10 Top Takeover Candidates for 2011

7/31/2019 10 Top Takeover Candidates for 2011

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10 Top Takeover Candidates for 2011 (1 Down, 9 to Go)ByConrad de Aenlle

Kudos to Footnoted, a Morningstar subsidiary that specializes in forecastingmergers and acquisitions. Footnoted, which does its thing in part by ferreting outclues ensconced in regulatory filings, recently identified Smurfit-StoneContainer as one of its top 10 merger candidates for 2011. Stock of Smurfit-Stone(SSCC), which makes cardboard and other packaging material, leaped 27percent after its deal to be taken over by RockTenn(RKT) was announced.The companies are mostly small, with market values ranging from a few hundredmillion dollars to $6 billion, and they are scattered across a wide variety ofindustries. Here they are:

Abiomed(ABMD). Morningstar's analysts call this medical device maker "an

attractive acquisition target for one of the industry's big fish, including AbbottLaboratories(ABT), Johnson & Johnson(JNJ)or Medtronic(MDT), givingthem an opportunity to pick up a nice range of innovative cardiology and heart-surgery products."

Copano Energy(CPNO). Footnoted points out that executives at Copano, whichhas a variety of oil and gas activities, have been working on an exit strategy bybeefing up their severance pay should they leave. In another possible harbinger ofa merger, the report says that Copano filed a note with regulators saying that it mayhave trouble covering dividend payments.

Infinera(INFN). Sounds like a mid-priced, midsized car, but Infinera producesoptical networking technology. This one might be ripe for a takeover, Footnotedsuggests, because its founder just left the company (replacement bosses are thoughtto have less of a sentimental attachment to their companies and therefore may bemore inclined to accept takeover offers) and because some institutional investorshave "increased their stakes dramatically."

Lawson Software(LWSN). This company makes software used in running dairy

farms, of all things. No divining of runes needed to determine that Lawson may bea takeover candidate. The report notes that Carl Icahn, a corporate raider fordecades, has been accumulating shares to the point that he holds nearly 11 percentof the company. Footnoted highlights this passage from a regulatory filing: "TheReporting Persons intend to seek to have conversations with management of theIssuer to discuss the business and operations of the Issuer and the maximization ofshareholder value."
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Leap Wireless(LEAP). The company provides prepaid cell phone service and isrumored to have been in talks with Metro PCSCommunications(PCS). Anotherpossible suitor is Sprint Nextel(S). Either way, "we see suggestions in Leap'sfilings that it remains very much in play," Footnoted says.

LKQ Corp.(LKQX). This maker of after-market auto parts has strong cash flowand a dominant position in its market, which could make it ripe to be plucked by aprivate-equity firm, Footnoted says. A new chief executive and the introduction of"chunky stock option grants" reinforce that belief.

Pride International(PDE). One potential suitor for this oil service firmis Seadrill(SDRL), which operates in many of the same locations and alreadyowns nearly 10 percent of Pride's shares. Derivative contracts taken out by Seadrill

indicate to Footnoted that it is ready to double its stake in Pride, which is thelargest company of the 10, with a market value of $6 billion.

Select Medical Holdings(SEM). Select operates outpatient rehabilitation clinicsand long-term, acute-care hospitals nationwide. In a move reminiscent of the one atCopano, Select's bosses have been tinkering with their contracts to make sure theyare properly compensated if they should be let go - after a takeover, for instance.

Stage Stores(SSI). Stage has a portfolio of retail chains operating at strip mallsacross the country. The report notes that Stage said in a regulatory filing that it hadadded a seat to its board for Gabrielle Greene, a general partner ofRusticCanyon/Fontis Partners. That's a private equity firm specializing in, among otherthings, companies in the western United States (Stage is based in Houston) doingbusiness in consumer goods.
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Merger Acquisition SWOT Analysis for Riordan Manufacturing

Merger Creates Wealth

For Riordan Manufacturing to gain from a merger it has to create synergies.Synergies are anticipated benefits from the merger. Basically shareholders of bothfirms must come to a consensus that merged stocks is more beneficial than holdingto individual share of the merging companies Factors contributing to a pro-mergerargument are: (1) economy of scale; (2) tax benefits; (3) capitalization on unused

debts; (4) complimentary in financial slack; (5) removal of ineffective managers;(6) increased market power; (7) reduction in bankruptcy costs; and (8) buyingbelow replacement costs merger.

Economy of Scale.

"Wealth can be created in a merger through economies of scale." In a typicalmerger number of operational layers become one; thus, redundancies areeliminated. Also, by merging two entities better producing resources are kept andunwanted financial burdens are phased out.

Tax Benefits.

Tax reduction through a merger is in fact creation of wealth. There are two waysthat tax-benefits can create wealth: (1) utilization of operation loss tax-credit(forward and back); and (2) reevaluation of depreciated assets.

Utilization of operation loss tax-credit.

In a merger, it is stipulated that one of the two merging firms has a weakerfinancial status; and the other merging firm has strong finances. Tax credits gainedfrom operation loss by one of the merging firms can compensate for tax liabilitiesincurred by profitability of the other firm.

Reevaluation of depreciated assets.


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In a merger, previously depreciated assets can be revalued and tax benefits arisingfrom increased depreciation of revalued assets create wealth.

Capitalization on Unused Debts.

Companies for various reasons may not take maximum advantage of their debtcapacity. Merger creates climate of development opportunities, and a strongmanagement that emerges from the merger can increase debt financing, and fullyutilize the tax benefits associated with the increased advantage.

Complimentary in Financial Slack.

"When cash-rich bidders and cash-poor targets are combined, wealth may be

created." A cash-poor entity has a more difficult time accessing market capital;therefore, a merger allows positive net present value project to be accepted.

Removal of Ineffective Managers.

Merger opens the door for a wider selection of human capital, especially selectingeffective managers. If one of the merged firms has ineffective management, as aresult of the merger, more effective managers are kept and others are marginalizedor eliminated.

Increased Market Power.

"The merger of two firms can result in an increase in market or monopoly power."Although a merger that monopolizes a market is illegal; nonetheless, such mergercreates wealth and provides wider market access and cross-marketing opportunitiesto both merging firms.

Reduction in Bankruptcy Costs.

Undoubtedly, diversification minimizes enterprise failure. In case where a firm isfailing and is forced to a possible liquidation or bankruptcy be creditors, assets aresold at a depressed value, and what channels down to stockholders are even lessamusing since legal fees and selling costs are levied before disbursement of anyfund to anyone. A merger may be a good solution for the creditors and thestockholders to absorb least amount of collateral damage.Buying Below Replacement Costs Merger.


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"Situations sometimes arise where it is cheaper to acquire an entire company thanto acquire the assets the company owns." Due to reality of market, sometimes it iscost-effective to merge with a rival to acquire its assets than to attain those assetsin any other way.

