common Sources of Economic,
Takeover Market 108 Industry, and Market Data 167
The Impact of Takeover Defenses on Shareholder
and Bondholder Value 121 5. Implementation: Search through
Some Things to Remember 124 Closing: Phases 3 through 10
Discussion Questions 125
Chapter Business Cases 126 Inside M&A: Bank of America Acquires Merrill
Case Study 3.1 Mittal Acquires Arcelor—A Lynch 169
Battle of Global Titans in the European Chapter Overview 170
Corporate Takeover Market 126 Phase 3: The Search Process 170
Case Study 3.2 Verizon Acquires MCI— Phase 4: The Screening Process 173
The Anatomy of Alternative Bidding Phase 5: First Contact 174
Strategies 128 Phase 6: Negotiation 178
Phase 7: Developing the Integration Plan 186
Phase 8: Closing 188
Phase 9: Implementing Postclosing Integration 191
Part II Phase 10: Conducting a Postclosing Evaluation 193
Some Things to Remember 194
THE MERGERS AND Discussion Questions 194
ACQUISITIONS PROCESS: Chapter Business Cases 196
PHASES 1 THROUGH 10 Case Study 5.1 Oracle’s Efforts to Consolidate
the Software Industry 196
4. Planning: Developing Business Case Study 5.2 Exxon Mobil Buys XTO Energy
and Acquisition Plans: Phases 1 and 2 of the in a Bet on Natural Gas 198
Acquisition Process Appendix A: Thoughts on Negotiating
Dynamics 200
Inside M&A: Nokia’s Gamble to Dominate the Appendix B: Legal Due Diligence Preliminary
Smartphone Market Falters 135 Information Request 202
Chapter Overview 136
A Planning-Based Approach to M&As 137 6. Integration: Mergers, Acquisitions,
Phase 1: Building the Business Plan 139 and Business Alliances
Case Study 4.1 CenturyTel Buys Qwest
Communications to Cut Costs and Buy Time Inside M&A: General Electric’s Water Business Fails
as the Landline Market Shrinks 145 to Meet Expectations 203
 CONTENTS xiii
Chapter Overview 204 Discussion Questions 274
The Role of Integration in Successful M&As 204 Practice Problems and Answers 275
Viewing Integration as a Process 206 Chapter Business Cases 279
Case Study 6.1 HP Acquires Compaq— Case Study 7.1 Hewlett-Packard Outbids Dell
The Importance of Preplanning Computer to Acquire 3PAR 279
Integration 208 Case Study 7.2 Creating a Global Luxury Hotel
Case Study 6.2 Integrating Supply Chains: Coty Chain 281
Cosmetics Integrates Unilever Cosmetics
International 217
Case Study 6.3 Culture Clash Exacerbates Efforts 8. Applying Relative, Asset-Oriented,
of the Tribune Corporation to Integrate the and Real-Option Valuation Methods
Times Mirror Corporation 222 to Mergers and Acquisitions
Case Study 6.4 Panasonic Moves to Consolidate
Past Acquisitions 224 Inside M&A: A Real-Options Perspective on
Integrating Business Alliances 225 Microsoft’s Dealings with Yahoo! 283
Some Things to Remember 227 Chapter Overview 285
Discussion Questions 227 Applying Relative-Valuation (Market-Based)
Chapter Business Cases 228 Methods 286
Case Study 6.5 The Challenges of Integrating Applying Asset-Oriented Methods 297
Steel Giants Arcelor and Mittal 228 The Replacement Cost Method 300
Case Study 6.6 Alcatel Merges with Valuing the Firm Using the Weighted-Average
Lucent, Highlighting Cross-Cultural Method 300
Issues 230 Analyzing Mergers and Acquisitions in Terms of
Real Options 302
Determining When to Use the Different Approaches
Part III to Valuation 314
Which Valuation Methods Are Actually Used in
MERGER AND ACQUISITION Practice 315
Some Things to Remember 316
VALUATION AND MODELING Discussion Questions 316
7. A Primer on Merger and Acquisition Practice Problems and Answers 317
Cash-Flow Valuation Chapter Business Cases 320
Case Study 8.1 Google Buys YouTube:
Inside M&A: The Importance of Distinguishing Valuing a Firm in the Absence of Cash
between Operating and Nonoperating Assets 235 Flows 320
Chapter Overview 235 Case Study 8.2 Merrill Lynch and BlackRock
Required Returns 236 Agree to Swap Assets 322
Analyzing Risk 242
Calculating Free Cash Flows 247 9. Applying Financial Modeling
Applying Income or Discounted-Cash-Flow Techniques: To Value, Structure, and
Methods 250 Negotiate Mergers and Acquisitions
Valuing Firms Subject to Multiple Growth
Periods 256 Inside M&A: HP Buys EDS—The Role of Financial
Valuing Firms under Special Situations 258 Models in Decision Making 325
Using the Enterprise Method to Estimate Equity Chapter Overview 326
Value 259 Limitations of Financial Data 327
Valuing Nonoperating Assets 266 The Model-Building Process 329
Putting It All Together 270 Using Financial Models in Support of M&A
Some Things to Remember 274 Negotiations 349
xiv CONTENTS

