Mergers & Acquisitions Theory, Strategy, Finance

This book deals with corporate mergers and acquisitions by analyzing the financial and strategic aspects. It starts with a chronological justification of the evolution of external growth operations and ends with case studies in order to put into practice the theoretical contribution of the previous titles. Through this book, we wish to detail the types of mergers and acquisitions, their modes, their motivations, their consequences and their performances. First of all, we propose a panoply of scientific research, methodological explanations and logical structuring to expose a subject of experience considered for a long time as a phenomenon in finance. Then, through a sample of 90 mergers or acquisitions, we analyze the effects of these transactions on French companies.

Introduction ix

Part 1. Taxonomy of Mergers and Acquisitions and the Evolution of Managerial Thought 1

Chapter 1. Strategic Evolution of Mergers and Acquisitions 3

1.1. Typology of mergers and acquisitions 4

1.1.1. Horizontal mergers and acquisitions 4

1.1.2. Vertical mergers and acquisitions 9

1.1.3. Conglomerate mergers and acquisitions 10

1.2. Theory, diversification and divergence 12

1.2.1. Contributions pre-1980 12

1.2.2. Contributions during the 1980s 16

1.2.3. Management approaches and divergences 18

Chapter 2. Growth Methods and Responses 23

2.1. Merger and takeover types 23

2.1.1. Types of company mergers and acquisitions 24

2.1.2. Takeover and acquisition types 26

2.1.3. Modes of expansion and responses 29

2.2. Tender offers as a market for corporate control 32

2.2.1. Characteristics of the control market 32

2.2.2. The role of the control market 34

2.2.3. Consequences of the control market 36

Part 2. Mergers and Acquisitions Strategies:Cause and Effect 41

Chapter 3. Asset Transfers: Causes and Consequences 43

3.1. Merger/acquisition waves 44

3.1.1. Global market and merger/acquisition waves 44

3.1.2. Merger/acquisition waves in the US market 48

3.1.3. Merger/acquisition waves in the French market 51

3.2. Diversification, restructuring, divestment and respecialization 57

3.2.1. Divestment as a development strategy 57

3.2.2. Corporate restructuring 60

3.2.3. Consequences of restructuring 64

Chapter 4 Mergers/Acquisitions: Motivation and Performance 69

4.1. Motivating factors in mergers/acquisitions 69

4.1.1. The pursuit of synergy 70

4.1.2. The possibility of non-economic motivations 73

4.1.3. Causes and consequences of motivations 77

4.2. Merger/acquisition performance 81

4.2.1. The many faces of success 81

4.2.2. Performance of mergers/acquisitions 86

4.2.3. Mergers/acquisitions: causes of failure 89

Part 3. Value Creation and Measurement Methods 93

Chapter 5. Synergy in Mergers and Acquisitions 95

5.1. Synergy creation or simple wealth transfer 95

5.1.1. Financial synergy 96

5.1.2. Strategic synergies 96

5.1.3. Wealth transfer theory 97

5.2. Sources of value creation in mergers/acquisitions 98

5.2.1. Sources of strategic value creation 99

5.2.2. Operational and managerial efficiency 101

5.2.3. Sources of financial value creation 108

Chapter 6. Measurement Methods for Value Creation 113

6.1. Stock-market methods: the event method 113

6.1.1. Market efficiency and samples 114

6.1.2. Estimation and calculation of returns 115

6.1.3. Results tests 118

6.2. Statistical and accounting methods 121

6.2.1. Studies pre-1990 121

6.2.2. Studies between 1990–2000 122

6.2.3. Studies post-2000 123

6.2.4. Methods in case studies 124

Part 4. The French Market: Analyses and Case Studies 127

Chapter 7. Observations and Lessons from the French Merger/Acquisition Market 129

7.1. Sources of value creation in the French market 130

7.1.1. Variables and calculation methods 130

7.1.2. Data analysis. 135

7.1.3. Observations and findings 141

7.2. Group growth strategy: the case of Sanofi 144

7.2.1. The pharmaceutical sector and external growth 144

7.2.2. The Sanofi takeover bid: an offensive strategy 149

7.2.3. Integration and reorganization policy 153

7.2.4. Findings and observations 154

Chapter 8. Value Creation in the Sanofi-Aventis Merger 157

8.1. Did the takeover create stock market value? 158

8.1.1. Methodology and data 158

8.1.2. Results and observations 162

8.1.3. The takeover bid period 167

8.2. Accounting and financial value: in-depth study 171

8.2.1. Methodology and data 171

8.2.2. Results and remarks 175

8.2.3. Discussion and observations 184

Conclusion 187

Appendix 189

Bibliography 203

Index 241

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