Category: Mergers & Acquisitions

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Banking Acquisitions during the Financial Crisis

I. Introduction

When the housing crisis was at its lowest point, entire neighborhoods were experiencing the possibility of foreclosure as residents defaulted on their mortgage payments. Foreclosures and consumer defaults have not only damaged the housing market but also have affected financial institutions. [1] The financial industry was hit particularly hard, especially leading subprime lending banking institutions. Washington Mutual, Freddie Mac, Wachovia, Bear Stearns, Countrywide and Merrill Lynch have been or are in the process of being acquired by big banks, strong enough to make the acquisition. [2] In this article, I will discuss the most recent acquisitions, Washington Mutual and Wachovia Corp., and analyze the benefits of this acquisition to the banking industry as well as the costs to consumers.

II. Background

Both Washington Mutual ("WaMu") and Wachovia Corp. ("Wachovia") suffered heavy losses after the housing market collapse. Wachovia and WaMu ranked first and second as the biggest providers

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Blockbuster’s $1 Billion Bid on Circuit City

I. Introduction

     On April 14, 2008 Blockbuster Inc. announced publicly its offer to purchase electronic retailer Circuit City Inc. Blockbuster has been in talks with Circuit City for months regarding an acquisition. [1] On February 17, 2008 Blockbuster sent a letter to Circuit City Chairman Philip Schoonover offering over $1 billion for the transaction. [2] This is equivalent to $6 to $8 a share in cash for the company. [3]Blockbuster also stated that they were willing to pursue alternative deal structures to enable Circuit City shareholders to receive stock. [4] Circuit City is hesitant about the deal and has yet to reveal to Blockbuster its long-term corporate plans and performance data. [5] This paper will evaluate the benefits and negatives of the acquisition as well as discuss whether this merger should occur.

II. Why Circuit City Should Consider the Merger

     The Blockbuster-Circuit City merger can result

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Breach of Fiduciary Duty Suits Arising Out of Yahoo’s Rejection of Microsoft’s Offer

Last month, Yahoo!, the California-based Internet service provider, rejected a “generous” offer by U.S. software giant, Microsoft. [1] Microsoft’s 62 percent premium above Yahoo!’s share was aimed at maximizing synergies that existed between both companies. Microsoft hoped to gain a greater market advantage in the internet search industry while enjoying a majority share of the projected $80 billion market by year 2010. [2] Following Yahoo!’s rejection, some disgruntled Yahoo shareholders have sought legal remedies to voice their dissatisfaction with Yahoo’s decision. [3] In light of three previously decided cases, Emerging, Van Gorkom, and Disney, this article will attempt to provide a legal analysis on the breach of fiduciary duty suits against Yahoo!.

 

Emerging Communication

 

In Emerging Communication, the court addressed, inter alia, class action claims for breach of fiduciary duty. The court held that the defendants in question were jointly and severally liable to the … Read the rest

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M&A Trend In 2008

In the first financial quarter of 2008, a steady trend in M&A activity is patent. The weak dollar, the economic slowdown, banks’ lack of liquidity, or the motivation to add shareholder value are all viable reasons for the trend in M&A activity. Some corporations, in 2007, projected M&A to remain strong until, “private-equity buyers pushed up target prices too high and economic growth slow[ed].” [1] A New York investment bank for media and information industries tracked buyouts in the media world for the first quarter of 2008 and reported 202 transactions that had a total value of $13.4 billion. [2] This figure is in no way a cap on the total dollar value of all M&A activity in the first quarter since the $13.4 billion represents only M&A activity in the media and information industries.

 

M&A Trend In the Second Quarter

 

The second quarter of 2008 has seen

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Will the XM-Sirius Merger Pass FCC Regulations?

I. Introduction

     On February 19, 2007 satellite radio rivals Sirius Satellite Radio and XM Satellite Radio announced their intention to merge. [1] Both companies have experienced billions of dollars in losses. [2] Their net debt is approximately $1.6 billion. [3] According to Wall Street equity analysts, this merger will help the financial future of both companies by cutting their costs and resulting in a savings of over $3 billion . [4] However, the two companies have major hurdles to overcome. One hurdle was antitrust concerns about the merger by the Department of Justice. [5] On March 24, 2008 the United States Department of Justice closed its investigation and approved the XM-Sirius merger, finding that the merger would not harm consumers or competition. [6] Still, the XM-Sirius merger has one more obstacle in its path – the approval of the Federal Communications Commission (FCC). [7] In order for XM