Alternative Applications of M&A Financial

Models 353
Part IV
Some Things to Remember 354 DEAL-STRUCTURING AND
Discussion Questions 355
Practice Problems and Answers 356 FINANCING STRATEGIES
Chapter Business Cases 357 11. Structuring the Deal: Payment
Case Study 9.1 Cleveland Cliffs Fails to
Complete Takeover of Alpha Natural and Legal Considerations
Resources in a Commodity Play 357
Inside M&A: Pfizer Acquires Wyeth Labs Despite
Case Study 9.2 Mars Buys Wrigley in One Sweet
Tight Credit Markets 409
Deal 360
Chapter Overview 410
Appendix A: Utilizing the M&A Model on the
The Deal-Structuring Process 411
Companion Site to This Book 361
Form of Acquisition Vehicle and Postclosing
Appendix B: M&A Model Balance Sheet Adjustment
Organization 415
Mechanism 363
Legal Form of the Selling Entity 419
Form of Payment or Total Consideration 419
10. Analysis and Valuation of Privately Managing Risk and Closing the Gap
Held Companies on Price 421
Using Collar Arrangements to Preserve Shareholder
Inside M&A: Cashing Out of a Privately Held
Value 427
Enterprise 365
Case Study 11.1 Flextronics Acquires
Chapter Overview 366
International DisplayWorks Using Fixed
Demographics of Privately Held Businesses 367
Value and Fixed Share Exchange
Governance Issues in Privately Held and Family-
Collars 430
Owned Firms 368
Form of Acquisition 431
Challenges of Valuing Privately Held
Case Study 11.2 Buyer Consortium Wins Control
Companies 369
of ABN Amro 437
Process for Valuing Privately Held Businesses 371
Some Things to Remember 442
Step 1: Adjusting Financial Statements 371
Discussion Questions 443
Step 2: Applying Valuation Methodologies to
Chapter Business Cases 444
Privately Held Companies 377
Case Study 11.3 Boston Scientific Overcomes
Step 3: Developing Discount (Capitalization)
Johnson & Johnson to Acquire Guidant—A
Rates 380
Lesson in Bidding Strategy 444
Step 4: Applying Control Premiums, Liquidity,
Case Study 11.4 Swiss Pharmaceutical Giant
and Minority Discounts 383
Novartis Takes Control of Alcon 446
Reverse Mergers 395
Using Leveraged Employee Stock Ownership Plans 12. Structuring the Deal: Tax and
to Buy Private Companies 397 Accounting Considerations
Empirical Studies of Shareholder Returns 398
Some Things to Remember 399 Inside M&A: Continued Consolidation in the
Discussion Questions 400 Generic Pharmaceuticals Industry 449
Practice Problems and Answers 400 Chapter Overview 449
Chapter Business Cases 401 General Tax Considerations and Issues 450
Case Study 10.1 Panda Ethanol Goes Public in a Taxable Transactions 450
Shell Corporation 401 Case Study 12.1 Cablevision Uses Tax Benefits
Case Study 10.2 Determining Liquidity to Help Justify the Price Paid for Bresnan
Discounts—The Taylor Devices and Tayco Communications 455
Development Merger 403 Tax-Free Transactions 456
 CONTENTS xv
Other Tax Considerations Affecting Corporate
Restructuring 463
Part V
Financial Reporting of Business Combinations 466 ALTERNATIVE BUSINESS
Impact of Purchase Accounting on Financial
Statements 469 AND RESTRUCTURING
International Accounting Standards 474 STRATEGIES
Recapitalization Accounting 474
Some Things to Remember 474 14. Joint Ventures, Partnerships, Strategic
Discussion Questions 475 Alliances, and Licensing
Practice Problems and Answers 476
Chapter Business Cases 477 Inside M&A: Microsoft Partners with Yahoo!—An
Case Study 12.2 Teva Pharmaceuticals Buys Alternative to Takeover? 539
Barr Pharmaceuticals to Create a Global Chapter Overview 540
Powerhouse 477 Motivations for Business Alliances 540
Case Study 12.3 Merck and Schering- Critical Success Factors for Business Alliances 545
Plough Merger: When Form Overrides Alternative Legal Forms of Business Alliances 547
Substance 480 Strategic and Operational Plans 554
Resolving Business Alliance Deal-Structuring
Issues 555
13. Financing Transactions: Private Equity, Case Study 14.1 Determining Ownership
Hedge Funds, and Leveraged Buyout Distribution in a Joint Venture 559
Empirical Findings 565
Structures and Valuation
Some Things to Remember 567
Inside M&A: Kinder Morgan Buyout Raises Ethical Discussion Questions 567
Questions 485 Chapter Business Cases 568
Chapter Overview 486 Case Study 14.2 Estimating the Real Cost of
Characterizing Leveraged Buyouts 487 Comcast’s Investment in NBC Universal 568
How Do LBOs Create Value? 493 Case Study 14.3 British Petroleum and Russia’s
When Do Firms Go Private? 495 Rosneft Unsuccessful Attempt to Swap
Financing Transactions 495 Shares 572
Common Forms of Leveraged Buyout Deal
Structures 500 15. Alternative Exit and Restructuring
Prebuyout and Postbuyout Shareholder Strategies: Divestitures, Spin-Offs,
Returns 504 Carve-Outs, Split-Ups, Split-Offs,
Using DCF Methods to Value Leveraged and Tracking Stocks
Buyouts 509
LBO Valuation and Structuring Model Inside M&A: Bristol-Myers Squibb Splits off the Rest
Basics 518 of Mead Johnson 575
Some Things to Remember 526 Chapter Overview 576
Discussion Questions 526 Commonly Stated Motives for Exiting
Practice Problems and Answers 527 Businesses 577
Chapter Business Cases 529 Case Study 15.1 British Petroleum Sells
Case Study 13.1 TXU Goes Private in the Oil and Gas Assets to Apache
Largest Private Equity Transaction in Corporation 579
History—A Retrospective Look 529 Divestitures 581
Case Study 13.2 “Grave Dancer” Takes Tribune Spin-Offs 587
Corporation Private in an Ill-Fated Case Study 15.2 Motorola Bows to Activist
Transaction 532 Pressure 588
xvi CONTENTS