Determination of a Firm's Value

For a merger to be of value to Riordan Manufacturing, the company must analyzethe value of the potential merger by quantifying the worth of acquired firm(Reference book Chapter 23 page 808). The value of acquired firm depends onnumber of elements such as: (1) book value; (2) appraisal value; (3) "chop-shop"or "break-up" value; (4) "free cash flow" or "going concern" value.Book Value.

"Book value generally used in this context to refer to the book or historical costvalue of the firm's net worth."

Appraisal Value.

Appraisal value is quantifying the worth of a company by an independentappraiser. This value is closely tied to the replacement cost of the assets.

"Chop-Shop" or "Break-Up" Value.

Dean Lebaron and Lawrence Speidell theorized that multiline companies that areundervalued can worth more if separated and sold individually.

"Free Cash Flow" or "Going Concern" Value.

The going concern value is estimated based on "incremental fee cash flows to thebidding firm as a result of the merger or acquisition."


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Situational Analysis

Riordan Manufacturing has two derogatory circumstances: first, replacement of thePontiac plant with a plant in Mexico; and second, excess cash. Thesecircumstances create numerous opportunities and conflicts for the company;however, with proper planning, the company can capitalize and reach a net gain.

Pontiac Plant Closure

Based on the company's executive summary, the Pontiac plant is was shut down;however, to make matter more unfavorable is opening of the Mexican factory,which at the very minimal raises eyebrows over jobs going south. This negativepublicity can have tremendous impact with the Defense Department, one ofRiordan's clientele.

As a recourse to loosing clientele due to closure of Pontiac Plant and shiftingoperations south to the Mexican Factor, Riordan Manufacturing may choose toacquire or merge with a U.S. based company in the same industry that is sufferingdue to lack of access for capital or poor management disciplines and practices.

Excess Cash

Excess cash on hand can be problematic, because, it is display of management'sinability to manage resources properly. Additionally, the company paid $943,274in taxes, which is six and half times the amount of interest paid ($143,175) tosecure over $3.5 million in credit. The company can afford to secure a $23 millionworth of mergers to offset money paid to taxes.

Strengths, Weaknesses, Opportunities, and Threats Analysis

A definitive parallel acquisition by Riordan Manufacturing provides an example ofthe ongoing consolidations in the plastic manufacturing industry. Coming afterclosure of Pontiac plant and launch of the Mexican plant, this acquisition provides

additional evidence of growing dichotomy between aggressive management andsmart investment within Riordan Manufacturing and its parent company.

Strengths

The strengths that Riordan Manufacturing could be gaining from the acquisitionwould be total control of the company, acquiring stock for a minimal price and


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reducing overall debt. There are also other factors to include with regards to theacquisition. Riordan Manufacturing could block their major competitors with thisacquisition and bring in a higher net project through the acquisition. Whether theacquired firm is left independent or dissolved within Riordan's operation, thetakeover can be a win-win situation.

End-to-end solutions.Acquisition of a parallel unit will greatly augment Riordan's plastic manufacturingportfolio and allows it to offer end-to-end manufacturing and warehousingsolutions.

Dominance over market share.

Acquisition can bring in a positive cash flow, untapped lines of credit, and the

customer base of the acquired firm. Acquisition also provides added support toRiordan's operations and enhances Riordan's market share.

Assets control.

Riordan can control more assets for less money through the merger than if it was toacquire those assets any other way.

Weaknesses

The weaknesses in business acquisitions mostly comes from risk's taken within themerged company or through external factors. As lucrative the deal may be, facingproblems are much of reality that Riordan has to encounter. A serious opposition tothe merger can be the management, labor unions, the existing shareholders of thetarget firm, vendors, and competition.

Management and labor unions.

Management and labor unions may oppose the merger because they perceive their

elimination to be inevitable. The management may act to protect their position bytaking the poison pill and making the merger unviable for Riordan. The laborunions with the same notion as the management may feel that their jobs can be cutand may picket the merger, file for an antitrust lawsuit, or walk off and make theplant inoperable. Any of aforementioned situations will create a red-light for anylending company seeking to finance the deal.


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Shareholders.

Shareholders of the target firm can have two perceptions: (1) they are sitting on apile of gold and there is no reason to negotiate for what they have over what theycould have; and (2) even though the company they own is facing financialsetbacks; however, their return can be better through a bankruptcy liquidation orreorganization of the business.

Vendors.Because Riordan operates in China and Mexico vendors and supplier of the targetfirm can see a real threat as they may get replaced by Riordan's own supplier withcheaper raw material. Subsequently, they may force the target firm to liquidateassets to repay outstanding debts; and the financial stress makes the acquisitionunfeasible to finance.

Competition.

Target firm's competition as well as Riordan's competition may feel the treat thatthis acquisition will create larger market domination for the merged companies. Asa result, other competing companies may file antitrust lawsuits or help the targetfirm submerge from financial stress on terms of turning down acquisitionopportunities.

Opportunities

Riordan Manufacturing has an enormous opportunity to acquire another companyand merge. This will provide Riordan Manufacturing with the opportunity toexpand their business practices and manufacturing. By merging, RiordanManufacturing will be able to complete more projects and acquire more clients thatin turn will produce more capital for the company.Leadership emergence.

Riordan will be able to position itself as providing a leading plastic manufacturing

and warehouse solutions that include medical industry, defense industry, consumerindustries, as well as hardware and high-tech industries.

Self-reliance.

Rather than relying on partners or new joint ventures for robust production anddelivery, Riordan will now expands its own and thus be able to determine future


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product directions. Expanded operations translate to more manufacturing hours,bigger warehousing capacities, and more effective logistics system.

Tax-minimization.Riordan can take maximum advantage of tax-breaks and reinvest its tax paymentstoward owning another profitable operations. Riordan pays six and a half times theamount of interest on existing liabilities to taxes; this means that with the taxincentives Riordan will gain it can invest in six other profitable entities. Typicallyin mergers there are two tax advantages, but Riordan has three tax advantages: (1)Riordan can use its tax reduced incentives on new projects; (2) Riordan can takeadvantage of target firms operation less tax-credit; and (3) reevaluation ofdepreciated assets at the target firm.

Threats

Riordan Manufacturing has a very big threat that comes with this acquisition andwith any business merger. There is a potential that the deal could fall through orthat the profits from the company will not be enough to recover. Furthermore,Riordan will need to explain why, after shutting down Pontiac Plant it is acquiringanother firm in the same industry.

Competition hostility.

Riordan's competitors can be expected to create market fear, uncertainty, and doubtabout how merger effects Riordan's product line and if Riordan is going to utilizean inferior product line in favor of profitability. It would not be unexpected forplastic manufacturing competitors to aggressively target the new mergedorganization in many ways, direct or indirect.

Government action.Government may see this merger as unhealthy for the target firm's consumermarket, thus blocking the merger and costing Riordan time and money.

