10 Top Takeover Candidates for 2011 (1 Down, 9 to Go) ByConrad de Aenlle Kudos to Footnoted, a Morningstar subsidiary that specializes

in forecasting mergers and acquisitions. Footnoted, which does its thing in part by ferreting out clues ensconced in regulatory filings, recently identified Smurfit-Stone Container as one of its top 10 merger candidates for 2011. Stock of Smurfit-Stone (SSCC), which makes cardboard and other packaging material, leaped 27 percent after its deal to be taken over by RockTenn (RKT) was announced. The companies are mostly small, with market values ranging from a few hundred million dollars to $6 billion, and they are scattered across a wide variety of industries. Here they are: Abiomed (ABMD). Morningstar's analysts call this medical device maker "an attractive acquisition target for one of the industry's big fish, including Abbott Laboratories (ABT), Johnson & Johnson (JNJ) or Medtronic (MDT), giving them an opportunity to pick up a nice range of innovative cardiology and heartsurgery products." Copano Energy (CPNO). Footnoted points out that executives at Copano, which has a variety of oil and gas activities, have been working on an exit strategy by beefing up their severance pay should they leave. In another possible harbinger of a merger, the report says that Copano filed a note with regulators saying that it may have trouble covering dividend payments. Infinera (INFN). Sounds like a mid-priced, midsized car, but Infinera produces optical networking technology. This one might be ripe for a takeover, Footnoted suggests, because its founder just left the company (replacement bosses are thought to have less of a sentimental attachment to their companies and therefore may be more inclined to accept takeover offers) and because some institutional investors have "increased their stakes dramatically." Lawson Software (LWSN). This company makes software used in running dairy farms, of all things. No divining of runes needed to determine that Lawson may be a takeover candidate. The report notes that Carl Icahn, a corporate raider for decades, has been accumulating shares to the point that he holds nearly 11 percent of the company. Footnoted highlights this passage from a regulatory filing: "The Reporting Persons intend to seek to have conversations with management of the Issuer to discuss the business and operations of the Issuer and the maximization of shareholder value."

Leap Wireless (LEAP). The company provides prepaid cell phone service and is rumored to have been in talks with Metro PCSCommunications (PCS). Another possible suitor is Sprint Nextel(S). Either way, "we see suggestions in Leap's filings that it remains very much in play," Footnoted says. LKQ Corp. (LKQX). This maker of after-market auto parts has strong cash flow and a dominant position in its market, which could make it ripe to be plucked by a private-equity firm, Footnoted says. A new chief executive and the introduction of "chunky stock option grants" reinforce that belief. Pride International (PDE). One potential suitor for this oil service firm is Seadrill (SDRL), which operates in many of the same locations and already owns nearly 10 percent of Pride's shares. Derivative contracts taken out by Seadrill indicate to Footnoted that it is ready to double its stake in Pride, which is the largest company of the 10, with a market value of $6 billion. Select Medical Holdings (SEM). Select operates outpatient rehabilitation clinics and long-term, acute-care hospitals nationwide. In a move reminiscent of the one at Copano, Select's bosses have been tinkering with their contracts to make sure they are properly compensated if they should be let go - after a takeover, for instance. Stage Stores (SSI). Stage has a portfolio of retail chains operating at strip malls across the country. The report notes that Stage said in a regulatory filing that it had added a seat to its board for Gabrielle Greene, a general partner of Rustic Canyon/Fontis Partners. That's a private equity firm specializing in, among other things, companies in the western United States (Stage is based in Houston) doing business in consumer goods.

Merger Acquisition SWOT Analysis for Riordan Manufacturing

Merger Creates Wealth

For Riordan Manufacturing to gain from a merger it has to create synergies. Synergies are anticipated benefits from the merger. Basically shareholders of both firms must come to a consensus that merged stocks is more beneficial than holding to individual share of the merging companies Factors contributing to a pro-merger argument are: (1) economy of scale; (2) tax benefits; (3) capitalization on unused debts; (4) complimentary in financial slack; (5) removal of ineffective managers; (6) increased market power; (7) reduction in bankruptcy costs; and (8) buying below replacement costs merger. Economy of Scale. "Wealth can be created in a merger through economies of scale." In a typical merger number of operational layers become one; thus, redundancies are eliminated. Also, by merging two entities better producing resources are kept and unwanted financial burdens are phased out. Tax Benefits. Tax reduction through a merger is in fact creation of wealth. There are two ways that tax-benefits can create wealth: (1) utilization of operation loss tax-credit (forward and back); and (2) reevaluation of depreciated assets. Utilization of operation loss tax-credit. In a merger, it is stipulated that one of the two merging firms has a weaker financial status; and the other merging firm has strong finances. Tax credits gained from operation loss by one of the merging firms can compensate for tax liabilities incurred by profitability of the other firm.