Case Study 15.3 Anatomy of a Spin-Off 590 Chapter Business Cases 648
Equity Carve-Outs 591 Case Study 16.2 The General Motors’
Split-Offs and Split-Ups 593 Bankruptcy—The Largest Government-
Case Study 15.4 Anatomy of a Split-Off 593 Sponsored Bailout in U.S. History 648
Tracking, Targeted, and Letter Stocks 595 Case Study 16.3 Delta Airlines Rises from the
Voluntary Liquidations (Bust-Ups) 596 Ashes 652
Comparing Alternative Exit and Restructuring
Strategies 597 17. Cross-Border Mergers and Acquisitions:
Choosing among Divestiture, Carve-Out, and
Spin-Off Restructuring Strategies 597
Analysis and Valuation
Determinants of Returns to Shareholders Resulting Inside M&A: InBev Buys an American Icon
from Restructuring Strategies 599 for $52 Billion 655
Some Things to Remember 609 Chapter Overview 656
Discussion Questions 609 Distinguishing between Developed and
Chapter Business Cases 610 Emerging Economies 656
Case Study 15.5 Kraft Foods Undertakes Globally Integrated versus Segmented
Split-Off of Post Cereals in Merger-Related Capital Markets 657
Transaction 610 Motives for International Expansion 659
Case Study 15.6 Sara Lee Attempts to Create Case Study 17.1 Ford Sells Volvo to Geely in
Value through Restructuring 613 China’s Biggest Overseas Auto Deal 660
Common International Market Entry
Strategies 662
16. Alternative Exit and Restructuring Structuring Cross-Border Transactions 665
Strategies: Reorganization and Financing Cross-Border Transactions 667
Liquidation Planning and Implementing Cross-Border
Transactions in Emerging Countries 669
Inside M&A: Calpine Emerges from the Protection Valuing Cross-Border Transactions 670
of Bankruptcy Court 617 Empirical Studies of Financial Returns to
Chapter Overview 618 International Diversification 683
Business Failure 618 Some Things to Remember 686
Voluntary Settlements with Creditors Outside of Discussion Questions 686
Bankruptcy 619 Chapter Business Cases 688
Reorganization and Liquidation in Bankruptcy 622 Case Study 17.2 Overcoming Political Risk
Case Study 16.1 Lehman Brothers Files for in Cross-Border Transactions: China’s
Chapter 11 in the Biggest Bankruptcy CNOOC Invests in Chesapeake Energy 688
in U.S. History 625 Case Study 17.3 Wal-Mart’s International
Analyzing Strategic Options for Failing Firms 633 Strategy Illustrates the Challenges
Failing Firms and Systemic Risk 635 and the Potential of Global Expansion 690
Predicting Corporate Default and Bankruptcy 637
Valuing Distressed Businesses 640 References 693
Empirical Studies of Financial Distress 644
Some Things to Remember 646 Glossary 715
Discussion Questions 646 Index 725
Contents of the Companion Site

