Читать книгу Applied Mergers and Acquisitions - Robert F. Bruner - Страница 130

A strategic decision to focus or restructure the firm poses the choice about degree (partial deployment or outright exit) and method. Here, the possible transactions also span a wide range of alternatives.

SALE OF MINORITY INTEREST The sale of a block of shares to another firm gains the selling firm fresh capital and attracts a committed partner who might be induced to contribute know-how or other resources. This alternative should be compared to a public offering of shares (i.e., for pricing and costs). The investor may seek advantageous (i.e., low) pricing, arguing that it amounts to a private transaction. The trade-off for the issuer is whether the other resources the investor might contribute will compensate for any private transaction discount. An added consideration is political: How will the minority stake affect the balance of voting power in the firm, and how will other equity investors respond? Sometimes a minority stake is prelude to a takeover.

SALE OF JOINT VENTURE INTEREST The sale of a partial interest in a joint venture to a partner attracts fresh capital for the venture and the participation of a partner with know-how and other resources. Compared to the minority stake, this has the virtue of less political impact and affords more transparency about the contributions of the respective sides.

DIVESTITURE OR ASSET SALE The business unit, or certain assets in the unit (such as a factory), could be sold outright to an unrelated party. This raises funds for your firm and possibly frees it from a money-losing proposition. While divestitures account for a large proportion of M&A activity (26 to 35 percent of all deals are divestitures), two types of sales deserve special mention. In the leveraged buyout/going private transaction, the management of the unit will organize an investor group and debt financing with which to pay for the unit. Usually the ability to sell a unit into an LBO depends on its capacity to succeed as a stand-alone entity and on its capacity to bear debt used to finance the transaction. Chapter 13 discusses LBOs and other highly leveraged transactions in more detail. The liquidation is the extreme divestiture strategy: the firm sells all of its assets, pays any outstanding liabilities, dividends the net proceeds to shareholders, and then dissolves. Bruner et al. (1979) explored the liquidation of UV Industries, a Fortune 500–ranked firm, in 1979. Triggered by a hostile raid, the firm commenced a voluntary liquidation that yielded a return of 163 percent over its preraid value. Exhibit 6.14 illustrates the divestiture alternative.

CARVE-OUT This tactic organizes the business unit as a separate entity and sells to the public an interest in the equity of the unit through an initial public offering (IPO). This generates cash for the parent, monetizes the parent’s interest in the subsidiary, and creates more transparency for investors to assess its value. Exhibit 6.14 presents the carve-out alternative.

SPIN-OFF Like the carve-out, the spin-off creates a separate entity for the business and results in public trading of its shares with majority ownership retained by the parent. But in the case of a spin-off, the shares are given to the parent’s shareholders in the form of a dividend. No money is exchanged. Where one firm existed before, two firms exist after. At the point of spin-off, the same shareholder group owns both companies (though ownership will probably change once trading commences in the new firm’s shares). Exhibit 6.14 diagrams the spin-off alternative.

EXHIBIT 6.14 Comparison of Divestiture, Spin-off, Carve-out, Split-off, and Tracking Stock Where the Parent Considers Redeploying Subsidiary B

SPLIT-OFF, OR EXCHANGE In this instance, shares of the subsidiary business are swapped by shareholders of the parent for shares in the subsidiary. This results in a freestanding firm, no longer a subsidiary of the parent, owned initially by a subgroup of the former parent’s shareholders. Exhibit 6.14 illustrates the split-off alternative.

TRACKING STOCK Here, there is no transfer of ownership of a business or its assets. But a special equity claim on the subsidiary business is created, the dividend of which is tied to the net earnings of the subsidiary. This results in monetization of the subsidiary and in greater transparency. Exhibit 6.14 illustrates the tracking stock alternative.

FINANCIAL RECAPITALIZATION This focuses on changes in the firm’s capital structure.⁵ The intent is usually to optimize the mix of debt or equity, or to adjust the equity interests in the business. Regarding the debt/equity mix, firms might undertake a leveraged restructuring in which the firm borrows debt to repurchase shares or pay an extraordinary dividend. Chapters 13, 20, and 34 explore the implications of capital structure altering transactions. Regarding changes in the equity base, firms could contemplate an ESOP restructuring in which the firm purchases its own shares (or issues them from its treasury) for sale to an employee stock ownership plan. Alteration of both the capital mix and equity ownership is seen in reorganization in bankruptcy in which the firm exchanges debt obligations for equity interests to reduce its debt burden under the protection of the court.

Exhibit 6.15 summarizes the activity in divestitures, spin-offs, and carve-outs from 1986 to 2002. The number of divestitures increased dramatically over this period, by almost five times. Also, relative to the total number of M&A transactions, divestitures account for about one-quarter to one-third of the total over time. The number of spin-offs and carve-outs is highly variable over this period and, relative to M&A activity, quite small.

EXHIBIT 6.15 Volume of Divestitures, Spin-offs, and Carve-outs by Year and as a Percentage of Total M&A Activity

	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002
Number of transactions
Divestitures	1,357	1,474	2,103	2,895	3,701	5,128	5,002	5,241	5,414	6,261	6,580	7,063	7,044	7,811	7,735	6,998	6,283
Spin-offs	34	28	38	37	48	31	42	46	39	63	76	76	118	81	102	63	35
Carve-outs	3	5	6	21	40	70	76	167	240	176	142	64	32	32	44	45	20
As a % of M&A deals
Divestitures	35.8%	30.8%	31.8%	31.5%	36.8%	37.2%	37.8%	37.8%	33.2%	31.8%	31.4%	30.9%	28.0%	28.5%	26.3%	31.3%	34.3%
Spin-offs	0.9%	0.6%	0.6%	0.4%	0.5%	0.2%	0.3%	0.3%	0.2%	0.3%	0.4%	0.3%	0.5%	0.3%	0.3%	0.3%	0.2%
Carve-outs	0.1%	0.1%	0.1%	0.2%	0.4%	0.5%	0.6%	1.2%	1.5%	0.9%	0.7%	0.3%	0.1%	0.1%	0.1%	0.2%	0.1%

Source of data: Thomson SDC Financial Services.