Reevaluation of depreciated assets.

In a merger, previously depreciated assets can be revalued and tax benefits arising from increased depreciation of revalued assets create wealth. Capitalization on Unused Debts. Companies for various reasons may not take maximum advantage of their debt capacity. Merger creates climate of development opportunities, and a strong management that emerges from the merger can increase debt financing, and fully utilize the tax benefits associated with the increased advantage. Complimentary in Financial Slack. "When cash-rich bidders and cash-poor targets are combined, wealth may be created." A cash-poor entity has a more difficult time accessing market capital; therefore, a merger allows positive net present value project to be accepted. Removal of Ineffective Managers. Merger opens the door for a wider selection of human capital, especially selecting effective managers. If one of the merged firms has ineffective management, as a result of the merger, more effective managers are kept and others are marginalized or eliminated. Increased Market Power. "The merger of two firms can result in an increase in market or monopoly power." Although a merger that monopolizes a market is illegal; nonetheless, such merger creates wealth and provides wider market access and cross-marketing opportunities to both merging firms. Reduction in Bankruptcy Costs. Undoubtedly, diversification minimizes enterprise failure. In case where a firm is failing and is forced to a possible liquidation or bankruptcy be creditors, assets are sold at a depressed value, and what channels down to stockholders are even less amusing since legal fees and selling costs are levied before disbursement of any fund to anyone. A merger may be a good solution for the creditors and the stockholders to absorb least amount of collateral damage. Buying Below Replacement Costs Merger.

"Situations sometimes arise where it is cheaper to acquire an entire company than to acquire the assets the company owns." Due to reality of market, sometimes it is cost-effective to merge with a rival to acquire its assets than to attain those assets in any other way. Determination of a Firm's Value For a merger to be of value to Riordan Manufacturing, the company must analyze the value of the potential merger by quantifying the worth of acquired firm (Reference book Chapter 23 page 808). The value of acquired firm depends on number of elements such as: (1) book value; (2) appraisal value; (3) "chop-shop" or "break-up" value; (4) "free cash flow" or "going concern" value. Book Value. "Book value generally used in this context to refer to the book or historical cost value of the firm's net worth." Appraisal Value. Appraisal value is quantifying the worth of a company by an independent appraiser. This value is closely tied to the replacement cost of the assets. "Chop-Shop" or "Break-Up" Value. Dean Lebaron and Lawrence Speidell theorized that multiline companies that are undervalued can worth more if separated and sold individually. "Free Cash Flow" or "Going Concern" Value. The going concern value is estimated based on "incremental fee cash flows to the bidding firm as a result of the merger or acquisition."

Situational Analysis Riordan Manufacturing has two derogatory circumstances: first, replacement of the Pontiac plant with a plant in Mexico; and second, excess cash. These circumstances create numerous opportunities and conflicts for the company; however, with proper planning, the company can capitalize and reach a net gain. Pontiac Plant Closure Based on the company's executive summary, the Pontiac plant is was shut down; however, to make matter more unfavorable is opening of the Mexican factory, which at the very minimal raises eyebrows over jobs going south. This negative publicity can have tremendous impact with the Defense Department, one of Riordan's clientele. As a recourse to loosing clientele due to closure of Pontiac Plant and shifting operations south to the Mexican Factor, Riordan Manufacturing may choose to acquire or merge with a U.S. based company in the same industry that is suffering due to lack of access for capital or poor management disciplines and practices. Excess Cash Excess cash on hand can be problematic, because, it is display of management's inability to manage resources properly. Additionally, the company paid $943,274 in taxes, which is six and half times the amount of interest paid ($143,175) to secure over $3.5 million in credit. The company can afford to secure a $23 million worth of mergers to offset money paid to taxes. Strengths, Weaknesses, Opportunities, and Threats Analysis A definitive parallel acquisition by Riordan Manufacturing provides an example of the ongoing consolidations in the plastic manufacturing industry. Coming after closure of Pontiac plant and launch of the Mexican plant, this acquisition provides additional evidence of growing dichotomy between aggressive management and smart investment within Riordan Manufacturing and its parent company. Strengths The strengths that Riordan Manufacturing could be gaining from the acquisition would be total control of the company, acquiring stock for a minimal price and

