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• M&As are financial transactions that involve a change in the control of a company:
Control Change Operation Changes:
- New controlling shareholders
- New board of directors
- New management
- New business strategy
• M&As are a consequence of changing markets and competitive environments
MERGERS AND ACQUISITIONS
• The buyer or acquiror may be:
- An operating company (the most common)
- A group of managers
- A group of financial investors
- A combination of the three
• The seller side may be:
- The board of directors
- A controlling shareholder
MERGERS AND ACQUISITIONS
• Financial Justification:
The acquisition will increase the per-share value of the acquirer over the long term
OR
Cash Flows from the transaction > Cost of the Acquisition
• The seller will be immediately paid for the acquisition’s expected benefits (if made in cash)
OR
• The seller will realize a premium over the trading market stock price (if made for stocks)
MERGERS AND ACQUISITIONS
• Generally Accepted Rules on M&As:
1. Pure conglomerate acquisitions do not necessarily create new shareholder value
2. Counter cyclical acquisitions do not necessarily create value
3. The market does not reward purely acquisition-induced growth
MERGERS AND ACQUISITIONS
• Generally Accepted Rules on M&As: (cont.)
4. Related diversification can be an important means of creating value in acquisitions
5. Acquisitions can be an important means of reaching a critical mass, where size is an important industry factor
6. Acquisitions are a tax-efficient means of investing excess corporate funds
MERGERS AND ACQUISITIONS
• There are three different valuing parties in an acquisition:
1. The Buyer Value = DCF of:
- Long-term operating business
- Total or partial liquidation of the business
- Synergies from the restructuring of both businesses
2. The Seller Value = DCF of the best available alternatives
3. A Potential Competing Buyer
MERGERS AND ACQUISITIONS
• Valuation Techniques:
- DCF: The most fundamental method of measuring value (cash)
- Acquisition Multiples: Benchmark values based on multiples of earnings, book value, etc.
- Premium over Market Trading Value: Percentage premium paid to public shareholders
- Liquidation Value: Amount of cash that could be realized if a company sells all of its assets and pays off its liabilities in the near future
- Replacement Value: Cost of starting up a similar company from scratch
MERGERS AND ACQUISITIONS
• Valuation Techniques: DCF
- Step 1.a Evaluation of historical and projections of operating characteristics of the company, specifically:
* Unit growth rate of sales
* Rate of price increases
* Cost of goods sold as a percentage of sales
* Depreciation as a percentage of net fixed assets
* Selling, general, and administrative expenses as a percentage of sales
* Effective tax rate
* Working capital required as a percentage of sales
* Net fixed assets required as a percentage of sales
MERGERS AND ACQUISITIONS
• Valuation Techniques: DCF
- Step 1.b Definition of specific economic and industry assumptions:
* Inflation
* Industry size and unit growth rate
* Market share changes within the industry
- Step 1.c Definition of scenarios by grouping varying sets of the economic assumptions into:
* Maturity scenarios
* Growth scenarios
MERGERS AND ACQUISITIONS
• Valuation Techniques: DCF
- Example:
MERGERS AND ACQUISITIONS
Flexible Technologies Corporation: Historical Operating Records
Latest Five-Year AverageRate of unit sales growth 7.0%Rate of price growth 6.0%Operating income (% of sales) 22.5%Depreciation rate (% of net fixed assets) 12.0%Tax rate 46.0%Net working capital required (% of sales) 15.0%Net fixed assets required (% of sales) 40.0%
• Valuation Techniques: DCF
- Example:
MERGERS AND ACQUISITIONS
Flexible Technologies Corporation: Summary of Maturity Scenario
Year 1 Year 2 Year 3Year 4 and Following
Unit sales growth 4.5% 2.5% 1.5% 1.5%General Inflation 4.0 4.0 4.0 4.0 Rela price changes (4.0) (4.0) (4.0) - Total price growth - - - 4.0 Operating margin as percentage of sales 17.3 15.0 11.0 11.0
Flexible Technologies Corporation: Summary of Growth Scenario
Year 1-8 Year 9 Year 10 Year 11Year 4 and Following
Unit sales growth 7.0% 4.5% 2.5% 1.5% 1.5%General Inflation 4.0 4.0 4.0 4.0 4.0 Rela price changes - (4.0) (4.0) (4.0) - Total price growth 4.0 - - - 4.0 Operating margin as percentage of sales 22.5 17.3 15.0 11.0 11.0
• Valuation Techniques: DCF
- Step 2. Project Free Cash Flows:
Levered FCF = net income after taxes - noncash charges to income (deferred taxes, depreciation, amort. of intangibles, etc.) - capital expenditures - investment in net working capital (excluding cash and short-term debt)
Example:
MERGERS AND ACQUISITIONS
Flexible Technologies Corporation: Summary Calculation of Levered Free Cash Flow
Net Income 7,800 Noncash charges
Depreciation 2,700 Deferred Taxes 520
Less: Investment in net working capital (680) Less: Capital expenditures (4,700)
Free Cash Flow 5,640
• Valuation Techniques: DCF
- Step 3. Calculate WACC (k):
Optimum Level of Debt = 20% - 50% debt to total capital
WACC (weighted average cost of debt and equity) is defined by:
k = kE(% equity) + kp(1 - t)(% debt); where:
kE = cost of equity
kp = cost of debt (pre-tax)
t = marginal tax rate
%debt = percentage of debt to total capital
% equity = percentage of equity to total capital
MERGERS AND ACQUISITIONS
• Valuation Techniques: DCF
- Step 3. Calculate WACC (k):(cont.)