Acquirer Due Diligence Question List

Acquisition Process: The Gee Whiz Media Integrative Case Study
Example of Applying Experience Curves to M&A
Example of Supernormal Growth Model
Example of Market Attractiveness Matrix (Updated)
Examples of Merger and Acquisition Agreements of Purchase and Sale
Excel-Based Mergers and Acquisitions Valuation and Structuring Model
Excel-Based Leveraged Buyout Valuation and Structuring Model
Excel-Based Decision Tree M&A Valuation Model
Excel-Based Model to Estimate Firm Borrowing Capacity
Excel-Based Offer Price Simulation Model (Updated)
Excel-Based Spreadsheet: How to Adjust Target Firm’s Financial Statements (Updated)
Excel-Based Spreadsheet: How to Value Distressed Businesses (New)
Excel-Based Spreadsheet: Determining Home Depot’s Equity Value Using the
Enterprise Method (New)
Guidelines for Organizing ESOPs
Interactive Learning Library (Updated)
MCI/Verizon 2005 Merger Agreement
Primer on Cash-Flow Forecasting (Updated)
Primer on Applying and Interpreting Financial Ratios
Student Chapter PowerPoint Presentations (Updated)
Student Study Guide, Practice Questions, and Answers (Updated)

xvii
 List of Business Case Studies

Chapter 1: Introduction to Mergers 2.5. Global Financial Exchanges Pose

and Acquisitions 3 Regulatory Challenges 84
Regulating global markets**
Inside M&A: Dell Moves into Information 2.6. The Legacy of GE’s Aborted Attempt to
Technology Services 3 Merge with Honeywell 86
Strategic realignment* EU antitrust**
1.1. Xerox Buys ACS to Satisfy Shifting
Customer Requirements 47
Related diversification* Chapter 3: The Corporate Takeover
1.2. Assessing Proctor & Gamble’s Market: Common Takeover Tactics,
Acquisition of Gillette 49 Antitakeover Defenses, and Corporate
Horizontal merger* Governance 91
Inside M&A: Kraft Sweetens Its Offer to
Chapter 2: Regulatory Overcome Cadbury’s Resistance 91
Considerations 51 Hostile takeover*
3.1. Mittal Acquires Arcelor—A Battle of
Inside M&A: The Limitations of
Global Titans in the European Corporate
Regulation—The Lehman Brothers
Takeover Market 126
Meltdown 51
Hostile cross-border takeover
Regulatory failure*
3.2. Verizon Acquires MCI—The Anatomy of
2.1. A Federal Judge Reprimands
Alternative Bidding Strategies 128
Hedge Funds in Their Effort to Control
Bidding strategy
CSX 57
Enforcing securities laws*
2.2. Justice Department Requires Verizon Chapter 4: Planning: Developing
Wireless to Sell Assets before Approving Business and Acquisition Plans:
Alltel Merger 65 Phases 1 and 2 of the Acquisition
Consent decrees*
Process 135
2.3. Google Thwarted in Proposed
Advertising Deal with Chief Rival Inside M&A: Nokia’s Gamble to Dominate
Yahoo! 70 the Smartphone Market Falters 135
Business alliances* Strategy implementation*
2.4. BHP Billiton and Rio Tinto Blocked by 4.1. CenturyTel Buys Qwest
Regulators in an International Iron Ore Joint Communications to Cut Costs and Buy Time
Venture 82 as the Landline Market Shrinks 145
International antitrust* Defensive acquisition*
*
A single asterisk indicates that the case study is new since the fifth edition of this book.
**
A double asterisk indicates that the case study has been updated since the fifth edition.