reducing overall debt. There are also other factors to include with regards to the acquisition. Riordan Manufacturing could block their major competitors with this acquisition and bring in a higher net project through the acquisition. Whether the acquired firm is left independent or dissolved within Riordan's operation, the takeover can be a win-win situation. End-to-end solutions. Acquisition of a parallel unit will greatly augment Riordan's plastic manufacturing portfolio and allows it to offer end-to-end manufacturing and warehousing solutions. Dominance over market share. Acquisition can bring in a positive cash flow, untapped lines of credit, and the customer base of the acquired firm. Acquisition also provides added support to Riordan's operations and enhances Riordan's market share. Assets control. Riordan can control more assets for less money through the merger than if it was to acquire those assets any other way. Weaknesses The weaknesses in business acquisitions mostly comes from risk's taken within the merged company or through external factors. As lucrative the deal may be, facing problems are much of reality that Riordan has to encounter. A serious opposition to the merger can be the management, labor unions, the existing shareholders of the target firm, vendors, and competition. Management and labor unions. Management and labor unions may oppose the merger because they perceive their elimination to be inevitable. The management may act to protect their position by taking the poison pill and making the merger unviable for Riordan. The labor unions with the same notion as the management may feel that their jobs can be cut and may picket the merger, file for an antitrust lawsuit, or walk off and make the plant inoperable. Any of aforementioned situations will create a red-light for any lending company seeking to finance the deal.

Shareholders. Shareholders of the target firm can have two perceptions: (1) they are sitting on a pile of gold and there is no reason to negotiate for what they have over what they could have; and (2) even though the company they own is facing financial setbacks; however, their return can be better through a bankruptcy liquidation or reorganization of the business. Vendors. Because Riordan operates in China and Mexico vendors and supplier of the target firm can see a real threat as they may get replaced by Riordan's own supplier with cheaper raw material. Subsequently, they may force the target firm to liquidate assets to repay outstanding debts; and the financial stress makes the acquisition unfeasible to finance. Competition. Target firm's competition as well as Riordan's competition may feel the treat that this acquisition will create larger market domination for the merged companies. As a result, other competing companies may file antitrust lawsuits or help the target firm submerge from financial stress on terms of turning down acquisition opportunities. Opportunities Riordan Manufacturing has an enormous opportunity to acquire another company and merge. This will provide Riordan Manufacturing with the opportunity to expand their business practices and manufacturing. By merging, Riordan Manufacturing will be able to complete more projects and acquire more clients that in turn will produce more capital for the company. Leadership emergence. Riordan will be able to position itself as providing a leading plastic manufacturing and warehouse solutions that include medical industry, defense industry, consumer industries, as well as hardware and high-tech industries. Self-reliance. Rather than relying on partners or new joint ventures for robust production and delivery, Riordan will now expands its own and thus be able to determine future

product directions. Expanded operations translate to more manufacturing hours, bigger warehousing capacities, and more effective logistics system. Tax-minimization. Riordan can take maximum advantage of tax-breaks and reinvest its tax payments toward owning another profitable operations. Riordan pays six and a half times the amount of interest on existing liabilities to taxes; this means that with the tax incentives Riordan will gain it can invest in six other profitable entities. Typically in mergers there are two tax advantages, but Riordan has three tax advantages: (1) Riordan can use its tax reduced incentives on new projects; (2) Riordan can take advantage of target firms operation less tax-credit; and (3) reevaluation of depreciated assets at the target firm. Threats Riordan Manufacturing has a very big threat that comes with this acquisition and with any business merger. There is a potential that the deal could fall through or that the profits from the company will not be enough to recover. Furthermore, Riordan will need to explain why, after shutting down Pontiac Plant it is acquiring another firm in the same industry. Competition hostility. Riordan's competitors can be expected to create market fear, uncertainty, and doubt about how merger effects Riordan's product line and if Riordan is going to utilize an inferior product line in favor of profitability. It would not be unexpected for plastic manufacturing competitors to aggressively target the new merged organization in many ways, direct or indirect. Government action. Government may see this merger as unhealthy for the target firm's consumer market, thus blocking the merger and costing Riordan time and money. Internal factors. The most difficult factor for the merger comes from within the Riordan family of companies. First, Riordan Manufacturing's own board and management may oppose the merger. Second, the parent company may oppose the merger. Third, employees who are uncertain of their own status with Riordan may sabotage the deal be leaking out information, bringing on rival bidder to the table for the target firm, or even worst, create an atmosphere of mistrust among workers.

Case study: Krafts takeover of Cadbury

The story In 2009, US food company Kraft Foods launched a hostile bid for Cadbury, the UK-listed chocolate maker. As became clear almost exactly two years later in August 2011, Cadbury was the final acquisition necessary to allow Kraft to be restructured and indeed split into two companies by the end of 2012: a grocery business worth approximately $16bn; and a $32bn global snacks business. Kraft needed Cadbury to provide scale for the snacks business, especially in emerging markets such as India. The challenge for Kraft was how to buy Cadbury when it was not for sale. The history Kraft itself was the product of acquisitions that started in 1916 with the purchase of a Canadian cheese company. By the time of the offer for Cadbury, it was the worlds second-largest food conglomerate, with seven brands that each generated annual revenues of more than $1bn. Cadbury, founded by John Cadbury in 1824 in Birmingham, England, had also grown through mergers and demergers. It too had recently embarked on a strategy that was just beginning to show results. Ownership of the company was 49 per cent from the US, despite its UK listing and headquarters. Only 5 per cent of its shares were owned by short-term traders at the time of the Kraft bid. The challenge Not only was Cadbury not for sale, but it actively resisted the Kraft takeover. Sir Roger Carr, the chairman of Cadbury, was experienced in takeover defences and immediately put together a strong defensive advisory team. Its first act was to

