国际金融管理课件(2014)

Chapter

14Multinational Restructuring

South-Western/Thomson Learning © 2003

Chapter Objectives To introduce international acquisitions byMNCs as a form of multinational restructuring;

To explain how MNCs conduct valuationsof foreign target firms;

To explain why the valuations of a targetfirm may vary among MNCs; and

To identify other methods of multinationalrestructuring.C14 - 2

Ⅰ Multinational Restructuring Building a new subsidiary, acquiring acompany, selling an existing subsidiary, downsizing operations, or shifting production among subsidiaries, are all forms of multinational restructuring.

MNCs continually assess possible formsof multinational restructuring to capitalize on changing economic, political, and industrial conditions across countries.C14 - 3

Online Application What are the economic, political, andindustrial changes for various countries?¤ Consult

the Country Commercial Guides prepared by embassy staff at http://doc.guandang.netatrade.gov/website/ccg. nsf/ccghomepage?openform. to the CIA’s World Factbook at http://www.odci.gov/.C14 - 4

¤ Refer

International Acquisitions Through an international acquisition, afirm can immediately expand its international business since the target is already in place, and benefit from alreadyestablished customer relationships.

However, establishing a new subsidiaryusually costs less, and there will not be a need to integrate the parent management style with that of the acquired company.C14 - 5

Value of International Acquisitions(billions) $ 350300 250 200 150 100 50 0 1988

Foreign Acquisitions of U.S. Firms

U.S. Acquisitions of Foreign Firms1990 1992 1994 1996 1998 2000

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Value of International Acquisitions(billions) $14001200 1000 800 600 400 200 0 1988

World-wide Cross-Border Acquisitions

1990

1992

1994

1996

1998

2000

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Online Application In the U.S., mergers and acquisitions aremonitored by two agencies:¤ Department

of Justice (Antitrust Division) http://doc.guandang.netdoj.gov/atr/ Trade Commission http://www.ftc.gov/

¤ Federal

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Ⅱ Factors that Affect the ExpectedCash Flows of the Foreign Target(1)Target-Specific Factors Target’s previous cash flows. These may

serve as an initial base from which future cash flows can be estimated. Managerial talent of the target. The

acquiring firm may allow the acquired firm to be managed as it was before the acquisition, downsize the firm, or restructure its operations.C14 - 9

Factors that Affect the Expected Cash Flows of the Foreign Target(2)Country-Specific Factors Target’s local economic conditions.

Demand is likely to be higher when the economic conditions are strong. Target’s local political conditions. Cash

flow shocks are less likely when the political conditions are favorable.

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Factors that Affect the Expected Cash Flows of the Foreign TargetCountry-Specific Factors Target’s industry condition

s. Industries

with high growth potential and nonexcessive competition are preferred. Target’s currency conditions. A currency

that is expected to strengthen over time will usually be preferred.

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Factors that Affect the Expected Cash Flows of the Foreign TargetCountry-Specific Factors Target’s local stock market conditions.

When the local stock market prices are generally low, the target’s acceptable bid price is also likely to be low.

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ⅢThe Valuation Process Prospective targets are first screened toidentify those that deserve a closer assessment.

Capital budgeting analysis is then appliedto each of the targets that passed the initial screening process.

Only those targets that are priced lowerthan their perceived net present values may be worth acquiring.C14 - 13

Example of The Valuation Process Lincoln Co. desires to expand in LatinAmerica or Canada.

International screening process – It firstidentifies prospective targets and then conducts an initial screening to pick out those that deserve a closer assessment.

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Example of Process Used to Screen Foreign Targets

Based on this screening process, Lincolndecides that the only target worth further consideration is the target in Canada.C14 - 15

Example of The Valuation Process Estimating the target’s value – OnceLincoln Co. has completed its initial screening, it conducts a valuation of all the targets that passed the screening process.

Only those targets that are priced lowerthan their estimated present values should be acquired.

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