xix
xx LIST OF BUSINESS CASE STUDIES

4.2. HP Redirects Its Mobile Device 6.4. Panasonic Moves to Consolidate

Business Strategy with the Acquisition Past Acquisitions 224
of Palm 152 Minority investors*
Strategic realignment* 6.5. The Challenges of Integrating
4.3. Adobe’s Acquisition of Omniture: Field Steel Giants Arcelor and
of Dreams Marketing? 163 Mittal 228
Industry consolidation* Integration implementation**
4.4. BofA Acquires Countrywide Financial 6.6. Alcatel Merges with Lucent,
Corporation 165 Highlighting Cross-Cultural
Opportunistic acquisition** Issues 230
International culture clash
Chapter 5: Implementation:
Search through Closing: Chapter 7: A Primer on Merger
Phases 3 through 10 169 and Acquisition Cash-Flow
Valuation 235
Inside M&A: Bank of America Acquires
Merrill Lynch 169 Inside M&A: The Importance of
Vision drives strategy* Distinguishing between Operating
5.1. Oracle’s Efforts to Consolidate the and Nonoperating Assets 235
Software Industry 196 Value of nonoperating assets
Strategy realignment* 7.1. Hewlett-Packard Outbids Dell
5.2. Exxon Mobil Buys XTO Energy Computer to Acquire 3PAR 279
in a Bet on Natural Gas 198 Betting on new technology*
Related diversification* 7.2. Creating a Global Luxury Hotel
Chain 281
Importance of understanding valuation
Chapter 6: Integration: Mergers, assumptions
Acquisitions, and Business
Alliances 203
Chapter 8: Applying Relative, Asset-
Inside M&A: General Electric’s Water Oriented, and Real-Option Valuation
Business Fails to Meet Expectations 203
Methods to Mergers and
Culture clash
6.1. HP Acquires Compaq—The Importance
Acquisitions 283
of Preplanning Integration 208 Inside M&A: A Real-Options’ Perspective
Plan before executing on Microsoft’s Dealings with Yahoo! 283
6.2. Integrating Supply Chains: Coty Defining real options**
Cosmetics Integrates Unilever Cosmetics 8.1. Google Buys YouTube: Valuing a
International 217 Firm in the Absence of Cash
IT integration challenges Flows 320
6.3. Culture Clash Exacerbates Efforts Valuing startups**
of the Tribune Corporation to Integrate 8.2. Merrill Lynch and BlackRock Agree
the Times Mirror Corporation 222 to Swap Assets 322
Incompatible cultures** Determining ownership percentages
 LIST OF BUSINESS CASE STUDIES xxi

Chapter 9: Applying Financial 11.2. Buyer Consortium Wins Control

Modeling Techniques: To Value, of ABN Amro 437
Structure, and Negotiate Mergers and Preselling assets**
Acquisitions 325 11.3. Boston Scientific Overcomes Johnson
& Johnson to Acquire Guidant—A Lesson
Inside M&A: HP Buys EDS—The Role in Bidding Strategy 444
of Financial Models in Decision Auction process**
Making 325 11.4. Swiss Pharmaceutical Giant Novartis
The power of models to Take Control of Alcon 446
9.1. Cleveland Cliffs Fails to Complete Staged transactions*
Takeover of Alpha Natural Resources
in a Commodity Play 357
Applying simulation models Chapter 12: Structuring the
9.2 Mars Buys Wrigley in One Sweet Deal: Tax and Accounting
Deal 360 Considerations 449
Analyzing synergy** Inside M&A: Continued Consolidation
in the Generic Pharmaceuticals
Chapter 10: Analysis and Industry 449
Valuation of Privately Held Addressing shareholder needs**
Companies 365 12.1. Cablevision Uses Tax Benefits to Help
Justify the Price Paid for Bresnan
Inside M&A: Cashing out of a Privately Communications 455
Held Enterprise 365 338 election*
Developing options 12.2. Teva Pharmaceuticals Buys Barr
10.1. Panda Ethanol Goes Public in a Shell Pharmaceuticals to Create a Global
Corporation 401 Powerhouse 477
Alternatives to IPO Tax-advantaged sale*
10.2. Determining Liquidity Discounts— 12.3. Merck and Schering-Plough Merger—
The Taylor Devices and Tayco When Form Overrides Substance 480
Development Merger 403 Two-stage, tax-advantaged deal*
Estimating and applying discounts**