brand the 745 pence-per-share offer unattractive, saying that it fundamentally undervalued the company. The team made clear that even if the company had to succumb to an unwanted takeover, almost any other confectionery company (Nestl, Ferrero and Hershey were all mentioned) would be preferred as the buyer. In addition, Lord Mandelson, then the UKs business secretary, publicly declared that the government would oppose any buyer who failed to respect the historic confectioner. The response Cadburys own defence documents stated that shareholders should reject Krafts offer because the chocolate company would be absorbed into Krafts low growth conglomerate business model an unappealing prospect that sharply contrasts with the Cadbury strategy of a pure play confectionery company. Little did Cadburys management know that Krafts plan was to split in two to eliminate its conglomerate nature and become two more focused businesses, thereby creating more value for its shareholders. The result The Cadbury team determined that a majority of shareholders would sell at a price of roughly 830 pence a share. A deal was struck between the two chairmen on January 18 2010 at 840 pence per share plus a special 10 pence per share dividend. This was approved by 72 per cent of Cadbury shareholders two weeks later. The key lessons In any takeover, especially a cross-border deal in which the acquired company is as well known as Cadbury was in the UK, the transaction will be front-page news. In this case, it was the lead business story for at least four months. Fortunately, this deal had no monopoly or competition issues, otherwise those regulators could also have been involved. But aside from any regulators, most other commentators will largely be distractions. It is important for the acquiring companys management and advisers to stay focused on the deal itself and the real decision-makers the shareholders of the target company. As this deal demonstrates, these shareholders may not (and often will not) be the long-term traditional owners of the target company stock, but rather very rational hedge funds and other arbitrageurs (in Cadburys case, owning 31 per cent of the shares at the end), who are swayed only by the offer price and how quickly the deal can be completed. Other stakeholders may have legitimate concerns that need to be addressed but this can usually be done after the deal is completed, as Kraft did.

Takeovers - the Indian Experience Sunday, March 04, 2012

A fantastic piece here in the Economist on the rapid globalization of Indian firms such as Tata Group - a key case study for A2 students looking at takeovers and mergers Tatas takeover of Tetley Tea (2000), Corus (2007) and Jaguar Land Rover (2008) are perhaps the most high-profile examples here in the UK of cross-border transactions led by Indian firms - but there have been many others. The Economist estimates that the value of such deals is around $130bn over the last decade. However, the article puts that investment by Indian firms in overseas takeovers in some useful context. Acquirers in other emerging markets (particularly China, Brazil and Russia) have been even more active. A question mark is raised too about whether Indian-led takeovers are likely to prove any more successful than the experience of cross-border takeovers generally. A good evaluative point is made about how to create shareholder value from takeovers; To succeed it is not enough to run the acquired firm well. It must also be bought for a sane price There is some useful analysis in the article about whether Indian-led takeovers have been successful - from a financial perspective. Some great evidence here for BUSS4 students, not the least when the relative performance of Tatas investments in JLR (a success) and Corus (less successful) are compared. In terms of both return on capital and absolute change in profitability, the Tata / JLR takeover is the shining star: it is explained like this: JLR, where earnings have soared despite a near-death experience after the 2008 crash. A chunk of the recovery is due to the fall of the pound: JLRs plants are mainly in Britain, though it sells largely in other countries. But that is not the whole story. Under Tatas ownership JLR has also launched a killer product, the Range Rover Evoque, and cracked emerging markets, not least China.

The Main Motives Behind Takeovers and Mergers Monday, March 26, 2012 by Jim Riley

If strategy is choice, then what motives lie behind a choice to take a risk by investing in a takeover or merging with another firm? Its an important question and one that students researching external growth via takeovers and mergers need to consider. By understanding the key motives for a takeover, it makes it easier for students to evaluate the likely success or failure of the transaction, including the potential for synergies to provide sufficient shareholder value. I like the approach taken by Johnson & Scholes, who divide up the motives for M&A into three main groups: (1) Strategic (2) Financial (3) Managerial Of course, there can be motives from all three of these groups involved in a particular transaction. However, it is important to identify the main motivation for each takeover or merger - by allocating it to one of the three groups.

Ive outlined the key differences between each of these three merger motive groups below. Lets take a brief look at how the distinction can be made between them.