Internal factors.The most difficult factor for the merger comes from within the Riordan family ofcompanies. First, Riordan Manufacturing's own board and management mayoppose the merger. Second, the parent company may oppose the merger. Third,employees who are uncertain of their own status with Riordan may sabotage thedeal be leaking out information, bringing on rival bidder to the table for the targetfirm, or even worst, create an atmosphere of mistrust among workers.


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Case study: Krafts takeover of Cadbury

The storyIn 2009, US food company Kraft Foods launched a hostile bid for Cadbury, theUK-listed chocolate maker. As became clear almost exactly two years later inAugust 2011, Cadbury was the final acquisition necessary to allow Kraft to berestructured and indeed split into two companies by the end of 2012: a grocerybusiness worth approximately $16bn; and a $32bn global snacks business. Kraftneeded Cadbury to provide scale for the snacks business, especially in emerging

markets such as India. The challenge for Kraft was how to buy Cadbury when itwas not for sale.

The historyKraft itself was the product of acquisitions that started in 1916 with the purchase ofa Canadian cheese company. By the time of the offer for Cadbury, it was theworlds second-largest food conglomerate, with seven brands that each generatedannual revenues of more than $1bn.Cadbury, founded by John Cadbury in 1824 in Birmingham, England, had alsogrown through mergers and demergers. It too had recently embarked on a strategy

that was just beginning to show results. Ownership of the company was 49 per centfrom the US, despite its UK listing and headquarters. Only 5 per cent of its shareswere owned by short-term traders at the time of the Kraft bid.The challengeNot only was Cadbury not for sale, but it actively resisted the Kraft takeover.Sir Roger Carr, the chairman of Cadbury, was experienced in takeover defencesand immediately put together a strong defensive advisory team. Its first act was to
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brand the 745 pence-per-share offer unattractive, saying that it fundamentallyundervalued the company. The team made clear that even if the company had to

succumb to an unwanted takeover, almost any other confectionery company(Nestl, Ferrero and Hershey were all mentioned) would be preferred as the buyer.

In addition, Lord Mandelson, then the UKs business secretary, publicly declaredthat the government would oppose any buyer who failed to respect the historicconfectioner.

The responseCadburys own defence documents stated that shareholders should reject Krafts

offer because the chocolate company would be absorbed into Krafts low growth

conglomerate business modelan unappealing prospect that sharply contrasts with

the Cadbury strategy of a pure play confectionery company.Little did Cadburys management know that Krafts plan was to split in two to

eliminate its conglomerate nature and become two more focused businesses,thereby creating more value for its shareholders.

The resultThe Cadbury team determined that a majority of shareholders would sell at a priceof roughly 830 pence a share. A deal was struck between the two chairmen onJanuary 18 2010 at 840 pence per share plus a special 10 pence per share dividend.This was approved by 72 per cent of Cadbury shareholders two weeks later.The key lessonsIn any takeover, especially a cross-border deal in which the acquired company is aswell known as Cadbury was in the UK, the transaction will be front-page news. In

this case, it was the lead business story for at least four months. Fortunately, thisdeal had no monopoly or competition issues, otherwise those regulators could alsohave been involved.But aside from any regulators, most other commentators will largely bedistractions. It is important for the acquiring companys management and advisers

to stay focused on the deal itself and the real decision-makersthe shareholders ofthe target company.As this deal demonstrates, these shareholders may not (and often will not) be thelong-term traditional owners of the target company stock, but rather very rational

hedge funds and other arbitrageurs (in Cadburys case, owning 31 per cent of theshares at the end), who are swayed only by the offer price and how quickly the dealcan be completed.Other stakeholders may have legitimate concerns that need to be addressed but thiscan usually be done after the deal is completed, as Kraft did.


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Takeovers - the Indian ExperienceSunday, March 04, 2012

A fantastic piece here in the Economist on the rapid globalization of Indianfirms such as Tata Group - a key case study for A2 students looking at takeoversand mergers

Tatas takeover of Tetley Tea (2000), Corus (2007) and Jaguar Land Rover (2008)are perhaps the most high-profile examples here in the UK of cross-bordertransactions led by Indian firms - but there have been many others. The Economistestimates that the value of such deals is around $130bn over the last decade.

However, the article puts that investment by Indian firms in overseas takeovers insome useful context. Acquirers in other emerging markets (particularly China,Brazil and Russia) have been even more active.

A question mark is raised too about whether Indian-led takeovers are likely toprove any more successful than the experience of cross-border takeovers generally.A good evaluative point is made about how to create shareholder value fromtakeovers;

To succeed it is not enough to run the acquired firm well. It must also be bought

for a sane price

There is some useful analysis in the article about whether Indian-led takeovershave been successful - from a financial perspective. Some great evidence here forBUSS4 students, not the least when the relative performance of Tatas investmentsin JLR (a success) and Corus (less successful) are compared.

In terms of both return on capital and absolute change in profitability, the Tata /JLR takeover is the shining star: it is explained like this:

JLR, where earnings have soared despite a near-death experience after the 2008crash. A chunk of the recovery is due to the fall of the pound: JLRs plants aremainly in Britain, though it sells largely in other countries. But that is not thewhole story. Under Tatas ownership JLR has also launched a killer product, theRange Rover Evoque, and cracked emerging markets, not least China.
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The Main Motives Behind Takeovers and MergersMonday, March 26, 2012

byJim Riley

Ifstrategy is choice, then what motives lie behind a choice to take a risk byinvesting in a takeover or merging with another firm? Its an important questionand one that students researching external growth via takeovers and mergers needto consider. By understanding the key motives for a takeover, it makes it easier forstudents to evaluate the likely success or failure of the transaction, including thepotential for synergies to provide sufficient shareholder value.

I like the approach taken by Johnson & Scholes, who divide up the motives for

M&A into three main groups:

(1) Strategic(2) Financial(3) Managerial

Of course, there can be motives from all three of these groups involved in aparticular transaction. However, it is important to identify the main motivation foreach takeover or merger - by allocating it to one of the three groups.

Ive outlined the key differences between each of these three merger motive groupsbelow. Lets take a brief look at how the distinction can be made between them.
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Strategic motives

In general, strategic motives tend to be the easiest to justify and the majority oftransactions they are the most influential and important. However, just becausethere is a strong stated strategic motive doesnt guarantee success. The chosentakeover target might be the wrong one; the price paid might be too high; theintegration process poorly managed.

On balance, though, if a takeover has a sensible strategic fit (it makes sense in thatit supports the achievement of corporate objectives) then a student can legitimatelysuggest a takeover had the right motives.

As you can see from the graphic below, there is a wide variety of potentialstrategic motives. Indeed, a takeover can have more than one strategic motive - it

all depends on what the corporate objectives are.

For example, takeovers that involve horizontal integration (e.g. Cooperative /Somerfield & WM Morrison / Safeway) are often pursued to increase both thescale and the market share of the combined firm. Successful horizontal integrationought to involve the achievement of significant cost synergies, which in turn oughtto lead to higher profit margins and lower unit costs, which therefore ought to bemake the combined business more competitive. In theory!

