Chapter 14. Mergers and Acquisitions (M&A) IntroductionINTRODUCTION Many companies undergo corporate restructuring throughout their life spans. Such restructuring may take place as part of an exit, as in the case of an acquisition or merger of the company; the creation of the company, as in the case of a spin-off; the raising of capital for divisions of the company (equity carve-out); or the sale (divestiture) of such divisions. Mergers and acquisitions, as well as corporate restructuring, are driven by several incentives. From the acquisition side, the first is management's desire to improve the company's profitability and future cash flows, either by streamlining the company's existing activities by acquiring the technologies and skilled labor of the target, by expanding the company's activities, or penetrating new markets. The second incentive is management's desire to increase the market's awareness of the company's activities and value, i.e., enhancing its "value-revealing" activities: From the selling company side, the main incentive is of course the desire of the target's investors and entrepreneurs to exit their investment, or to increase the likelihood of such an exit (see the section later in this chapter on mergers and acquisitions for a detailed discussion of the reasons for mergers). |