Mergers Acquisitions And Other Restructuring Activities 7th Edition Donald M. Depamphilis - Solutions

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In your judgment, what criteria should Wal-Mart employ in selecting other foreign markets to enter? Be specific.
Given the challenges of international market entry and the probable substantial delay in experiencing a return on investment, do you believe that Wal-Mart should slow its pace of international expansion or even avoid it altogether? Explain your answer.
In what ways does the Massmart acquisition reflect lessons learned by Wal-Mart from its previous international market entries? Be specific.
Wal-Mart’s missteps in Germany may represent an example of the limitations of introducing what works in one market into another.To what extent do you believe that Wal-Mart’s failure represented a strategic error? To what extent did the firm’s lack of success represent an implementation error?
Despite having similar profit margins, Hsu Fu Chi traded at a ratio of 22 times trailing earnings, compared with 28 for comparable firms. Why do you believe Hsu Fu Chi’s share price on the Singapore stock market sold at a 21% discount from the share price of other firms?
Do you believe that multiples of revenue paid by other food companies is a good means of determining the true value of Hsu Fu Chi? Why? Why not?
Nestlé is assuming that it will be able to grow its share of the Chinese confectionary market by a combination of expanding its existing Chinese operations(so-called organic growth) and acquiring regional candy and food manufacturers. What obstacles do you believe Nestlé could encounter in its
Why do you believe the independent and noninstitutional shareholders in Hsu Fu Chi, whose shares were listed on the Singapore stock exchange, were willing to sell to Nestlé? What were their other options?
Speculate as to why Nestlé used cash rather than its stock to acquire its ownership interest in Hsu Fu Chi.
What alternatives did the majority shareholders in Hsu Fu Chi have for growing the firm? Speculate as to why they may have chosen to sell a controlling interest to Nestlé?
What were Nestlé’s motives for acquiring Hsu Fu Chi? What were the firm’s alternatives to acquisition, and why do you believe they may not have been pursued?
Assume that the Eurozone risk-free interest rate on bonds with one year to maturity is 4.78% and that the U.S. risk-free interest rate on one-year bonds is 3.155%. The current exchange rate is $.90 per euro. Assume that the United States is the domestic country.a. Calculate the one-year forward
a. List reasons that an international extension of the CAPM is problematic.b. In an international extension of the CAPM, why would the optimal portfolio differ from the world market portfolio, as suggested by the traditional CAPM, even if the markets are fully efficient?Source: CFA Institute 2011
Comment on the following statement: “The conditions for foreign buyers interested in U.S. targets could not be more auspicious. The dollar is weak, M&A financing is harder to come by for financial sponsors (private equity firms), and many strategic buyers in the United States are hardpressed to
During the 1980s and 1990s, changes in the S&P 500 (a broadly diversified index of U.S. stocks) were about 50% correlated with the MSCI EAFE Index (a broadly diversified index of European and other major industrialized countries’ stock markets). In recent years, the correlation has increased to
Give examples of economic and political risk that you could reasonably expect to encounter in acquiring a firm in an emerging economy. Be specific.
What factors contribute to the increasing integration of the global capital markets?
Do you see the growth in sovereign wealth funds as important sources of capital to the M&A market or as a threat to the sovereignty of the countries in which they invest?
Discuss the various types of adjustments for risk that might be made to the global CAPM before valuing a target firm in an emerging country. Be specific.
Find an example of a recent cross-border transaction in the business section of a newspaper. Discuss the challenges an analyst might face in valuing the target firm.
Discuss adjustments commonly made in estimating the cost of debt in emerging countries.
What factors influence the selection of which tax rate to use (i.e., the target’s or the acquirer’s) in calculating the weighted-average cost of capital in cross-border transactions?
Discuss the circumstances under which a non-U.S. buyer may choose as its acquisition vehicle a U.S. corporate structure; a limited liability company; a partnership.
Why do the bankruptcy courts allow investors such as hedge funds to buy deeply discounted debt from creditors and later exchange such debt at face value for equity in the newly restructured firm?
Comment on the fairness of this transaction to the various stakeholders involved. How would you apportion the responsibility for the eventual bankruptcy of Tribune among Sam Zell and his advisors, the Tribune board, and the largely unforeseen collapse of the credit markets in late 2008? Be specific.
Describe the firm’s strategy to finance the transaction.
Comment on the fairness of the bankruptcy process to shareholders, lenders, employees, communities, government, etc. Be specific.
To what extent do you believe the factors contributing to Tribune’s bankruptcy were beyond the control of current management?To what extent do you believe past mismanagement may have contributed to the bankruptcy?
Speculate as to why Blockbuster filed a motion with the Court to initiate a Section 363 auction rather than to continue to negotiate a reorganization plan with its creditors to exit Chapter 11.
Do you believe that a strategic bidder like Dish Network has an inherent advantage over a financial bidder in a 363 auction? Explain your answer.
Financial buyers such as hedge funds clearly are motivated by the potential profit they can make by buying distressed debt. Their actions may have both a positive and a negative impact on parties to the bankruptcy process. Identify how parties to a bankruptcy may be helped or hurt by the actions of
The Blockbuster case study illustrates the options available to the creditors and owners of a failing firm. How do you believe creditors and owners might choose among the range of available options? Explain your answer.
