MERGERS AND THE BUSINESS HEALTH

Prepared by: Jammie Ann Felipe

Mergers and the Business Health

Do mergers create value?

Corporate Alliances

or Strategic Alliance, a cooperative deal that stops short of a merger.

Form of Corporate Alliance

Joint Venture A corporate alliance in which two or

more independent companies combine their resources to achieve a specific, limited objective.

Private Equity Investments

Leveraged Buyout (LBO) A situation in which a small group of

investors (which usually includes the firm’s managers) borrows heavily to buy all the shares of a company.

Private Equity Investments

Divestitures The sale of some of a company’s

operating assets.

Types of Divestitures

Spin-Off A divestiture in which the stock of a

subsidiary is given to the parent company’s stockholders.

Carve-Out A minority interest in a corporate

subsidiary is sold to new shareholders, so the parent gains new equity financing yet retains control.

Liquidation Occurs when the assets of a division are

sold off piecemeal rather than as an operating entity.

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