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Special purpose acquisition companies (SPACs) are created by a group of specialists to pool funds for financing future acquisitions within a specified time limit. SPACs…
Special purpose acquisition companies (SPACs) are created by a group of specialists to pool funds for financing future acquisitions within a specified time limit. SPACs are basically “shell” companies with no operations and business, assets or liabilities but they acquire the status of public corporations through initial public offerings (IPOs). The SPAC founders use the IPO funds to acquire a potential target. They are generally found to be successful to close an mergers & acquisitions (M&A) deal but they may not bother to ensure perpetual success of the acquired entity for a long time. In many countries, “shell” companies are characterized as the “bad boys” of the corporate world but they can be used for long-lasting successful M&As due to their inherent strengths, if they play the role of protagonists and “good guys” as SPACs. This chapter examines how SPACs can be used as special vehicles to ensure worthy and successful acquisitions to create sustainable corporations.
The purpose of this study is to show that corporations may resort to legal compliance instead of acting voluntarily towards abatement of environmental damages as a…
The purpose of this study is to show that corporations may resort to legal compliance instead of acting voluntarily towards abatement of environmental damages as a strategy for improving their reputation.
Based on the natural philosophy and postulate of business, theoretical models have been developed to justify the purpose of this paper. Financial impacts of Indian revenue law on environmental damage prevention by the polluting firms have been gauged mathematically.
Corporate environmental responsibilities have seemed to be more reputation-led than innovation-led or efficiency-led. Reputation-led environmental responsibilities can have ways to bypass innovations and some firms can simply comply with regulations at the society’s cost (may be to a sizeable extent). If penalty is imposed on companies in the form of taxation for damaging the environment, then companies get chances to pass the financial burden to the shareholders in the form of lower dividend pay-outs. Unless the capital market supports corporate green initiatives, there may be destruction of shareholder wealth.
Extensive empirical analysis have not been conducted as the paper concentrates on developing theoretical understanding of the models of “green cost”.
The exploration and outcomes of this paper can offer several directions to the government, business and social activists in articulating green economic policy for the benefits of all.
The civil society will understand better what the corporate environmental responsibility really means for them.
This paper has made a modest endeavour to develop theoretical models of both “green cost internalisation” and “green cost externalisation”. It has paved the path for further deliberations and research.
A corporate takeover (with major stake in equity) gives the acquirer the right to appoint majority of directors in the target’s board to control its management and policy…
A corporate takeover (with major stake in equity) gives the acquirer the right to appoint majority of directors in the target’s board to control its management and policy decisions. When such acquisition is unsolicited and unwelcome, it becomes a “hostile takeover.” In such cases, the acquirer is said to be a “raider” and the raider’s management team may act under the influence of “hubris” implying that they seek to acquire the target for their own personal motives ignoring pure economic gains for the owners of both the companies. The hostile bidder makes all possible efforts to justify the takeover by paying handsome premium over the target’s fairly valued share price. In a hostile takeover, the target management or target promoters resist and fight tooth and nail against the raider to convey to the world that the bidder’s acts are not in the best interest of all their stakeholders. Any unsolicited and hostile takeover offer is generally viewed as oppression, domination or coercion by the bidding company against the target and its management. In a hostile bid, the existing target management always believes that whatever they do is in best interest of everyone. They feel complacent and assume that their standards of corporate governance are of highest order. Therefore, they are unwilling to succumb to the aggression and hostility of another corporate entity for takeover. The “so-called” victimized target resorts to all means to gain sympathy from peers, press, common shareholders, employees and general public. In today’s regulated market for corporate control, an intelligent hostile bidder would probably not acquire a business unless it has good strategic or financial reasons to do so. Hence, “stewardship” on the part of bidder’s management is very important in case of any hostile takeover. This chapter derives motivation from a three-and-half-decade-old abortive hostile takeover bid in India by Caparo Group of the UK and also the recently completed hostile takeover in India of a famous mid-sized information technology company, Mindtree by Larsen & Toubro, a major conglomerate. This research aims at developing a distinctive model to demonstrate that unsolicited hostile takeover may not be a good mechanism for a successful business combination.