Strategic motives In general, strategic motives tend to be the easiest to justify and the majority of transactions they are the most influential and important. However, just because there is a strong stated strategic motive doesnt guarantee success. The chosen takeover target might be the wrong one; the price paid might be too high; the integration process poorly managed. On balance, though, if a takeover has a sensible strategic fit (it makes sense in that it supports the achievement of corporate objectives) then a student can legitimately suggest a takeover had the right motives. As you can see from the graphic below, there is a wide variety of potential strategic motives. Indeed, a takeover can have more than one strategic motive - it all depends on what the corporate objectives are. For example, takeovers that involve horizontal integration (e.g. Cooperative / Somerfield & WM Morrison / Safeway) are often pursued to increase both the scale and the market share of the combined firm. Successful horizontal integration ought to involve the achievement of significant cost synergies, which in turn ought to lead to higher profit margins and lower unit costs, which therefore ought to be make the combined business more competitive. In theory! I must admit, I find the strategic motives behind takeovers fascinating. These days it is rarely about a firm simply becoming bigger. More often, it is about a firm wanting to use a takeover to acquire capabilities and competences, often related to technological change or geographical change. For example, Googles takeover of Motorola Mobility in 2011 was really about Google gaining access to /control of a wide variety of patents and other technologies that will enable it to support the Android operating eco-system against Apple and Microsoft/Nokia. Students ought to be able to identify at least one main strategic motive involving any takeover or merger involving two corporates (see below for the complication involving private equity investors). So for example, I would say that the strategic motives for the following takeovers were: Transaction (Main motives for the transaction) Kraft / Cadbury: Establish global market leadership in confectionery & access emerging markets Google / Motorola: Acquire valuable smartphone patents & manufacturing expertise

Tata / JLR: Economies of scale & acquire expertise, brands, capacity and distribution Santander / Abbey: Market entry (UK) & establish base for further acquisitions to build market share WM Morrison & Safeway: Increase market share & exploit economies of scale to improve competitiveness HMV / MAMA: Diversification into fast-growing markets & reduce reliance on retailing British Airways / Iberia: Consolidation; economies of scale & survival: positioning for further takeovers

Financial motives All takeovers and mergers have financial motives of one kind or another - each is designed to achieve a satisfactory rate of return for the investment and risk been taken, However, there are also circumstances where the underlying motive for the transaction is financial rather than strategic. In other words, it is the financial returns that are most important and which drive the deal. A good example for students to consider would be any takeover involving a private equity (or venture capital) buyer. Private equity firms are professional investors who manage investment funds specifically designed to be used in corporate transactions. These can range from relatively small-scale management buyouts to much larger leveraged buy-outs where a substantial proportion of the finance used is in the form of debt (rather than equity).

Private equity firms have been highly active in takeovers across developed economies for many years now. Almost by definition, they do not have strategic motives for their investments, since they are simply acting as financial investors. Heres how it works, in a nutshell. A private equity firm raises the cash to make investments by launching a fund. Who invests in that fund? Usually pension schemes, high net worth individuals etc - who are looking to achieve high returns by passing their money onto professional investors (the private equity people). Once the fund is raised, the private equity team gets to work making investments in its target sectors. It might have criteria relating to markets, industries, deal size, geography. The private equity fund will often specialise in particular industries or types of transaction, in order to better understand the risks being taken. This also helps them identify potential takeover targets. So, back to those financial motives. Typically a private equity fund will aim to achieve an annual rate of return of around 25-40% p.a. over the course of the funds life. A private equity takeover is unlikely to offer many opportunities for cost or revenue synergies (since the investor is just a professional finance firm). So how is a return achieved? By picking target investments that still have good growth potential and/or where significant opportunities exist for profit improvement (e.g. through cost cutting). Not for nothing is venture capital (private equity) also sometimes referred to as vulture capital! Weve listed a few examples of private equity takeovers in recent years below: KKR buys Pets At Home 1bn http://goo.gl/qjrsP Apax Partners buys Tommy Hilfiger $1.6bn http://goo.gl/IbHLF Blackstone Group buys Center Parcs 205m http://goo.gl/R2BDd Blackstone Group buys Legoland Parks 259m http://goo.gl/hkYsF KKR buys Alliance Boots 11.1bn http://goo.gl/swyfD Terra Firma buys EMI 4.2bn http://goo.gl/jT7va Blackstone Group buys Hilton Hotels $26bn http://goo.gl/NtcSN Bridgepoint Capital buys Pret A Manger http://goo.gl/VjX5T Blackstone Group buys SeaWorld $2.3bn http://goo.gl/3cWIb Doughty Hanson buys Vue Entertainment 450m http://goo.gl/NlzVb Bridgepoint Capital buys Wiggle180m http://goo.gl/pyQXw CVC Capital Partners buys Virgin Active 450m http://goo.gl/NOMdN