I must admit, I find the strategic motives behind takeovers fascinating. These days

it is rarely about a firm simply becoming bigger. More often, it is about a firmwanting to use a takeover to acquire capabilities and competences, often related totechnological change or geographical change. For example,Googles takeover ofMotorola Mobility in 2011 was really about Google gaining access to /control of awide variety of patents and other technologies that will enable it to support theAndroid operating eco-system against Apple and Microsoft/Nokia.

Students ought to be able to identify at least one main strategic motive involvingany takeover or merger involving two corporates (see below for the complicationinvolving private equity investors). So for example, I would say that the strategic

motives for the following takeovers were:

Transaction (Main motives for the transaction)Kraft / Cadbury: Establish global market leadership in confectionery & accessemerging marketsGoogle / Motorola: Acquire valuable smartphone patents & manufacturingexpertise
http://news.bbc.co.uk/1/hi/england/7682109.stmhttp://news.bbc.co.uk/1/hi/england/7682109.stmhttp://news.bbc.co.uk/1/hi/business/3542291.stmhttp://www.bbc.co.uk/news/business-14531859http://www.bbc.co.uk/news/business-14531859http://www.bbc.co.uk/news/business-14531859http://www.bbc.co.uk/news/business-14531859http://www.bbc.co.uk/news/business-14531859http://news.bbc.co.uk/1/hi/business/3542291.stmhttp://news.bbc.co.uk/1/hi/england/7682109.stmhttp://news.bbc.co.uk/1/hi/england/7682109.stm


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Tata / JLR: Economies of scale & acquire expertise, brands, capacity anddistributionSantander / Abbey: Market entry (UK) & establish base for further acquisitions tobuild market shareWM Morrison & Safeway: Increase market share & exploit economies of scale toimprove competitivenessHMV / MAMA: Diversification into fast-growing markets & reduce reliance onretailingBritish Airways / Iberia: Consolidation; economies of scale & survival:positioning for further takeovers

Financial motives

All takeovers and mergers have financial motives of one kind or another - each isdesigned to achieve a satisfactory rate of return for the investment and risk beentaken, However, there are also circumstances where the underlying motive for thetransaction is financial rather than strategic. In other words, it is the financialreturns that are most important and which drive the deal.

A good example for students to consider would be any takeover involving a privateequity (or venture capital) buyer. Private equity firms are professional investorswho manage investment funds specifically designed to be used in corporatetransactions. These can range from relatively small-scale management buy-outs to much larger leveraged buy-outs where a substantial proportion of thefinance used is in the form of debt (rather than equity).


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Private equity firms have been highly active in takeovers across developedeconomies for many years now. Almost by definition, they do not have strategicmotives for their investments, since they are simply acting as financial investors.

Heres how it works, in a nutshell. A private equity firm raises the cash to makeinvestments by launching a fund. Who invests in that fund? Usually pensionschemes, high net worth individuals etc - who are looking to achieve high returnsby passing their money onto professional investors (the private equity people).

Once the fund is raised, the private equity team gets to work making investments inits target sectors. It might have criteria relating to markets, industries, deal size,geography. The private equity fund will often specialise in particular industries ortypes of transaction, in order to better understand the risks being taken. This alsohelps them identify potential takeover targets.

So, back to those financial motives. Typically a private equity fund will aim toachieve an annual rate of return of around 25-40% p.a. over the course of thefunds life. A private equity takeover is unlikely to offer many opportunities for

cost or revenue synergies (since the investor is just a professional finance firm). Sohow is a return achieved? By picking target investments that still have good growthpotential and/or where significant opportunities exist for profit improvement (e.g.through cost cutting). Not for nothing is venture capital (private equity) alsosometimes referred to as vulture capital!

Weve listed a few examples of private equity takeovers in recent years below:

KKR buys Pets At Home 1bnhttp://goo.gl/qjrsPApax Partners buys Tommy Hilfiger $1.6bnhttp://goo.gl/IbHLFBlackstone Group buys Center Parcs 205mhttp://goo.gl/R2BDdBlackstone Group buys Legoland Parks 259mhttp://goo.gl/hkYsFKKR buys Alliance Boots 11.1bnhttp://goo.gl/swyfDTerra Firma buys EMI 4.2bnhttp://goo.gl/jT7vaBlackstone Group buys Hilton Hotels $26bnhttp://goo.gl/NtcSNBridgepoint Capital buys Pret A Mangerhttp://goo.gl/VjX5TBlackstone Group buys SeaWorld $2.3bnhttp://goo.gl/3cWIbDoughty Hanson buys Vue Entertainment 450mhttp://goo.gl/NlzVbBridgepoint Capital buys Wiggle180mhttp://goo.gl/pyQXwCVC Capital Partners buys Virgin Active 450mhttp://goo.gl/NOMdN
http://goo.gl/qjrsPhttp://goo.gl/qjrsPhttp://goo.gl/qjrsPhttp://goo.gl/IbHLFhttp://goo.gl/IbHLFhttp://goo.gl/IbHLFhttp://goo.gl/R2BDdhttp://goo.gl/R2BDdhttp://goo.gl/R2BDdhttp://goo.gl/hkYsFhttp://goo.gl/hkYsFhttp://goo.gl/hkYsFhttp://goo.gl/swyfDhttp://goo.gl/swyfDhttp://goo.gl/swyfDhttp://goo.gl/jT7vahttp://goo.gl/jT7vahttp://goo.gl/jT7vahttp://goo.gl/NtcSNhttp://goo.gl/NtcSNhttp://goo.gl/NtcSNhttp://goo.gl/VjX5Thttp://goo.gl/VjX5Thttp://goo.gl/VjX5Thttp://goo.gl/3cWIbhttp://goo.gl/3cWIbhttp://goo.gl/3cWIbhttp://goo.gl/NlzVbhttp://goo.gl/NlzVbhttp://goo.gl/NlzVbhttp://goo.gl/pyQXwhttp://goo.gl/pyQXwhttp://goo.gl/pyQXwhttp://goo.gl/NOMdNhttp://goo.gl/NOMdNhttp://goo.gl/NOMdNhttp://goo.gl/NOMdNhttp://goo.gl/pyQXwhttp://goo.gl/NlzVbhttp://goo.gl/3cWIbhttp://goo.gl/VjX5Thttp://goo.gl/NtcSNhttp://goo.gl/jT7vahttp://goo.gl/swyfDhttp://goo.gl/hkYsFhttp://goo.gl/R2BDdhttp://goo.gl/IbHLFhttp://goo.gl/qjrsP


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Managerial motives

When a takeover or merger fails, you can often trace it back to what are calledmanagerial motives. In general these are bad news for the shareholders of abusiness that is pursuing the takeover; it often results in a transaction that destroyssignificant amounts of shareholder value.

