Boost M&A outcomes with less risk by learning from mistakes of the past
Material Adverse Change will help you close more successful mergers and acquisitions by analyzing the common root causes of deal failures from before the Great Recession to today. The time between signing and closing a deal is a particularly risky period where the buyer has committed to purchase the company, but the seller continues to operate it while waiting for regulatory approval or funding to close out the deal. A Material Adverse Change clause allows the buyer to back out of the transaction if certain adverse events occur during this period. By designing this safety net into the contract, you’re free to take the time to examine records, meet with employees, and fully understand the legal issues at hand. If the target loses value during that time, in certain cases, you’re free to walk away. This book explores the full power of the Material Adverse Change clause, and today’s M&A in general. You’ll dig into the real causes of M&A failure, and discover the traits and practices that lead to poor results as you learn how to avoid these common mistakes and drive more successful deals. Recent case studies highlight common mistakes made - and propagated - by otherwise intelligent people, so you can identify and eliminate these practices within your own organization.
A large acquisition is already a delicate balancing act. Why complicate it with the exponential risk by not doing your homework? This book shows you how to apply best practices to increase your chances of successful deals and avoid potentially career ending mistakes.
- Explore the true root causes of M&A failures of the past
- Analyze the personality traits that drive suboptimal outcomes
- Implement new practices to avoid mistakes and close successful deals
- Learn why common-sense errors are repeated over and over again
Table of Contents
Introduction: The Risks and Opportunities of Doing a Deal xi
Chapter 1 Why Bad Deals Happen 1
A Practical Approach to Mergers and Acquisitions 3
A Case Study: RBS Buys ABN AMRO 4
Motivations for Deals 5
A Case Study: Bank of America Buys Merrill Lynch 5
Using M&A to Divert Attention 12
Using M&A to Grow Quickly 12
Using M&A to Solve Problems 13
Horizontal and Vertical Mergers 14
Conclusion 16
Chapter 2 Buy or Build? 19
A Case Study: Commerce Bank 21
A Case Study: Metro Bank 26
Is There Anything in Between? 29
A Case Study: Dow Corning Joint Venture 31
A Case Study: Bucknell Industries 32
Conclusion 34
Chapter 3 Let the Buyer Beware 37
Wachovia Buys Golden West 40
AOL Time Warner Merger 46
Wells Fargo Buys Wachovia 48
Chapter 4 The Opportunities and Risks of Expanding Your Business Globally 51
Telenor India Joint Venture 54
Telenor’s Global Strategy over Time 56
Telenor Expands into Eastern Europe 57
Telenor Pushes into Asia 59
The Telenor Unitech Joint Venture 61
Postmortem on the Telenor Unitech Joint Venture 63
Lessons Learned 64
Trends for the Future 67
Chapter 5 Culture Is Critical 69
A Case Study from China 71
A Case Study from Japan 74
A Summary of Other Best Practices 76
Chapter 6 Who Is Behind the Curtain? 85
A Case Study: Lloyds HBOS 87
A Case Study: Kraft Buys Cadbury 96
Chapter 7 Is It Too Late to Back Out? 103
Case Study One: Bank of America Purchases Merrill Lynch 106
Case Study Two: AT&T/T Mobile 110
Case Study Three: Verizon Bids for Yahoo 115
Conclusion 116
Chapter 8 How to Negotiate a Better Deal 119
Ten Best Practices for Effective Negotiation 124
Chapter 9 Making It Right 135
Background 137
Be Strategic 138
Maintain a Rational Organizational Structure 140
Structure the Deal Properly 141
Recognize the Importance of Brand 142
Efficient Distribution 143
Beware of Culture 144
Have Financing Lined Up in Advance 145
Establish an Appropriate M&A Approval Process 145
Integrate Early and Often 146
Clear Legal and Regulatory Process 146
Don’t Overpay 147
Continuous Learning 148
A Case Study: J.P. Morgan Buys Bear Stearns 148
Conclusion 152
Chapter 10 Where Do We Go from Here? 155
How Fast We Forget 157
Appendix A
Trinity International/American Public Media Group: Material Adverse Change Clause 169
Appendix B
Bank of America/Merrill: Material Adverse Change Clause 171
About the Author 175
Index 177