Cost of Debt (kp) = medium to long-term borrowing rate
Cost of Equity (kE) = rf + (rm - rf); where
rf = long-term risk free rate
rm = long-term return on the market
= systematic risk factor of the company and its industry
rm - rf = long-term real return on the market (usually estimated between 3% and 8.5%)
MERGERS AND ACQUISITIONS
• Valuation Techniques: DCF
- Step 4. DCF Value Calculation
Vfirm (DCF value) = Vdebt + Vequity
DCF value = cash flow component + terminal component
= PV of unleveraged FCFs for each projection year (discounted at k) + PV of the terminal value of the firm at the end of the projection period (discounted at k)
Unleveraged FCF = FCF + (interest expense)(1 - tax rate)
MERGERS AND ACQUISITIONS
• Valuation Techniques: Acquisition Multiples
- Earnings Multiples: Use unleveraged acquisition multiples = gross acquisition price / operating earnings;
Gross acquisition price = price paid for equity + market value of total debt owed by acquired company
Operating Earnings = earnings before interest and taxes (EBIT)= pretax earnings + interest expense
Possible Distortions:
* Non-comparable accounting principles underlying earnings
* Amount of debt associated with an acquired company
* Cyclicality of earnings
MERGERS AND ACQUISITIONS
• Valuation Techniques: Acquisition Multiples
- Earnings Multiples: (cont.)
Example:
MERGERS AND ACQUISITIONS
Premiums paid in selected mergers in the commercial banking industry
Dates Acquiror AcquireeTransaction
ValueBook Value Earnings
Market Value
6/24/91 Wachovia Corp.South Carolina National Corp./Wachovia Corp. 835.00$ 1.7X 16.2X 1.7X
7/15/91 Chemical Banking Corp. Manufacturers Hanover Corp. 2136.10 0.7 20 1.27/22/91 NCNB Corp. C&S/Sovran Corp. 4316.10 1.4 23.7 1.58/12/91 Bank America Corp. Security Pacific Corp. 4180.30 1 16.4 1.59/12/91 First America Bank Corp. Security Bancorp, Inc. 547.00 2.8 17.8 1.810/28/91 Comerica Inc. Manufacturers National Corp. 1085.20 1.3 9.2 110/30/91 National City Corp. Merchants National Corp. 655.40 1.9 16.7 1.8
Price paid as a multiple of acquiree
• Valuation Techniques: Acquisition Multiples
- Book Value Multiples: Useful ONLY for industries where a company’s book value plays a role in determining future profitability. Examples:
* In rate-of-return regulated industries, such as telephone, electric, and gas utilities, where the company’s future earnings are limited to a defined return on the company’s equity
* In financial institutions such as banks, insurance companies, and security firms, where the balance sheet values of most assets and liabilities are reasonably close to market values
MERGERS AND ACQUISITIONS
• Valuation Techniques: Acquisition Multiples
- Cash Flow Multiples: Useful in industries where the cash flow from operations (net income plus noncash charges) is close to the free cash flow of the DCF analysis. Example:
* Industries that undertake project-type investments: Real estate and oil and gas industries
MERGERS AND ACQUISITIONS
• Valuation Techniques: Premium over Market Trading Value
- When an acquisition candidate is publicly traded, the buyer must pay a premium to market. The amount of the premium will depend on the attitude of the company’s management (friendly or hostile to the acquiror) and the regulatory climate
- Market trading values are also useful as a benchmark in calculating the value of a privately held company or division
MERGERS AND ACQUISITIONS
• Valuation Techniques: Liquidation and Replacement Values
- Liquidation Value: amount of proceeds that could be realized by a stockholder if a company ceased operations, if all assets were sold at prevailing market prices, and if all liabilities and tax obligations were satisfied
- Replacement Value: cost that would be incurred if one tried to replicate all of the assets and liabilities of a company by building them or purchasing them on the market