Managerial motives When a takeover or merger fails, you can often trace it back to what are called managerial motives. In general these are bad news for the shareholders of a business that is pursuing the takeover; it often results in a transaction that destroys significant amounts of shareholder value. Perhaps the best example recently was the RBS takeover of part of Dutch banking giant ABN Amro. RBS paid 10bn for their part of the deal (they invested alongside Belgian Bank Fortis and Santander Group). RBS got their part of the takeover horribly wrong, and ended up buying something that was worthless with an extra 5bn of liabilities thrown in for good measure. What followed is history RBS had to be rescued by the UK Government before it took most of the UK banking sector down with it. How could RBS have got things so wrong? Well, much went wrong with the takeover process (poor due diligence & inadequate integration planning). But the main problem was the the takeover was motivated by the wrong reasons. It was partly motivated by the vanity and egos of the senior management team, who believed in their own hype and simply wanted to continue building the RBS global empire. Students are very unlikely to have any experience of the financial system and cultural forces that encourage Boards of Directors to pursue takeovers and mergers. An entire industry populated by very bright and highly paid professionals exists in order to encourage and facilitate takeovers and mergers, often focusing on

managerial motives rather than strategic. When the vanity of a management team overcomes simple strategic logic and pushes on with a risk takeover, it should be time for shareholders to get outquick

ResearchBuster: Acquisitions Saturday, March 03, 2012 by Jim Riley

Our ResearchBuster blog posts are designed to help students identify and integrate examples of business strategy for their synoptic essays and exams. This ResearchBuster look at some of the most significant examples of takeovers / acquisitions in recent years Here is a selection of key acquisitions. Follow the link to identify at least one key strategic reason behind the deal: 1998: Merger of Daimler Benz and Chrysler http://news.bbc.co.uk/1/hi/business/88912.stm 1999: Merger of Exxon and Mobile Value: $82bn http://news.bbc.co.uk/1/hi/business/544288.stm 2000: Merger of Glaxo Wellcome with http://news.bbc.co.uk/1/hi/business/607187.stm Price: 130bn 2000: Buyer: Vodafone Target: Mannesmann Price: 112bn 2000: Buyer: Unilever Target: Ben & Jerrys Price: 203 million 2000: Buyer: Unilever: Target: Slim-Fast Foods Price: 1.44bn SmithKline Beecham

2001: Buyer: E.on Target: Powergen Price: 5.1bn 2002: Buyer: eBay Target: PayPal Price: $1.5bn 2002: Buyer: Hewlett Packard Target: Compaq Price: $25bn 2003: Buyer: Pearson Target: Edexcel Price: 20 million 2004: Buyer; WM Morrison Target - Safeway Price: 3bn 2004: Buyer: Santander Target: Abbey National Price: 8bn 2004: Buyer: Lenovo Target: IBM PC Business Price: $1.8bn 2004: Merger of Carlton and Granada http://news.bbc.co.uk/1/hi/business/2319563.stm 2005: Apax Partners (Private Equity) Target: Tommy Hilfiger Price: $1.6bn 2005: Buyer: eBay Target: Skype Price 1.4bn to form ITV plc

2005: Buyer: News Corporation Target: MySpace Price: $580 million 2005: Buyer: ITV plc Target; Friends Reunited Price: 175 million 2005: Buyer; Adidas Target - Reebok Price: 2.1bn 2005: Buyer Telefonica Target: O2 Price: 17.7bn 2005: Buyer: Cadburys plc Target: Green & Blacks Price: 20 million 2006: Buyer: Disney Target: Pixar Price: $7.4bn 2006: Buyer: Dubai Ports World Target: P&O Price: 3.9bn 2006: Merger of Arcelor and Mittal Steel http://news.bbc.co.uk/1/hi/business/5114290.stm Price: 33bn 2006: Buyer; Ferrovial Target: BAA plc Price: 10.3bn 2006: Buyer; First Choice Target; Late Rooms Price: 120 million

2006: Buyer; Nippon Sheet Glass Target: Pilkington Price: 1.9bn 2006: Blackstone Group (Private Equity) Target: Center Parcs Price: 205 million 2006: Buyer: Blackstone Group (Private Equity) Target: Legoland Parks Price: 259 million 2006: Buyer: Google Target: YouTube Price: $1.65bn 2006: Buyer: Procter & Gamble Target: Gillette Price: 30bn 2006: Buyer: LOreal Target: Body Shop Price: 652 million 2006: Buyer: Virgin Active Target: Holmes Place Price: not disclosed 2006: Buyer: Heinz Target: HP Foods Price: 470m 2007: Buyer; Tata Target: Corus Price: 5.8bn 2007: Buyer; BSkyB Target: Amstrad Price: 125 million

