Top Highlights

• States, as promanagement courts give targets the power to deflect a buyer’s intentions. Governance mechanisms such as poison pills, staggered board terms, and supermajority voting plans protect the target. As a substitute, activists use the proxy fight.
• Local Finance Practices Inhibit Emerging Market M&A M&A debt financing in the United States and Western Europe relies on the cash flow loan. The buyer typically acquires the seller at two times (or more) its historical accounting value, so the borrower sometimes lacks sufficient hard collateral to cover the debt obligation.
• In contrast, emerging market banks are uncomfortable with cash flow loans. They want 150 percent collateral coverage as a requirement, which often upends a transaction
• The need for growth sparks companies’ desire to acquire other businesses. Growth tends to promote a higher stock price, which helps a firm to retain good employees and to sustain operations. In this chapter, we look at the 10 principal motivations.
• A working number for cost synergies in a like-for-like deal is 2 percent of the target’s revenue, although this rule of thumb varies by industry.