Perhaps the best example recently was the RBS takeover of part of Dutch bankinggiant ABN Amro. RBS paid 10bn for their part of the deal (they investedalongside Belgian Bank Fortis and Santander Group). RBS got their part of the

takeover horribly wrong, and ended up buying something that was worthless withan extra 5bn of liabilities thrown in for good measure. What followed is history -RBS had to be rescued by the UK Government before it took most of the UKbanking sector down with it.

How could RBS have got things so wrong? Well, much went wrong with thetakeover process (poor due diligence & inadequate integration planning). But themain problem was the the takeover was motivated by the wrong reasons. It waspartly motivated by the vanity and egos of the senior management team, whobelieved in their own hype and simply wanted to continue building the RBS globalempire.

Students are very unlikely to have any experience of the financial system andcultural forces that encourage Boards of Directors to pursue takeovers andmergers. An entire industry populated by very bright and highly paid professionalsexists in order to encourage and facilitate takeovers and mergers, often focusing on


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managerial motives rather than strategic. When the vanity of a management teamovercomes simple strategic logic and pushes on with a risk takeover, it should betime for shareholders to get outquick


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ResearchBuster: AcquisitionsSaturday, March 03, 2012

byJim Riley

Our ResearchBuster blog posts are designed to help students identify and integrateexamples of business strategy for their synoptic essays and exams. ThisResearchBuster look at some of the most significant examples of takeovers /acquisitions in recent years

Here is a selection of key acquisitions. Follow the link to identify at least one keystrategic reason behind the deal:

1998: Merger of Daimler Benz and Chryslerhttp://news.bbc.co.uk/1/hi/business/88912.stm

1999: Merger of Exxon and MobileValue: $82bnhttp://news.bbc.co.uk/1/hi/business/544288.stm

2000: Merger of Glaxo Wellcome with SmithKline Beechamhttp://news.bbc.co.uk/1/hi/business/607187.stmPrice: 130bn

2000: Buyer: VodafoneTarget:MannesmannPrice: 112bn

2000: Buyer: UnileverTarget:Ben & Jerrys

Price: 203 million

2000: Buyer: Unilever:Target:Slim-Fast FoodsPrice: 1.44bn
http://www.tutor2u.net/blog/index.php/business-studies/comments/researchbuster-acquisitionshttp://www.tutor2u.net/blog/index.php/business-studies/comments/researchbuster-acquisitionshttp://www.tutor2u.net/blog/index.php/site/author/11/http://www.tutor2u.net/blog/index.php/site/author/11/http://www.tutor2u.net/blog/index.php/site/author/11/http://news.bbc.co.uk/1/hi/business/88912.stmhttp://news.bbc.co.uk/1/hi/business/88912.stmhttp://news.bbc.co.uk/1/hi/business/544288.stmhttp://news.bbc.co.uk/1/hi/business/544288.stmhttp://news.bbc.co.uk/1/hi/business/607187.stmhttp://news.bbc.co.uk/1/hi/business/607187.stmhttp://news.bbc.co.uk/1/hi/business/630293.stmhttp://news.bbc.co.uk/1/hi/business/630293.stmhttp://news.bbc.co.uk/1/hi/business/630293.stmhttp://news.bbc.co.uk/1/hi/business/710694.stmhttp://news.bbc.co.uk/1/hi/business/710694.stmhttp://news.bbc.co.uk/1/hi/business/710694.stmhttp://news.bbc.co.uk/1/hi/business/710392.stmhttp://news.bbc.co.uk/1/hi/business/710392.stmhttp://news.bbc.co.uk/1/hi/business/710392.stmhttp://news.bbc.co.uk/1/hi/business/710392.stmhttp://news.bbc.co.uk/1/hi/business/710694.stmhttp://news.bbc.co.uk/1/hi/business/630293.stmhttp://news.bbc.co.uk/1/hi/business/607187.stmhttp://news.bbc.co.uk/1/hi/business/544288.stmhttp://news.bbc.co.uk/1/hi/business/88912.stmhttp://www.tutor2u.net/blog/index.php/site/author/11/http://www.tutor2u.net/blog/index.php/business-studies/comments/researchbuster-acquisitions


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2005: Buyer: News CorporationTarget:MySpacePrice: $580 million

2005: Buyer: ITV plcTarget;Friends ReunitedPrice: 175 million

2005: Buyer; AdidasTarget -ReebokPrice: 2.1bn

2005: Buyer TelefonicaTarget:O2

Price: 17.7bn

2005: Buyer: Cadburys plcTarget:Green & BlacksPrice: 20 million

2006: Buyer: DisneyTarget:PixarPrice: $7.4bn

2006: Buyer: Dubai Ports WorldTarget:P&OPrice: 3.9bn

2006: Merger of Arcelor and Mittal Steelhttp://news.bbc.co.uk/1/hi/business/5114290.stmPrice: 33bn

2006: Buyer; FerrovialTarget:BAA plc

Price: 10.3bn

2006: Buyer; First ChoiceTarget;Late RoomsPrice: 120 million
http://news.bbc.co.uk/1/hi/business/4695495.stmhttp://news.bbc.co.uk/1/hi/business/4695495.stmhttp://news.bbc.co.uk/1/hi/business/4695495.stmhttp://www.telegraph.co.uk/finance/2927757/ITV-buys-Friends-Reunited-for-175m.htmlhttp://www.telegraph.co.uk/finance/2927757/ITV-buys-Friends-Reunited-for-175m.htmlhttp://www.telegraph.co.uk/finance/2927757/ITV-buys-Friends-Reunited-for-175m.htmlhttp://news.bbc.co.uk/1/hi/business/4740755.stmhttp://news.bbc.co.uk/1/hi/business/4740755.stmhttp://news.bbc.co.uk/1/hi/business/4740755.stmhttp://news.bbc.co.uk/1/hi/business/4392036.stmhttp://news.bbc.co.uk/1/hi/business/4392036.stmhttp://news.bbc.co.uk/1/hi/business/4392036.stmhttp://news.bbc.co.uk/1/hi/business/4543583.stmhttp://news.bbc.co.uk/1/hi/business/4543583.stmhttp://news.bbc.co.uk/1/hi/business/4543583.stmhttp://news.bbc.co.uk/1/hi/business/4642116.stmhttp://news.bbc.co.uk/1/hi/business/4642116.stmhttp://news.bbc.co.uk/1/hi/business/4642116.stmhttp://news.bbc.co.uk/1/hi/business/4765262.stmhttp://news.bbc.co.uk/1/hi/business/4765262.stmhttp://news.bbc.co.uk/1/hi/business/4765262.stmhttp://news.bbc.co.uk/1/hi/business/5114290.stmhttp://news.bbc.co.uk/1/hi/business/5114290.stmhttp://www.guardian.co.uk/business/2006/jun/07/theairlineindustry.travelnewshttp://www.guardian.co.uk/business/2006/jun/07/theairlineindustry.travelnewshttp://www.guardian.co.uk/business/2006/jun/07/theairlineindustry.travelnewshttp://www.manchestereveningnews.co.uk/news/business/s/231/231640_first_choice_snaps_up_120m_lateroomscom.htmlhttp://www.manchestereveningnews.co.uk/news/business/s/231/231640_first_choice_snaps_up_120m_lateroomscom.htmlhttp://www.manchestereveningnews.co.uk/news/business/s/231/231640_first_choice_snaps_up_120m_lateroomscom.htmlhttp://www.manchestereveningnews.co.uk/news/business/s/231/231640_first_choice_snaps_up_120m_lateroomscom.htmlhttp://www.guardian.co.uk/business/2006/jun/07/theairlineindustry.travelnewshttp://news.bbc.co.uk/1/hi/business/5114290.stmhttp://news.bbc.co.uk/1/hi/business/4765262.stmhttp://news.bbc.co.uk/1/hi/business/4642116.stmhttp://news.bbc.co.uk/1/hi/business/4543583.stmhttp://news.bbc.co.uk/1/hi/business/4392036.stmhttp://news.bbc.co.uk/1/hi/business/4740755.stmhttp://www.telegraph.co.uk/finance/2927757/ITV-buys-Friends-Reunited-for-175m.htmlhttp://news.bbc.co.uk/1/hi/business/4695495.stm