What types of businesses are most appropriate for Chapter 11 reorganization, Chapter 7 liquidation, or a Section 363 sale?
What are the primary objectives of the bankruptcy process?
In general, a creditor would consider a decrease in which of the following ratios to be positive news?a. Interest coverage ratiob. Debt-total assetsc. Return on assets
An analyst has calculated a ratio using as the numerator the sum of operating cash flow, interest, and taxes, and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate?a. This ratio is an interest coverage ratio, measuring a company’s
An investor worried that a company may go bankrupt would most likely examine its:a. Current ratiob. Return on equityc. Debt-to-equity ratio
Comment on the statement that bankruptcy provides the best means of asset preservation. Why would W.L. Ross and Company lend money to a firm that had just filed for bankruptcy?
American Home Mortgage Investments filed for Chapter 11 bankruptcy in late 2008. The company indicated that it chose this course of action because it represented the best means of preserving the firm’s assets.W.L. Ross and Company agreed to provide the firm $50 million in debtor-in-possession
In recent years, hedge funds engaged in so-called loan-to-own pre-bankruptcy investments, in which they acquired debt from distressed firms at a fraction of face value. Subsequently, they moved the company into Chapter 11, intent on converting the acquired debt to equity in a firm with sharply
What are the primary factors contributing to business failure? Be specific.
Dura Automotive emerged from Chapter 11 protection in mid-2008. The firm obtained exit financing consisting of a $110 million revolving-credit facility, a $50 million European first-lien term loan, and an $84 million U.S. second-lien loan. The reorganization plan specified how a portion of the
On June 25, 2008, JHT Holdings, Inc., a Kenosha, Wisconsin–based package delivery service, filed for bankruptcy. The firm had annual revenues of$500 million. What would the firm have to demonstrate for its petition to be accepted by the bankruptcy court?
Identify at least two financial or non-financial variables that have been shown to affect firm defaults and bankruptcies. Explain how each might affect the likelihood the firm will default or seek Chapter 11 protection.
Describe the probable trend in financial returns to shareholders of firms that emerge from bankruptcy. To what do you attribute these trends?Explain your answer.
What are the primary options available to a failing firm? What criteria might the firm use to select a particular option? Be specific.
Although most companies that file for bankruptcy do so because of their deteriorating financial position, companies increasingly are seeking bankruptcy protection to avoid litigation. Give examples of how bankruptcy can be used to avoid litigation.
Why would creditors make concessions to a debtor firm? Give examples of common types of concessions. Describe how these concessions affect the debtor firm.
Describe how you, as an analyst, would estimate the potential impact of the Huntington Ingalls Industries spin-off on the long-term value of Northrop Grumman’s share price.
Why would the U.S. Internal Revenue Service be concerned about a change of control of the spun-off business?
Why do businesses that have been spun-off from their parent often immediately put antitakeover defenses in place?
What is the likely impact of the spin-off on Northrop Grumman’s share price immediately following the spin-off of Huntington Ingalls, assuming no other factors offset it?
Speculate as to why Northrop Grumman used a spin-off rather than a divestiture, a splitoff, or a split up to separate Huntington Ingalls from the rest of its operations. What were the advantages of the spin-off over the other restructuring strategies?
Why did the addition of the shareholder-rights plan by Diamond Foods following the merger with Pringles make sense given the type of deal structure used?
How is value created for the P&G and Diamond shareholders in this type of transaction?
Why was this transaction subject to the Morris Trust tax regulations?
Speculate as to why P&G chose to split-off rather than spin-off Pringles as part of its plan to merge post with Diamond. Be specific.
The merger of Pringles and Diamond Foods could have been achieved as a result of a P&G spinoff of Pringles. Explain the details of how this might happen.
Since 2001, GE, the world’s largest conglomerate, had been underperforming the S&P 500 stock index. In late 2008, the firm announced that it would spin-off its consumer and industrial unit. What do you believe are GE’s motives for their proposed restructuring? Why do you believe they chose a
After months of trying to sell its 81% stake in Blockbuster Inc., Viacom undertook a spin-off in mid-2004. Why would Viacom choose to spin-off rather than divest its Blockbuster unit? Explain your answer.
Hewlett-Packard announced in 1999 the spin-off of its Agilent Technologies unit to focus on its main business of computers and printers.HP retained a controlling interest until mid-2000, when it spun off the rest of its shares in Agilent to HP shareholders as a tax-free transaction.Discuss the
In an effort to increase shareholder value, USX announced its intention to split U.S. Steel and Marathon Oil into two separately traded companies.The breakup gives holders of Marathon Oil stock an opportunity to participate in the ongoing consolidation within the global oil and gas industry.
Explain how executing successfully a large-scale divestiture can be highly complex. This is especially true when the divested unit is integrated with the parent’s functional departments and other units operated by the parent. Consider the challenges of timing, interdependencies, regulatory
How might spin-offs result in a transfer of wealth from bondholders to shareholders?