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Creating Stability in the Airline Industry through Merger

I. Introduction

In the mid-1980s the airline industry experienced merger mania. Delta bought up Western. [1] Pan Am merged with National [2]. Texas International and New York Air merged with Continental and People Express. [3] Now this trend has reemerged through the possible merger of Delta, the third-largest U.S. airline in terms of passenger traffic, with Northwest, the fifth-largest carrier, to create the largest passenger airline in the world. [4] Executives of both airlines have agreed on most of the basics of a merger, but talks have stalled over the issue of integrating workers. [5] As talks have stalled, the question remains whether Delta and Northwest should merge. This article will discuss the implications of the Delta-Northwest merger. First, it will discuss the antitrust considerations. Second, it will examine the likely impact of the merger on employers, shareholders, and customers. Finally, this article will conclude on whether or not the

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A New Height For Internet Search?: The Micro-Hoo Deal

Microsoft’s Offer

A $44 billion bid by Microsoft (“MSFT”) to acquire Yahoo (“YHOO”) may be an indicator of just how desperate Microsoft is to dominate the internet search market. [1] This bid may be reflective of Google’s threat to the world’s largest software maker. [2] With the offer on the table, analysts can only speculate about Yahoo’s response to the $44 billion possible merger.

Yahoo’s Evaluation

Microsoft’s proposal is currently being evaluated by Yahoo. However, Yahoo CEO Jerry Yang may be unlikely to accept the bid, because accepting the bid may be indicative of Yang’s failure as CEO. Yang replaced former Yahoo CEO Terry Semel promising to secure a competitive share of search advertising revenue. [3] [4] Notwithstanding Yang’s ego, the recent trend in Yahoo’s finances may eventually lead management to accept the bid, [5] given its deteriorating profits as well as a murky 2008 outlook that caused a 23 … Read the rest

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Analyzing the Beer Market

I. Introduction

On Tuesday, October 9th, London-based
SABMiller and Denver-based Molson Coors announced they would be
combining their brewing operations in the United States, creating a
brewer called MillerCoors.[1] This move is the latest in a growing
consolidation trend among the brewers of the world’s beer. In 2002, South African Breweries purchased
Miller Brewing from Philip Morris, forming SABMiller.[2] Molson Coors was formed in 2004 when Molson, a Canadian brewer, merged with Adolph Coors.[3] Earlier this year, Anheuser-Busch announced that it would be importing Czechvar Beer, brewed by the Czech state-run brewery
Budejovicky Budvar NP[4] into the United States despite a century-long legal battle over the Budweiser name.[5] Most recently, Scotch & Newcastle, the U.K.’s largest brewer, is receiving numerous takeover bids from other major
brewers.[6]

The
first part of this article will examine the SABMiller and Molson Coors
United States brewing operations merger in some detail, including … Read the rest

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Post-Merger: What’s in a Name?

Amongst the due diligence, negotiations, and deal making in crafting a merger between two companies, one issue that arises is what to name the new company.  A newly merged company’s choice of name may have much to do with how shareholders, customers, and other corporate constituents perceive the newly merged company.

As one example of the importance of names, it has been previously estimated that among law firms “about half of the proposed mergers among equal-sized firms, with living, named partners, fail on the issue of firm name alone.”[1]  While this sounds drastic, choosing a name for a newly-merged company seems to have at least some bearing on the future business of the company.

In some instances, changing names after a corporate transaction can be a positive signal to corporate workers and consumers.  After DaimlerChrysler sold its majority interest in Chrysler, Chrysler celebrated its return to its pre-merger name and

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Why We Should Care About “Meandering Giants”

Healthcare mergers are topping headlines as what the Economist calls “meandering giants.”[1]  Most recently, CVS Corp. acquired Caremark Rx Inc. in a $26 billion acquisition agreement.[2]  Some wonder whether these mergers will lead to a “meandering giant syndrome,” where companies that grow too much may “stifle innovative culture that smaller companies tend to have,” leading to loss of corporate identity and employee enthusiasm.[3]  In other words, the Economist seems to be questioning whether the merger of major companies in the healthcare industry has a contemplated direction, or whether the pharmaceutical giants are “meandering” towards a possible corporate detriment.  As a proposed answer to the Economist’s question, I suggest that the pharmaceutical giants are lining up as merged entities to take advantage of the economies of scale, rather than meandering aimlessly. 

The Economist points to a number of factors underlying the merger of pharmaceutical giants.  The research costs of new

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