searching for acquisitions

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1、2SearchingforAcquisitionsVISHWANATHS.R.ANDK.SANKARANCHAPTEROBJECTIVESProvidesaframeworkforsearchingforacquisitioncandidatesHighlightsthetypesofanalysesinvolvedinacquisitionsHighlightsthestagesinvolvedinacquisitionsDiscussesstrategydevelopmentatthetargetcompanyProvi

2、desaframeworkforenteringforeignmarketsthroughacquisitionsAcademicstudiesindicatethatsuccessincreatingvaluethroughacquisitionsinacompetitivemarketisextremelydifficult.JensenandRuback(1983)highlightthispointbysummarizingtheresultsfrommergersandacquisitionsoveraperiodo

3、f11years.Theyfoundthatincaseofamerger,theaveragereturn,aroundthedateofannouncement,toshareholdersoftheacquiredcompanywas20percent,whereastheaveragereturntotheacquiringcompanywas0percent.AnotherstudybyMcKinseyindicatesthat61percentofthe116acquisitionsstudiedwerefail

4、ures,while23percentweresuccesses.YetanotherstudysuggeststhatmorethanhalfthedealsamountingtoUS$1.5trillionfallshortofvaluecreationtargets.Despitesuchstatistics,whydocompaniesacquire?Whatshouldmanagersdotoensuresuccessinacquisitions?Toanswerthisquestion,itisimportant

5、tounderstandwhyfirmsacquireinthefirstplaceandwhothesellersare.Takeoverscanbebroadlyclassifiedasbothfriendly24VISHWANATHS.R.ANDK.SANKARANandhostile.Thepurposeofhostiletakeoversistodisciplinetheunder-performingmanagementoftargetcompanies.Hostiletakeoversaddressthetenden

6、cyofmanagerstowastefreecashflow.Friendlytakeovers,ontheotherhand,areaimedatrealizingsynergyinoperations,marketingandR&D.Synergistictakeoversmayalsoleadtoadecreaseinthecostofcapitalbecausethecombinedentitymaybeabletoborrowatlowerratesthanstand-aloneentities,orthecomb

7、inationmayincreasethedebtcapacityorreducesystematicrisk.1Hostiletakeovertargetsareoftenpoorperformers,comparedtotheacquiringcompanyorothercompaniesintheindustrygroup.Theyarealsolesslikelytoberunbythecompanysfounderorthefoundersfamily.Givenbelowisalistofcharacterist

8、icsoffriendlyandhostiletakeovertargets.2FriendlyHostiletakeoversBoardownershipHighSmallRunbyfounderorMorelikelyLesslikelyfoundersfamilyGrowth/per