Liquidation Value Minimum value for a company
Replacement Value Maximum value for a company
MERGERS AND ACQUISITIONS
• Valuation Techniques: Excess Assets and Liabilities
- If there are excess assets or liabilities of a company that play no part in determining the earnings or cash flows on which the basic valuation is made, such assets and liabilities must be separately added to (or substracted from) the basic value estimate
MERGERS AND ACQUISITIONS
• Financing an Acquisition
- Most acquisitions are made in cash
- Non cash payments are allowed when an alternative form of consideration can achieve a superior result for both parties
- The driving factors for non cash payments are:
* Tax Deferrals
* Accounting
* Regulatory Requirements
* Contingent Payments
* Financing Ability
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Income Tax Aspects
- The IRC provides that an acquisition can be accomplished without triggering income tax liability on the part of the selling shareholder, ONLY in the following cases:
* Reorganization through Merger
* Reorganization through Stock Purchase
* Reorganization through Asset Purchase
* Reorganization through Forward Triangular Merger
* Reorganization through Reverse Triangular Merger
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Tax Deferrals
1. Reorganization (merger):
Y merges into X to form XY AND at least 40-50% of the consideration paid for Y consists of equity securities of X
2. Reorganization (stock purchase):
X purchases at least 80% of the voting stock of Y, using only voting stock of X in payment
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)
3. Reorganization (asset purchase):
Y transfers all of its assets (with or without liabilities) to X in exchange for voting stock of X
4. Reorganization (forward triangular merger):
Y merges in to S (a subsidiary of X) and X retains 100% ownership of S. Y’s former shareholders receive 40 to 50% equity securities of X to satisfy the continuity-of-interest test
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)
5. Reorganization (reverse triangular merger):
S merges in to Y (a subsidiary of X) and X receives all of the voting securities of Y. Y’s former shareholders receive solely voting stock in X
- The most commonly used structures for tax-free acquisitions are (4) and (5), the triangular mergers
MERGERS AND ACQUISITIONS
(s)he may have dividend treatment on the cash portion
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)
What happens to the selling shareholders in a tax free reorganization?
- If shareholders receive equity securities from the acquiror he maintains a carry over basis in the new security-
-
Recognition of gain or loss by shareholders will have no impact on the target company
MERGERS AND ACQUISITIONS
(s)he owes a capital gains tax on his gain
If shareholders receive cash or debt
If shareholders receive a mixture
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)
Subsidiary Divestitures:
- Section 355 of the IRC allows a company to distribute a subsidiary to its stockholders in 2 ways:
1. Spin-off: the shares in the subsidiary are distributed as a pro-rata dividend to the company’s common stockholders
2. Split-off: one or more stockholders of the company exchange their shares for shares in the subsidiary, on a non-pro rata basis
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)Subsidiary Divestitures:
- Section 355 restrictions:
* Both, distributing company and subsidiary must have conducted an active trade or business for 5 years preceding the date of the transaction, and not have been acquired during that period
* The distribution transaction must transfer at least 80% control of the subsidiary from the company to its stockholders
* The transaction must be supported by a non tax corporate business purpose
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Tax Deferrals (cont.)