2007: Buyer: KKR (Venture Capital) Target: Alliance Boots Price: 11.1bn 2007: Buyer: Merlin Entertainments Target: Tussauds Group Price: 1bn 2007: Buyer: Terra Firma (Venture Capital) Target: EMI Price: 4.2bn 2007: Merger of MyTravel and Thomas Cook http://news.bbc.co.uk/1/hi/business/6353023.stm 2007: Merger of TUI and First Choice http://news.bbc.co.uk/1/hi/6465387.stm 2007: Buyer: Blackstone Group (Venture Capital) Target: Hilton Hotels Price : $26bn 2007: Buyer: Easyjet Target: GB Airways Price: 104million 2007: Merger of Taylor Woodrow and George Wimpey http://news.bbc.co.uk/1/hi/business/6494387.stm Value: 5bn 2008: Buyer; Tata Target: Jaguar Land Rover Price: 1.7bn 2008 - Buyer: Lloyds TSB Target: HBOS Price: 12.2bn 2008: Buyer: Santander Target: Alliance & Leicester Price: 1.3bn

2008: Buyer: Santander Target: Bradford & Bingley Price: 612 million 2008: Buyer: Tesco Target: E-Land (South Korea) Price: 958 million 2008: Buyer: Bridgepoint Capital (Private Equity) Target: Pret A Manger Price: not disclosed 2009: Buyer: Oracle Target: Sun Microsystems Price: $7.4bn 2009: Merger of Boots Opticians and Dollond & Aitchison http://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stm 2009: Buyer: Disney Target: Marvel Entertainment Price: 2.5bn 2009: Buyer: The Co-operative Group Target: Somerfield Price: 1.6bn 2009: Buyer: Resolution Target: Friends Provident Price: 1.9bn 2009: Buyer: HMV Target: MAMA Group Price: 42 million 2009: Buyer: Cisco Target: Pure Digital (Flip) Price: $590 million 2009: Merger of Orange UK and T-Mobile UK http://news.bbc.co.uk/1/hi/business/8243226.stm

2009: Buyer: Panasonic Target: Sanyo Price: 2.8bn 2010: Buyer: Deutsche Bahn Target: Arriva Price: 1.6bn 2010: Buyer: Philips-Van Heusen Target: Tommy Hilfiger Price : $3.0bn 2010: Buyer: Blackstone Group (Venture Capital) Target: SeaWorld Parks & Entertainment Price : $2.3bn 2010: Buyer: KKR (Venture Capital) Target: Pets At Home Price: 1bn 2010: Buyer: Unilever Target: Alberto Culver Price: 2.3bn 2010: Buyer: Resolution Target: AXA UK Price: 2.8bn 2010: Buyer;Kraft Foods Inc Target: Cadbury plc Price: 1.96bn 2010: Buyer; New England Sports Ventures Target: Liverpool FC Price: 300 million 2010: Buyer: Onex Target: Tomkins Price: 2.9bn

2010: Merger of United Airlines and Continental Airlines http://www.bbc.co.uk/news/business-11353161 2010: Buyer: Reckitt Benckiser Target: SSL International Price: 2.5bn 2010: Buyer: Coca-Cola Target: Innocent Price: not disclosed 2010: Buyer: Doughty Hanson (Private Equity) Target: Vue Entertainment Price: 450 million 2010: Merger of British Airways and Iberia http://www.bbc.co.uk/news/business-11862956 2010: Buyer: Asda Target; Netto Price: 778 million 2011: Buyer: Amazon Target: LoveFilm Price: 200 million (est) 2011: Buyer: Bridgepoint Capital (Private Equity) Target: Wiggle Price: 180 million 2011: Buyer; Whitbread Target: Coffee Nation Price: 60 million 2011: Buyer; Microsoft Target: Skype Price: 5.2bn 2011: Buyer: Google Target: Motorola Mobility Price: $12.5bn

2011: Carlyle Group (Venture Capital) Target: RAC Price: 1bn 2011: Buyer: Labelux Target: Jimmy Choo Price: 525 million 2011: Cheung Kong Infrastructure Holdings (CKI) Target: Northumbrian Water Price: 2.4bn 2011: Hewlett-Packard Target: Autonomy Price: 7 billion 2011: Buyer: Mattel Target: Hit Entertainment Price: 420 million 2011: Merger of Thomas Cook Travel Agents and Co-op Travel http://www.bbc.co.uk/news/uk-england-cambridgeshire-14550184 2011: Buyer: Tesco Target: Blinkbox Price: not disclosed 2011: Buyer: International Airlines Group (IAG) Target: British Midland (BMI) Price: 172 million 2011: Buyer: SABMiller Target: Fosters Price: 6.5bn 2011: Buyer: Muller Group Target: Robert Wiseman Dairies Price: 280 million

2011: Buyer: Virgin Active Target: Esporta Price: 78 million 2011: Buyer: CVC Capital Partners (Private Equity) Target: Virgin Active Price: 450 million 2011: Buyer: Virgin Money Target: Northern Rock Price: 747 million

Adidas agrees to buy rival Reebok German sports goods firm Adidas-Salomon says it has struck an agreement to buy US rival Reebok for 3.1bn Euros ($3.8bn; 2.1bn). The tie-up could create a challenger to Nike in the Boss Herbert Hainer wants Adidas to take a big leap US market. forward Adidas boss Herbert Hainer said that the deal "represents a major strategic milestone for our group". The takeover still needs to be approved by Reebok shareholders and competition authorities. If cleared, the deal should be completed in early 2006.