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2006: Buyer; Nippon Sheet GlassTarget:PilkingtonPrice: 1.9bn

2006: Blackstone Group (Private Equity)Target:Center ParcsPrice: 205 million

2006: Buyer: Blackstone Group (Private Equity)Target:Legoland ParksPrice: 259 million

2006: Buyer: GoogleTarget:YouTube

Price: $1.65bn

2006: Buyer: Procter & GambleTarget:GillettePrice: 30bn

2006: Buyer: LOrealTarget:Body ShopPrice: 652 million

2006: Buyer: Virgin ActiveTarget:Holmes PlacePrice: not disclosed

2006: Buyer: HeinzTarget:HP FoodsPrice: 470m

2007: Buyer; TataTarget:Corus

Price: 5.8bn

2007: Buyer; BSkyBTarget:AmstradPrice: 125 million
http://news.bbc.co.uk/1/hi/business/4754114.stmhttp://news.bbc.co.uk/1/hi/business/4754114.stmhttp://news.bbc.co.uk/1/hi/business/4754114.stmhttp://news.bbc.co.uk/1/hi/business/4788484.stmhttp://news.bbc.co.uk/1/hi/business/4788484.stmhttp://news.bbc.co.uk/1/hi/business/4788484.stmhttp://news.bbc.co.uk/1/hi/business/4678213.stmhttp://news.bbc.co.uk/1/hi/business/4678213.stmhttp://news.bbc.co.uk/1/hi/business/4678213.stmhttp://news.bbc.co.uk/1/hi/business/6034577.stmhttp://news.bbc.co.uk/1/hi/business/6034577.stmhttp://news.bbc.co.uk/1/hi/business/6034577.stmhttp://news.bbc.co.uk/1/hi/business/4214485.stmhttp://news.bbc.co.uk/1/hi/business/4214485.stmhttp://news.bbc.co.uk/1/hi/business/4214485.stmhttp://news.bbc.co.uk/1/hi/business/4815776.stmhttp://news.bbc.co.uk/1/hi/business/4815776.stmhttp://news.bbc.co.uk/1/hi/business/4815776.stmhttp://news.bbc.co.uk/1/hi/business/5313292.stmhttp://news.bbc.co.uk/1/hi/business/5313292.stmhttp://news.bbc.co.uk/1/hi/business/5313292.stmhttp://news.bbc.co.uk/1/hi/business/4110006.stmhttp://news.bbc.co.uk/1/hi/business/4110006.stmhttp://news.bbc.co.uk/1/hi/business/4110006.stmhttp://news.bbc.co.uk/1/hi/business/6315823.stmhttp://news.bbc.co.uk/1/hi/business/6315823.stmhttp://news.bbc.co.uk/1/hi/business/6315823.stmhttp://news.bbc.co.uk/1/hi/business/6923517.stmhttp://news.bbc.co.uk/1/hi/business/6923517.stmhttp://news.bbc.co.uk/1/hi/business/6923517.stmhttp://news.bbc.co.uk/1/hi/business/6923517.stmhttp://news.bbc.co.uk/1/hi/business/6315823.stmhttp://news.bbc.co.uk/1/hi/business/4110006.stmhttp://news.bbc.co.uk/1/hi/business/5313292.stmhttp://news.bbc.co.uk/1/hi/business/4815776.stmhttp://news.bbc.co.uk/1/hi/business/4214485.stmhttp://news.bbc.co.uk/1/hi/business/6034577.stmhttp://news.bbc.co.uk/1/hi/business/4678213.stmhttp://news.bbc.co.uk/1/hi/business/4788484.stmhttp://news.bbc.co.uk/1/hi/business/4754114.stm


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2007: Buyer: KKR (Venture Capital)Target:Alliance BootsPrice: 11.1bn

2007: Buyer: Merlin EntertainmentsTarget:Tussauds GroupPrice: 1bn

2007: Buyer: Terra Firma (Venture Capital)Target:EMIPrice: 4.2bn

2007: Merger of MyTravel and Thomas Cookhttp://news.bbc.co.uk/1/hi/business/6353023.stm

2007: Merger of TUI and First Choicehttp://news.bbc.co.uk/1/hi/6465387.stm

2007: Buyer: Blackstone Group (Venture Capital)Target:Hilton HotelsPrice : $26bn

2007: Buyer: EasyjetTarget:GB Airways

Price: 104million

2007: Merger of Taylor Woodrow and George Wimpeyhttp://news.bbc.co.uk/1/hi/business/6494387.stmValue: 5bn