How might the form of payment affect the abnormal return to sellers and buyers?
What factors influence a parent firm’s decision to undertake a spin-off rather than a divestiture or equity carve-out?
How would you decide when to sell a business?
There is often a natural tension between so-called activist investors, interested in short-term profits, and a firm’s management, interested in pursuing a longer-term vision.When is this tension helpful to shareholders, and when does it destroy shareholder value?
How might a spin-off create shareholder value for Kraft Foods’shareholders?
Speculate as to why Kraft chose not divest its grocery business and use the proceeds either to reinvest in its faster-growing snack business, to buy back its stock, or a combination of the two.
Speculate as to why the partners chose to operate NBCUniversal through a holding company
Why did GE and Comcast choose to operate NBCUniversal as a limited liability company rather than as a corporation? Be specific.
What are the likely challenges Comcast and GE will have in integrating the various businesses that comprise the joint venture? Be specific.
Speculate as to the potential circumstances in which either Comcast or GE would be likely to exercise their call or put options.Which party do you believe is likely to exercise their options first, and why?
Why was the NBCUniversal joint venture used to borrow the $9.1 billion paid to GE? How might this impact the ongoing operation of NBCUniversal? What are the tradeoffs the partners are making in agreeing to fund a portion of the purchase price through NBCUniversal?
Speculate as to why GE may have found it difficult to manage NBCUniversal.
Who do you believe benefitted most from the partnership, Microsoft or Nokia, and why?
What alternatives to a partnership did Nokia and Microsoft have?Why was a partnership selected as the means of implementing Microsoft’s strategy to expand into the smartphone market?
Conduct an internal analysis of Nokia and Microsoft (see Chapter 4).
Conduct an external analysis of the smartphone marketplace (see Chapter 4).
Through its alliance with Best Buy, Microsoft is selling its products—including Microsoft Network (MSN) Internet access services and handheld devices, such as digital telephones, handheld organizers, and WebTV, that connect to the web—through kiosks in Best Buy’s 354 stores nationwide. In
General Motors, the world’s largest auto manufacturer, agreed to purchase 20% of Japan’s Fuji Heavy Industries, Ltd., the manufacturer of Subaru vehicles, for $1.4 billion. Why do you believe that General Motors initially may have wanted to limit its investment to 20%?
Johnson & Johnson sued Amgen over their 14-year alliance to sell a blood-enhancing treatment called erythropoietin. The partners ended up squabbling over sales rights and a spin-off drug and could not agree on future products for the JV. Amgen won the right in arbitration to sell a chemically
ConocoPhillips (Conoco) announced the purchase of 7.6% of Lukoil’s (a largely government-owned Russian oil and gas company) stock for $2.36 billion during a government auction of Lukoil’s stock. Conoco would have one seat on Lukoil’s board. As a minority investor, how could Conoco protect its
Google invested $1 billion for a 5% stake in America Online as part of a partnership that expands the firm’s existing search engine deal to include collaboration on advertising, instant messaging, and video. Under the deal, Google would have the customary rights afforded a minority investor. What
What are the common reasons for the termination of a business alliance?
What are the advantages and disadvantages of the various organizational structures that could be used to manage a business alliance?
Discuss ways of valuing tangible and intangible contributions to a JV.
Why is defining the scope of a business alliance important?
What is a limited liability company? What are its advantages and disadvantages?
Assume you are a private equity investor responsible for designing the optimal capital structure for a firm you intend to acquire through a leveraged buyout. What factors would you take into consideration in constructing the optimal capital structure? Be specific.
HCA had a negative shareholders’equity at the end of 2010 of$(11.93) billion, just prior to the IPO, making the firm technically insolvent. Nonetheless, the investor response to the IPO was highly enthusiastic. Why do you believe this was the case?
Critics of LBOs often argue that such transactions contribute little to society and serve only to enrich the financial sponsor. Do you agree or disagree with this statement?Support your conclusion.
Based on what you know about HCA and the outlook for the U.S. healthcare industry, in what sense do you believe HCA was an attractive LBO candidate and in what sense was it not? Be specific.
The private equity investors in HCA decided in 2010 to declare dividends totaling $4.3 billion financed with HCA borrowings.Presumably, if the additional borrowing had not taken place, the firms’ leverage would have been lower prior to the IPO in March 2011 and the potential IPO share price could
Is this transaction likely to be taxable or nontaxable to pre-buyout Immucor shareholders? Is Immucor post-buyout likely to be paying much in the way of taxes during the several years following closing?Explain your answer
What type of a merger is described in Figure 14.1? In this type of merger, which is the surviving entity, Immucor or IVD Acquisitions Corporation? Why is it structured this way?
What is the purpose of the bridge and revolving loan facilities?
Accelerating revenue growth is the primary driver of cash available for debt repayment. Explain why cash available for debt repayment may be overstated in the projected cash flow statement.
Do you believe that TPG may have overpaid for Immucor? Explain your answer.

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Mergers Acquisitions And Other Restructuring Activities 7th Edition Donald M. Depamphilis - Solutions

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