determine whether mergers really create value B u s i n e s s F i n a n c e

determine whether mergers really create value B u s i n e s s F i n a n c e

the case is attached with all the question.

I want all the questions to be answered correctly and well written in a professional way please.

Here are the questions of the case study:

a.Several reasons have been proposed to justify mergers. Among the more prominent are (1) tax considerations, (2) risk reduction, (3) control, (4) purchase of assets at below replacement cost, (5) synergy, and (6) globalization. In general, which of the reasons are economically justifiable? Which are not? Which fit the situation at hand?Explain.

b.Briefly describe the differences between a hostile merger and a friendly merger.

c.What are the steps in valuing amerger?

d.Use the data developed in the table to construct the L division’s free cash flows for 2016 through 2018. Why are we identifying interest expense separately when it is not normally included in calculating free cash flows or in a capital budgeting cash flow analysis? Why is investment in net operating capital included when calculating the free cashflow?

e.Conceptually, what is the appropriate discount rate to apply to the cash flows developedinpartc?Whatisyouractualestimateofthisdiscountrate?

f. What is the estimated horizon, or continuing, value of the acquisition; that is, what is the estimated value of the L division’s cash flows beyond 2018? What is LL’s value to Hager’s shareholders? Suppose another firm were evaluating LLasanacquisitioncandidate.Woulditobtainthesamevalue?Explain.

g.Assume that LL has 20 million shares outstanding. These shares are traded relativelyinfrequently,butthelasttrade(madeseveralweeksago)wasata price of $11 per share. Should Hager’s make an offer for Lyons Lighting? If so, how much should it offer per share?

h.How would the analysis be different if Hager’s intended to recapitalize LL with 40percentdebtcosting10percentattheendof4years?Thisamountsto

$221.6 million in debt as of the end of 2017.

i.There has been considerable research undertaken to determine whether mergers really create value and, if so, how this value is shared between the parties involved. What are the results of thisresearch?

  • What method is used to account formergers?
  • What merger-related activities are undertaken by investmentbankers?

l.What are the major types of divestitures? What motivates firms to divestassets?


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