2008: Buyer; TataTarget:Jaguar Land RoverPrice: 1.7bn

2008 - Buyer: Lloyds TSBTarget:HBOSPrice: 12.2bn

2008: Buyer: SantanderTarget:Alliance & LeicesterPrice: 1.3bn
http://news.bbc.co.uk/1/hi/business/6708245.stmhttp://news.bbc.co.uk/1/hi/business/6708245.stmhttp://news.bbc.co.uk/1/hi/business/6708245.stmhttp://news.bbc.co.uk/1/hi/business/6419019.stmhttp://news.bbc.co.uk/1/hi/business/6419019.stmhttp://news.bbc.co.uk/1/hi/business/6419019.stmhttp://news.bbc.co.uk/1/hi/business/6926032.stmhttp://news.bbc.co.uk/1/hi/business/6926032.stmhttp://news.bbc.co.uk/1/hi/business/6926032.stmhttp://news.bbc.co.uk/1/hi/business/6353023.stmhttp://news.bbc.co.uk/1/hi/business/6353023.stmhttp://news.bbc.co.uk/1/hi/6465387.stmhttp://news.bbc.co.uk/1/hi/6465387.stmhttp://news.bbc.co.uk/1/hi/business/6267856.stmhttp://news.bbc.co.uk/1/hi/business/6267856.stmhttp://news.bbc.co.uk/1/hi/business/6267856.stmhttp://news.bbc.co.uk/1/hi/business/7061246.stmhttp://news.bbc.co.uk/1/hi/business/7061246.stmhttp://news.bbc.co.uk/1/hi/business/7061246.stmhttp://news.bbc.co.uk/1/hi/business/6494387.stmhttp://news.bbc.co.uk/1/hi/business/6494387.stmhttp://news.bbc.co.uk/1/hi/business/7431789.stmhttp://news.bbc.co.uk/1/hi/business/7431789.stmhttp://news.bbc.co.uk/1/hi/business/7431789.stmhttp://news.bbc.co.uk/1/hi/business/7778914.stmhttp://news.bbc.co.uk/1/hi/business/7778914.stmhttp://news.bbc.co.uk/1/hi/business/7778914.stmhttp://news.bbc.co.uk/1/hi/business/7504822.stmhttp://news.bbc.co.uk/1/hi/business/7504822.stmhttp://news.bbc.co.uk/1/hi/business/7504822.stmhttp://news.bbc.co.uk/1/hi/business/7504822.stmhttp://news.bbc.co.uk/1/hi/business/7778914.stmhttp://news.bbc.co.uk/1/hi/business/7431789.stmhttp://news.bbc.co.uk/1/hi/business/6494387.stmhttp://news.bbc.co.uk/1/hi/business/7061246.stmhttp://news.bbc.co.uk/1/hi/business/6267856.stmhttp://news.bbc.co.uk/1/hi/6465387.stmhttp://news.bbc.co.uk/1/hi/business/6353023.stmhttp://news.bbc.co.uk/1/hi/business/6926032.stmhttp://news.bbc.co.uk/1/hi/business/6419019.stmhttp://news.bbc.co.uk/1/hi/business/6708245.stm


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2008: Buyer: SantanderTarget:Bradford & BingleyPrice: 612 million

2008: Buyer: TescoTarget:E-Land (South Korea)Price: 958 million

2008: Buyer: Bridgepoint Capital (Private Equity)Target:Pret A MangerPrice: not disclosed

2009: Buyer: OracleTarget:Sun Microsystems

Price: $7.4bn

2009: Merger of Boots Opticians and Dollond & Aitchisonhttp://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stm

2009: Buyer: DisneyTarget:Marvel EntertainmentPrice: 2.5bn

2009: Buyer: The Co-operative Group

Target:SomerfieldPrice: 1.6bn

2009: Buyer: ResolutionTarget:Friends ProvidentPrice: 1.9bn

2009: Buyer: HMVTarget:MAMA GroupPrice: 42 million

2009: Buyer: CiscoTarget:Pure Digital (Flip)Price: $590 million

2009: Merger of Orange UK and T-Mobile UKhttp://news.bbc.co.uk/1/hi/business/8243226.stm
http://news.bbc.co.uk/1/hi/business/7641055.stmhttp://news.bbc.co.uk/1/hi/business/7641055.stmhttp://news.bbc.co.uk/1/hi/business/7641055.stmhttp://news.bbc.co.uk/1/hi/business/7399957.stmhttp://news.bbc.co.uk/1/hi/business/7399957.stmhttp://news.bbc.co.uk/1/hi/business/7399957.stmhttp://news.bbc.co.uk/1/hi/business/7258869.stmhttp://news.bbc.co.uk/1/hi/business/7258869.stmhttp://news.bbc.co.uk/1/hi/business/7258869.stmhttp://news.bbc.co.uk/1/hi/business/8008246.stmhttp://news.bbc.co.uk/1/hi/business/8008246.stmhttp://news.bbc.co.uk/1/hi/business/8008246.stmhttp://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stmhttp://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stmhttp://news.bbc.co.uk/1/hi/business/8230955.stmhttp://news.bbc.co.uk/1/hi/business/8230955.stmhttp://news.bbc.co.uk/1/hi/business/8230955.stmhttp://news.bbc.co.uk/1/hi/business/7918963.stmhttp://news.bbc.co.uk/1/hi/business/7918963.stmhttp://news.bbc.co.uk/1/hi/business/7918963.stmhttp://news.bbc.co.uk/1/hi/business/8194573.stmhttp://news.bbc.co.uk/1/hi/business/8194573.stmhttp://news.bbc.co.uk/1/hi/business/8194573.stmhttp://news.bbc.co.uk/1/hi/business/8428713.stmhttp://news.bbc.co.uk/1/hi/business/8428713.stmhttp://news.bbc.co.uk/1/hi/business/8428713.stmhttp://www.bbc.co.uk/news/business-13052370http://www.bbc.co.uk/news/business-13052370http://www.bbc.co.uk/news/business-13052370http://news.bbc.co.uk/1/hi/business/8243226.stmhttp://news.bbc.co.uk/1/hi/business/8243226.stmhttp://news.bbc.co.uk/1/hi/business/8243226.stmhttp://www.bbc.co.uk/news/business-13052370http://news.bbc.co.uk/1/hi/business/8428713.stmhttp://news.bbc.co.uk/1/hi/business/8194573.stmhttp://news.bbc.co.uk/1/hi/business/7918963.stmhttp://news.bbc.co.uk/1/hi/business/8230955.stmhttp://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stmhttp://news.bbc.co.uk/1/hi/business/8008246.stmhttp://news.bbc.co.uk/1/hi/business/7258869.stmhttp://news.bbc.co.uk/1/hi/business/7399957.stmhttp://news.bbc.co.uk/1/hi/business/7641055.stm


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2009: Buyer: PanasonicTarget:SanyoPrice: 2.8bn

2010: Buyer: Deutsche BahnTarget:ArrivaPrice: 1.6bn

2010: Buyer: Philips-Van HeusenTarget:Tommy HilfigerPrice : $3.0bn

2010: Buyer: Blackstone Group (Venture Capital)Target:SeaWorld Parks & Entertainment

Price : $2.3bn

2010: Buyer: KKR (Venture Capital)Target:Pets At HomePrice: 1bn

2010: Buyer: UnileverTarget:Alberto CulverPrice: 2.3bn

2010: Buyer: ResolutionTarget:AXA UKPrice: 2.8bn

2010: Buyer;Kraft Foods IncTarget:Cadbury plcPrice: 1.96bn

2010: Buyer; New England Sports VenturesTarget:Liverpool FC

Price: 300 million

2010: Buyer: OnexTarget:TomkinsPrice: 2.9bn
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2010: Merger of United Airlines and Continental Airlineshttp://www.bbc.co.uk/news/business-11353161

2010: Buyer: Reckitt BenckiserTarget:SSL InternationalPrice: 2.5bn

2010: Buyer: Coca-ColaTarget:InnocentPrice: not disclosed

2010: Buyer: Doughty Hanson (Private Equity)Target:Vue EntertainmentPrice: 450 million

2010: Merger of British Airways and Iberiahttp://www.bbc.co.uk/news/business-11862956

