CHAPTER THIRTY-THREE M E R G E R S The scale and pace of merger activity in the United States have been remarkable. In 2000, the peak of the merger boom, . companies were involved in deals totaling more than $ trillion. Table lists just a few of the more important recent mergers, including several that involved overseas companies. | Brealey-Meyers Principles of Corporate Finance Seventh Edition X. Mergers Corporate Control and Governance 33. Mergers The McGraw-Hill Companies 2003 Brealey-Meyers Principles of Corporate Finance Seventh Edition X. Mergers Corporate Control and Governance 33. Mergers The McGraw-Hill Companies 2003 THE SCALE AND pace of merger activity in the United States have been remarkable. In 2000 the peak of the merger boom . companies were involved in deals totaling more than trillion. Table lists just a few of the more important recent mergers including several that involved overseas companies. During these periods of intense merger activity management spends significant amounts of time either searching for firms to acquire or worrying about whether some other firm will acquire their company. A merger adds value only if the two companies are worth more together than apart. This chapter covers why two companies could be worth more together and how to get the merger deal done if they are. We proceed as follows. Motives. Sources of value added. Dubious motives. Don t be tempted. Benefits and costs. It s important to estimate them consistently. Mechanics. Legal tax and accounting issues. Takeover battles and tactics. We look back to several famous takeover battles. This history illustrates merger tactics and shows some of the economic forces driving merger activity. Mergers and the economy. How can we explain merger waves Who gains and who loses as a result of mergers This chapter concentrates on ordinary mergers that is combinations of two established firms. We keep asking What makes two firms worth more together than apart We assume mergers are undertaken to cut costs add revenues or create growth opportunities. But mergers also change control and ownership. Pick a merger and you ll almost always find that one firm is the protagonist and the other is the target. The top management of the target firm usually departs after the merger. Financial economists now view .
