The Art of Capital Restructuring

H. Kent Baker, PhD, CFA, CMA, is University Professor of Finance and Kogod Research Professor at the Kogod School of Business at American University, Washington, D.C. He has published extensively in leading academic and professional finance journals including the Journal of Finance, Journal of Financial and Quantitative Analysis, Financial Management, Financial Analysts Journal, and Journal of Portfolio Management. He has also published more than a dozen books including several corporate finance textbooks. Recognized as one of the most prolific authors in finance during the past 50 years, Professor Baker has consulting and training experience with more than 100 organizations. Halil Kiymaz is Bank of America Chair and Professor of Finance at the Crummer Graduate School of Business at Rollins College. He holds the Chartered Financial Analyst (CFA) designation and has served as a grader for the CFA Institute. Professor Kiymaz maintains an extensive research agenda focusing on everything from international M&As to the financial management of multinationals, and has published more than 50 articles in scholarly and practitioner journals. He is the recipient of several research awards, including the McGraw-Hill Irwin Best Paper Award and Outstanding Research Award at the Global Conference on Business and Finance.

Acknowledgments ix

1 Mergers, Acquisitions, and Corporate Restructuring: An Overview 1
H. Kent Baker and Halil Kiymaz

Part I Background

2 Merger Waves 17
Jarrad Harford

3 Takeover Regulation 39
Marina Martynova and Luc Renneboog

4 Corporate Governance and M&As 57
Fei Xie

5 Ethical and Social Issues in M&As 71
Robert W. McGee

6 Theoretical Issues on Mergers, Acquisitions, and Divestitures 87
Abdul H. Rahman

7 The Short-Term and Long-Term Performance of M&As 105
Shantanu Dutta and Samir Saadi

Part II Valuation

8 Standard Valuation Methods for M&As 127
Pablo Fernandez

9 Real Options and Their Impact on M&As 151
Hemantha Herath and John S. Jahera Jr.

10 The Law and Finance of Control Premiums and Minority Discounts 169
Helen Bowers

11 Cross-Border Valuation Effects in Developed and Emerging Markets 185
Wenjie Chen

Part III the M&A Deal Process

12 Sources of Financing and Means of Payment in M&As 205
Marina Martynova and Luc Renneboog

13 Cultural Due Diligence 223
Ronald F. Piccolo and Mary Bardes

14 Negotiation Process, Bargaining Area, and Contingent Payments 243
William A. Grimm

15 Merger Negotiations: Takeover Process, Selling Procedure, and Deal Initiation 261
Nihat Aktas and Eric de Bodt

16 Postacquisition Planning and Integration 281
Olimpia Meglio and Arturo Capasso

17 Organizational and Human Resource Issues in M&As 297
Siddhartha S. Brahma

Part IV Takeovers and Behavioral Effects

18 Takeover Strategies 323
Shailendra (Shail) Pandit

19 Defensive Strategies in Takeovers 339
Christian Rauch and Mark Wahrenburg

20 The Impact of Restructuring on Bondholders 359
Luc Renneboog and Peter G. Szilagyi

21 Behavioral Effects in M&As 385
Jens Hagendorff

Part V Recapitalization and Restructuring

22 Financial Restructuring 401
Otgontsetseg Erhemjamts and Kartik Raman

23 Going Private and Leveraged Buyouts 419
Onur Bayar

24 International Takeovers and Restructuring 437
Rita Biswas

Part VI Special Topics

25 Joint Ventures and Strategic Alliances: Alternatives to M&As 461
Tomas Mantecon and James A. Conover

26 Fairness Opinions in M&As 483
Steven M. Davidoff, Anil K. Makhija, and Rajesh P. Narayanan

27 How Initial Public Offerings Affect M&A Markets: The Dual Tracking Phenomenon 495
Roberto Ragozzino and Jeffrey J. Reuer

28 The Diversification Discount 511
Seoungpil Ahn

29 Partial Acquisitions: Motivation and Consequences on Firm Performance 527
Pengcheng Zhu and Shantanu Dutta

Answers to End-of-Chapter Discussion Questions 545

Index 581