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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.
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.