Chapter 13: Financing Transactions:

Chapter 11: Structuring the Deal: Private Equity, Hedge Funds, and
Payment and Legal Leveraged Buyout Structures and
Considerations 409 Valuation 485
Inside M&A: Pfizer Acquires Wyeth Labs Inside M&A: Kinder Morgan Buyout Raises
Despite Tight Credit Markets 409 Ethical Questions 485
Financing transactions* Potential conflicts of interest**
11.1. Flextronics Acquires DisplayWorks 13.1. TXU Goes Private in the Largest Private
Using Fixed Value and Fixed Share Equity Transaction in History—A
Exchange Collars 430 Retrospective Look 529
Preserving value* Private equity deal*
xxii LIST OF BUSINESS CASE STUDIES

13.2. “Grave Dancer” Takes Tribune 15.6. Sara Lee Attempts to Create Value
Corporation Private in an Ill-Fated through Restructuring 613
Transaction 532 Breakup strategy*
Two-stage, tax-advantaged deal**

Chapter 16: Alternative Exit

Chapter 14: Joint Ventures, and Restructuring Strategies:
Partnerships, Strategic Alliances,
Reorganization and
and Licensing 539 Liquidation 617
Inside M&A: Microsoft Partners with
Inside M&A: Calpine Energy Emerges
Yahoo!—An Alternative to Takeover? 539
from the Protection of Bankruptcy
M&A alternative*
Court 617
14.1. Determining Ownership Distribution
Chapter 11 Reorganization
in a Joint Venture 559
16.1. Lehman Brothers Files for Chapter 11
Minority investment**
in the Biggest Bankruptcy in U.S.
14.2. Estimating the Real Cost of Comcast’s
History 625
Investment in NBC Universal 568
Liquidation of a financial services firm**
Joint venture*
16.2. The General Motors Bankruptcy—
14.3. British Petroleum and Russia’s Rosneft
The Largest Government-Sponsored
Unsuccessful Attempt to Swap Shares 572
Bailout in U.S. History 648
International joint venture*
363 reorganization*
16.3. Delta Airlines Rises from the
Chapter 15: Alternative Exit and Ashes 652
Restructuring Strategies: Divestitures, Using Chapter 11 to renegotiate contracts
Spin-Offs, Carve-Outs, Split-Ups,
Split-Offs, and Tracking Stocks 575
Chapter 17: Cross-Border Mergers
Inside M&A: Bristol-Myers Squibb Splits and Acquisitions: Analysis and
off the Rest of Mead Johnson 575
Valuation 655
Split-offs of noncore businesses*
15.1. British Petroleum Sells Oil and Gas Inside M&A: InBev Buys an American Icon
Assets to Apache Corporation 579 for $52 Billion 655
Asset sale* Cross-border auction**
15.2 Motorola Bows to Activist 17.1. Ford Sells Volvo to Geely in China’s
Pressure 588 Biggest Overseas Auto Deal 660
Breakup* Geographic diversification*
15.3. Anatomy of a Spin-Off 590 17.2. Overcoming Political Risk in Cross-
Spin-offs structure** Border Transactions: China’s CNOOC
15.4. Anatomy of a Split-Off 593 Invests in Chesapeake Energy 688
Split-off structure* Political risk in cross-border M&A risk*
15.5. Kraft Foods Undertakes Split-Off 17.3. Wal-Mart’s International Strategy
of Post Cereals in Merger-Related Illustrates the Challenges and the Potential of
Transaction 610 Global Expansion 690
Split-off related merger** International expansion**