Reebok's shares rose 30% on Wednesday reaching $51 - as reports of takeover talks appeared on the websites of financial papers.Adidas' offer is worth $59 per share in cash. Bigger footprint "This is a once in a lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry", said Mr Hainer. The combined group will have worldwide athletic footwear sales of 9bn euros, Adidas said. The list of celebrities promoting Adidas includes football star David Beckham and singer Missy Elliott. Reebok tried to rejuvenate its youth appeal with a controversial advert featuring rapper 50 Cent. Its US sport licensing deals include the National Football League and National Basketball Association. North America accounts for roughly half of the global sporting goods market, and Adidas said buying Reebok would more than double its North American sales to 3.1bn euros. The firm added that the deal would bring it wider geographic reach and a more balanced sales portfolio. Among the benefits, it listed Reebok's presence in North America and Adidas' ability to bring its greater expertise in Europe and Asia to bear on Reebok's profile there. The combined group's brands will be anchored by the Adidas and Reebok labels, but will also include Taylormade, Rockport, Greg Norman Collection, Maxfli, CCM, Jofa and Koho. It would have about 20% of the US sports shoe market, while Nike has 36%.

Profits rise Adidas was known to be targeting a stronger position in the US market. In May, it sold off its struggling Salomon winter sports equipment business to Finnish firm Amer in order to concentrate on footwear. As it announced its takeover plans, Adidas also unveiled better-than-expected profits. Its second-quarter net profits jumped 33% to 94m Euros, after adjustments were made for the sale of the Salomon business. Sales rose to 1.5bn Euros from 1.4bn in the same period a year earlier. It expects a further boost to sales from the 2006 World Cup Championship which is taking place in Germany.

M&A: 8 ways to make a success of a takeover Sunday, February 12, 2012 by Jim Riley

Firms that pursue takeovers should look to create value, not headlines. Thats one of the lessons Ive picked up from some analysis of successful takeover strategies listed in the 2010 KPMG survey of global M&A. Here is a brief summary of their recommendations for approaches which are more likely to result in a takeover or merger..

(1) Dont start with the deal (start the detail planning early) The worst time to start evaluating the potential benefits and drawbacks of the deal is when the transaction is just about to be completed (or worse, just after). Integration planning needs to start as as soon as possible and it needs to be wideranging (i.e. not just limited to financial and marketing aspects). (2) Define the strategy Obvious really, but still essential. The buyer needs to have a clear and agreed understanding of the strategic rationale for the deal. (3) Dont just focus on costs Cost synergies are important, but they shouldnt be the only focus. It is important to work hard to identify and evaluate potential revenue synergies as well so that shareholders are better informed when they analyze whether to support the proposed deal. (4) Focus due diligence on the future The process of due diligence is often too focused on understanding the past performance of the target business. However, many takeover targets operate in markets which are changing rapidly - how reliable is the past in predicting performance in the future? For example, due diligence should critically analyse the competitive environment of the target, including the prospects for market growth. (5) Is a takeover really the right answer? A vital question to ask. Is a takeover the best option to deliver the growth objectives of the business? Are alternative external growth options a better bet (e.g. joint venture, licensing deals, strategic partnership etc). KPMG make the important point that some management teams become committed to takeovers too readily without critically evaluating whether an acquisition is the right tool. (6) Recognise the hard truths about the soft issues KPMG report a statistic that 45% of Fortune 500 CFOs blame post-M&A failure on unexpected people problems. The key soft issues to address include choosing

the right management team post deal, handling differences in culture between the buyer and target, and managing communication about the deal. (7) One size does not fit all An interesting one this - and a great depends-on evaluation point for students to make in an exam essay. There is no such thing as a standard takeover or merger. Every transaction has significant individual elements that need addressing in order to make it a success. Maybe a key customer needs to be brought on-board. Maybe there is a risk of the loss of highly-skilled and business-critical employees. Perhaps there is a strong entrepreneurial culture in the target business which needs to be embraced and nurtured in order for value to be created. Every takeover and merger is different - each requires careful thought and planning. (8) Balance risk and reward Another great point for evaluation. A business should not become over-reliant on acquisitions to sustain growth. As KPMG point out, being busy with takeovers is not the same thing as being busy creating value for shareholders. Once bought, every business needs detailed attention to make it even more successful.