Subsidiary Divestitures:
- Section 355 conditions to be used as a tax saving device for divestitures:
* The divesting company cannot arrange to sell the subsidiary to a third party
* The distributing company receives no cash consideration for its equity in the subsidiary and is effectively shrinking its capitalization
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Accounting Aspects
- There are two principal methods of accounting for acquisitions of control of a company:
* Pooling Method Accounting: which applies exclusively to
acquisitions using the acquiror’s common stocks
* Purchase Method: which applies to all other forms of
acquisitions
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Pooling Accounting
Pooling of Interest Method of Accounting:
- Benefit: Favorable effects on the reported earnings per share (EPS) of an acquiror when the target is being acquired for a high multiple of its earnings
- Requirements :
* The merger must be for common stocks of the acquiror
* No subsidiaries
* Mutual independence
*Timely completion
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Pooling Accounting
Pooling of Interest Method of Accounting:
- Requirements (cont.):
* 90% rule
* No equity changes
* Repurchases
* No voting realignments or restrictions
* No contingent earnouts
* No plan to dispose of significant assets
* No other financial arrangements
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Pooling Accounting
Pooling of Interest Method of Accounting:
- Balance Sheet treatment: B/Ss are simply added together, line by line, eliminating any inter-company investments which are treated as treasury stocks
Example:
MERGERS AND ACQUISITIONS
MergedA B A + B
Assets
Current assets 200$ 100$ 300$ Net plant and equipment 200 100 300Goodwill 100 50 150Total assets 500$ 250$ 750$
Liabilities and Shareholders' Equity
Current Liabilities 50$ 30$ 80$ Long-term debt 100 100 200Deferred taxes 100 40 140Total liabilities 250$ 170$ 420$ Common equity 250 80 330Total liabilities and shareholders' equity 500$ 250$ 750$
Prior to Merger
• Financing an Acquisition: Obtaining Pooling Accounting
Pooling of Interest Method of Accounting:
- Income Statement treatment: All items, down to net income, are simply added together
- Key Statistics for Merger Analysis:
* Pro-forma EPS: Earnings are additive and the number of shares outstanding after the merger depends on the exchange ratio of the merger. Analyze forecasted EPS dilution to see when it disappears and the opposite emerges
* Credit Statistics: Debt ratio and interest coverage must be examined. As a general rule, poolings create the least concern for the credit position of the acquiror
MERGERS AND ACQUISITIONS
• Pooling of Interest Accounting. Example:
MERGERS AND ACQUISITIONS
MergedA B A + B
Sales 300$ 120$ 420$ Cost of Sales (100) (50) (150) Selling General and admin. Expenses (100) (40) (140) Interest Expense (20) (14) (34) Income before taxes 80$ 16$ 96$ Income taxes (32) (6) (38) Net Income 48$ 10$ 58$ EPS 1.20$ 1.20$ 1.02$ Dividends per share 0.50$ 0.30$ 0.50$ Number of shares outstanding 40 8.3 56.6
Market Assumptions
Stock price per share 12$ 24$ 12$ P/E Ratio 10 20 11.8Total Market Value 480$ 200$ 680$ Dividend Yield 4.2% 1.3% 4.2%
Credit Statistics
Long-term debt capitalization (see B/S) 29% 56% 38%Interest Coverage 5.0 2.1 3.8
Transaction AssumptionsA acquires BEach share of B is converted into two shares of A (exchange ratio is 2A:1B)
Prior to Merger
• Financing an Acquisition: Obtaining Purchase Accounting
Pooling of Interest Method of Accounting:
- Basis: The investment has taken place on the part of an acquiror, and it must be recorded at the acquiror’s full cost
- The cost of an investment must be allocated among the assets acquired as follows:
* Adjust each acquiree B/S account to its fair value
* Any excess of purchase price over net fair value is recorded as goodwill
*If the purchase price is bellow net fair value, non current assets should be reduced proportionately Negative goodwill is ordinarily not recorded
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Obtaining Purchase Accounting
Pooling of Interest Method of Accounting:
- Implication for the earnings of the combined companies:
* Revaluations must be amortized against future earnings according to the remaining life of the asset
* Goodwill must be amortized against future earnings over a period not to exceed 40 years
* Revaluations of liabilities (bond discount or premium) must also be amortized into earnings over an appropriate period
* In each case, it is important to ascertain the tax effect of the particular adjustment to earnings
MERGERS AND ACQUISITIONS
• Purchase Method of Accounting. B/S Example:
MERGERS AND ACQUISITIONS
Adjust B to B as Purchase Price CombinedA B Fair Value Adjusted Allocation A and B
Assets
Current assets 200$ 100$ 10a 110$ (100)h 210$
Net plant and equipment 200 100 50b 150 - 350
Goodwill 100 50 (50)c - 130i 230Total assets 500$ 250$ 260$ 790$
Liabilities and Shareholders' Equity
Current Liabilities 50$ 30$ - 30$ - 80$
Long-term debt 100 100 (10)d 90 100h 290
Pension Liability - - 5e 5 - 5
Deferred taxes 100 40 25f 65 - 165Total liabilities 250$ 170$ 190$ 540$
Common equity 250 80 (10)g 70 (70) 250Total liabilities and shareholders' equity 500$ 250$ 260$ 790$
Transaction Assumptions
A acquires B
Each share of B is exchanged for $24 cash
Total transaction size is $200, which A raises by issuance of $100 in long-term debt and $100 in excess cash
Since the transaction is a stock purchase, A retains B's old tax basis in its assets
Prior to Merger
• Purchase Method of Accounting. B/S Example:
Notes on B/S:
- a Since B is on LIFO, B’s B/S understates the value of B’s inventory by $10
- b B’s fixed assets are worth 50% more as a result of long-term inflation effects
- c Goodwill incurred by B in its own past acquisitions has no identifiable value and therefore is eliminated
- d B’s outstanding fixed-rate debt is worth less today because of general interest rate rises. It therefore must be revalued at a discount
- e B’s unfunded vested pension liability is added
- f B’s deferred tax liabilities are increased by the tax effect on timing differences arising from valuation adjustments a, b, c and e. The net valuation adjustment is a debit of $65, which creates an additional deferred tax provision of $25 (at a 38% tax rate)
MERGERS AND ACQUISITIONS
• Purchase Method of Accounting. B/S Example:
Notes on B/S: (cont.)