2010: Buyer: AsdaTarget;NettoPrice: 778 million

2011: Buyer: AmazonTarget:LoveFilm

Price: 200 million (est)

2011: Buyer: Bridgepoint Capital (Private Equity)Target:WigglePrice: 180 million

2011: Buyer; WhitbreadTarget:Coffee NationPrice: 60 million

2011: Buyer; MicrosoftTarget:SkypePrice: 5.2bn

2011: Buyer: GoogleTarget:Motorola MobilityPrice: $12.5bn
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2011: Carlyle Group (Venture Capital)Target:RACPrice: 1bn

2011: Buyer: LabeluxTarget:Jimmy ChooPrice: 525 million

2011: Cheung Kong Infrastructure Holdings (CKI)Target:Northumbrian WaterPrice: 2.4bn

2011: Hewlett-PackardTarget:Autonomy

Price: 7 billion

2011: Buyer: MattelTarget:Hit EntertainmentPrice: 420 million

2011: Merger of Thomas Cook Travel Agents and Co-op Travelhttp://www.bbc.co.uk/news/uk-england-cambridgeshire-14550184

2011: Buyer: Tesco

Target:BlinkboxPrice: not disclosed

2011: Buyer: International Airlines Group (IAG)Target:British Midland (BMI)Price: 172 million

2011: Buyer: SABMillerTarget:FostersPrice: 6.5bn

2011: Buyer: Muller GroupTarget:Robert Wiseman DairiesPrice: 280 million
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2011: Buyer: Virgin ActiveTarget:EsportaPrice: 78 million

2011: Buyer: CVC Capital Partners (Private Equity)Target:Virgin ActivePrice: 450 million

2011: Buyer: Virgin MoneyTarget:Northern RockPrice: 747 million

Adidas agrees to buy rival Reebok

German sports goods

firm Adidas-Salomon

says it has struck anagreement to buy US

rival Reebok for 3.1bn

Euros ($3.8bn; 2.1bn).

The tie-up could create achallenger to Nike in theUS market.

Adidas boss HerbertHainer said that the deal"represents a major strategic milestone for our group".

The takeover still needs to be approved by Reebokshareholders and competition authorities. If cleared, thedeal should be completed in early 2006.

Boss Herbert Hainer wants

Adidas to take a big leap

forward
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Reebok's shares rose 30% on Wednesday reaching$51 - as reports of takeover talks appeared on thewebsites of financial papers.Adidas' offer is worth $59per share in cash.

Bigger footprint

"This is a once in a lifetime opportunity to combinetwo of the most respected and well-known companiesin the worldwide sporting goods industry", said MrHainer.

The combined group will have worldwide athleticfootwear sales of 9bn euros, Adidas said.

The list of celebrities promoting Adidas includesfootball star David Beckham and singer Missy Elliott.Reebok tried to rejuvenate its youth appeal with acontroversial advert featuring rapper 50 Cent. Its USsport licensing deals include the National FootballLeague and National Basketball Association.

North America accounts for roughly half of the globalsporting goods market, and Adidas said buying Reebok

would more than double its North American sales to3.1bn euros.

The firm added that the deal would bring it widergeographic reach and a more balanced sales portfolio.Among the benefits, it listed Reebok's presence inNorth America and Adidas' ability to bring its greaterexpertise in Europe and Asia to bear on Reebok'sprofile there.

The combined group's brands will be anchored by theAdidas and Reebok labels, but will also includeTaylormade, Rockport, Greg Norman Collection,Maxfli, CCM, Jofa and Koho.

It would have about 20% of the US sports shoe market,while Nike has 36%.


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Profits rise

Adidas was known to be targeting a stronger positionin the US market.

In May, it sold off its struggling Salomon winter sportsequipment business to Finnish firm Amer in order toconcentrate on footwear.

As it announced its takeover plans, Adidas alsounveiled better-than-expected profits.

Its second-quarter net profits jumped 33% to 94mEuros, after adjustments were made for the sale of theSalomon business.

Sales rose to 1.5bn Euros from 1.4bn in the sameperiod a year earlier.

It expects a further boost to sales from the 2006 WorldCup Championship which is taking place in Germany.

M&A: 8 ways to make a success of a takeoverSunday, February 12, 2012

byJim Riley

Firms that pursue takeovers should look to create value, not headlines. Thats one

of the lessons Ive picked up from some analysis of successful takeover strategieslisted in the 2010 KPMG survey of global M&A. Here is a brief summary of theirrecommendations for approaches which are more likely to result in a takeover ormerger..
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(1) Dont start with the deal (start the detail planning early)

The worst time to start evaluating the potential benefits and drawbacks of the dealis when the transaction is just about to be completed (or worse, just after).Integration planning needs to start as as soon as possible and it needs to be wide-ranging (i.e. not just limited to financial and marketing aspects).

(2) Define the strategy

Obvious really, but still essential. The buyer needs to have a clear and agreedunderstanding of the strategic rationale for the deal.

(3) Dontjust focus on costs

Cost synergiesare important, but they shouldnt be the only focus. It is importantto work hard to identify and evaluate potential revenue synergies as well so thatshareholders are better informed when they analyze whether to support theproposed deal.

(4) Focus due diligence on the future

The process ofdue diligence is often too focused on understanding the pastperformance of the target business. However, many takeover targets operate inmarkets which are changing rapidly - how reliable is the past in predicting

performance in the future? For example, due diligence should critically analysethe competitive environment of the target, including the prospects for marketgrowth.

(5) Is a takeover really the right answer?

A vital question to ask. Is a takeover the best option to deliver the growthobjectives of the business? Are alternative external growth options a better bet(e.g. joint venture, licensing deals, strategic partnership etc). KPMG make theimportant point that some management teams become committed to takeovers too

readily without critically evaluating whether an acquisition is the right tool.

(6) Recognise the hard truths about the soft issues

KPMG report a statistic that 45% of Fortune 500 CFOs blame post-M&A failureon unexpected people problems. The key soft issues to address include choosing


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the right management team post deal, handling differences in culture between thebuyer and target, and managing communication about the deal.

(7) One size does not fit all

An interesting one this - and a great depends-on evaluation point for students tomake in an exam essay. There is no such thing as a standard takeover or merger.Every transaction has significant individual elements that need addressing in orderto make it a success. Maybe a key customer needs to be brought on-board. Maybethere is a risk of the loss of highly-skilled and business-critical employees. Perhapsthere is a strong entrepreneurial culture in the target business which needs to beembraced and nurtured in order for value to be created. Every takeover and mergeris different - each requires careful thought and planning.

(8) Balance risk and reward

Another great point for evaluation. A business should not become over-reliant onacquisitions to sustain growth. As KPMG point out, being busy with takeovers isnot the same thing as being busy creating value for shareholders. Once bought,every business needs detailed attention to make it even more successful.

10 Top Takeover Candidates for 2011

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Transcript of 10 Top Takeover Candidates for 2011