M&A Flashcards by Max S

Q

Diversification - benefits

A

Co-insurance - if financial distress is costly
tax reduction - if one division earns a profit and another earns a loss
use managerial talent more broadly
Internal labor market
Synergies

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Q

Costs of diversification

A

Agency problems - overpayment due to empire building, overconfidence, etc.
Inefficient cross-subsidization - corporate socialism - divisions with different cost of capital
managerial talent spread across more assets
Incentive alignment problems - can’t create stock options for each division

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Q

Diversification - the evidence

A

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Q

The Diversification Discount

A

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Q

Successful Diversification

A

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Q

Possible Explanations for diversification discount

A

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Q

The Adjusted Present Value Method - Overview

A

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Q

APV vs WACC - practical implications - what to prefer

A

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Q

Where do Realized Synergies Come From

A

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Q

Merger returns: hostile vs. friendly

A

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Q

Does activist investing work?

A

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