Management buyout (MBO) is a specialized form of acquisition with different motives. Sometimes, there are initiatives taken by the senior management to bailout the firm…
Management buyout (MBO) is a specialized form of acquisition with different motives. Sometimes, there are initiatives taken by the senior management to bailout the firm from sickness. The predominant agency theory focuses only on the governance issues in the MBO firms and this theory can be applied to understand how managerial discretion can play vital roles in mitigating value destruction in the post-MBO firm. A CEO-led MBO is presumed to be greed-driven (Bebchuk, L., Cremers, M., & Peyer, U. (2011). The CEO pay slice. Journal of Financial Economics, 102, 199–221.). But a senior management team-led MBO is said to be a socialistic move. By default, MBOs are debt-driven, unless the buying management team is financially affluent, which may be rare, considering the price for the buyout. Private equity (PE) players play a dominant role in providing and or arranging funds in the form of equity and or debt. There is a notion that the PE investors help promote entrepreneurial and modern management practices. The MBO target firm has to ensure returning the entire money back to the sponsors within the shortest possible time out of the operational cash flow. Therefore, various issues like identifying a target firm, sourcing mix of finance, MBO price determination, value creation and value delivery to all stakeholders are all important for understanding the subject. This chapter attempts to construct a robust model for structuring MBO to ensure value fairness to all parties involved in the transaction.
Cross-border mergers and acquisitions are now the fundamental mechanisms of globalization and considered as prime vehicles for business engagement across the countries…
Cross-border mergers and acquisitions are now the fundamental mechanisms of globalization and considered as prime vehicles for business engagement across the countries through the foreign direct investment route. Significant amounts of foreign funds are crossing the country borders for acquisitions with the objectives of earning super normal returns. But realizing super normal returns from foreign acquisitions are far more difficult than that of foreign greenfield projects or domestic M&As or greenfield projects. The super normal profit itself is “synergy” which is the main driving force for any M&A including the cross-border one. Even though foreign policies of individual countries affect cross-border M&A decisions, corporate and market-driven financial numbers significantly influence the synergy estimation. Synergy should bring in all round greater efficiency and value addition to all stakeholders. But if the cross-border deal is not financially crafted properly, it may fall flat causing more distress to the acquirer compared to domestic acquisition. The theory of synergy is well developed which mostly applies to the domestic M&As. But due to inherent differences between cross-border and domestic M&As, the same synergy theory may not apply equally to the cross-border ones. Therefore, a different connotation of synergy is propounded in this work for cross-border M&As, which can be a corollary to the conventional theory of synergy. This alternative theory of synergy aims at helping the companies in developing their own financial strategies before making their strategic decisions for cross-border M&A deals.
The purpose of this paper is to show that there did exist a typical “managing agency system” in pre‐independent corporate India, which itself was a significant and…
The purpose of this paper is to show that there did exist a typical “managing agency system” in pre‐independent corporate India, which itself was a significant and powerful system of corporate governance.
This is a qualitative exploration and analysis of the nineteenth century model of corporate governance and its impact on industrialisation in pre‐independent India.
Initially, the system of managing agency was instrumental in improving the performances of companies through economies of scale and scope and other best practices. Gradually, over the century it became corrupt and opposed to the interests of majority of the stakeholders. However, the superstructure of the system, even though not backed by any legal framework, has been found to be solid and not inferior to the present day corporate governance system and practices.
Because of the absence of corporate data warehousing, and lack of presence of corporate and business literature in the nineteenth century, the research could not be made empirical. Much of comparisons could not be made between the now and then corporate practices, management style and financial performances.
The findings and analysis of this paper provide a direction to the policy makers, governments and researchers in formulating an alternative model of corporate governance for sustainable development of the society.
The paper is one of the few attempts made so far on the subject and rediscovers “managing agency system” in the light of the corporate governance practices of modern times. It has paved the path for further meaningful and value adding deliberations and researches.