- g This is a balancing adjustment reflecting the net effect on the fair value of B’s common equity
- h Transaction price of $200 is financed by $100 in excess cash and $100 in new long-term debt
- i Goodwill incurred is aggregate price paid ($200) less fair value of net assets acquired ($70)
MERGERS AND ACQUISITIONS
• Purchase Method of Accounting. Income Stat. Example:
MERGERS AND ACQUISITIONS
Purchase Accounting Combined
A B Adjustments A + B
Sales 300$ 120$ (10)a 410.0$ Cost of Sales (100) (50) 8.4b (158.4)Selling General and admin. Expenses (100) (40) 1.6c (141.6)Interest Expense (20) (14) 11.0d (45.0)Income before taxes 80$ 16$ 65.0$ Income taxes (32) (6) (11.8)e (26.2)Net Income 48$ 10$ 38.8$ EPS 1.20$ 1.20$ 0.97Dividends per share 0.50$ 0.30$ 0.5Number of shares outstanding 40 8.3 40.0
Market Assumptions
Stock price per share 12$ 24$ 12.0$ P/E Ratio 10 20 12.4Total Market Value 480$ 200$ 480.0$ Dividend Yield 4.20 1.30 4.2
Credit Statistics
Long-term debt capitalization (see B/S) 29% 56% 54%Interest Coverage 5.0 2.1 2.4
Transaction Assumptions
A acquires BEach share of B is exchanged for $24 cashTotal transaction size is $200, which A raises by issuance of $100 in long-term debt and $100 in excess cashSince the transaction is a stock purchase, A retains B's old tax basis in its assets
Absence of Mergers
Projected Income Statements in
• Purchase Method of Accounting. B/S Example:
Notes on Income Statement:
- a Interest Income forgone on $100 of excess cash (at 10%)
- b Increased depreciation on B’s fixed assets’ $50 increase, amortized over remaining life of six years
- c Net change in B’s goodwill amortization, assumes prior amortization of $1.7 per year and 40-year life for amortization of new goodwill ($130)
- d Increased expense: $100 new debt, financed at 10%. In addition, amortization of debt discount will generate another $1 of interest expense
- e Income tax effect of all purchase accounting adjustments other than goodwill at 40%
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Mergers and Consolidations:
- The most basic form of combination. In a merger, 2 corporations, A and B, combine as follows:
* The directors of corporations A and B approve an agreement of merger, specifying:
- Terms and conditions, - Designation of one corporation as the survivor, -
Number of shares or other consideration as a result of the merger, - Timing and means by which the merger is to be carried out
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Mergers and Consolidations: (cont.)
* The % of each corporation’s outstanding shares that must approve the merger is 50% plus one vote, unless otherwise specified
* The surviving corporation files a certificate of merger with the secretary of state of Delaware
* As a result of filing, the target corporation ceases to exist and each share of the target Corp. becomes a right to receive the consideration provided in the agreement of merger
* All assets and liabilities of the target Corp. becomes assets and liabilities of the survivor
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Tender Offers:
- Solicitation made broadly to shareholders of a target company requesting tenders of shares for purchase by the bidder. The consideration is cash or an exchange offer (less frequent)
* Tender offers are regulated by the SEC under Williams Act. The most important regulations are referred to:
- Prorationing
- Withdrawal
- Minimum offer period
- Amendments
- Purchases outside the offer
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Asset Sales:
- The buyer agrees to buy specified assets and to assume specified liabilities of the seller. The only assets and liabilities transferred are those specifically agreed to in the purchase and sale agreement
* The steps involved in a typical asset sale are:
- Buyer and seller reach agreement with respect to the sale of a division, specifying: the price to be paid, terms and conditions, general principal for determination of assets and liabilities to be transferred
- Buyer and seller negotiate and execute purchase and sale agreement. Boards of both sides approve it.
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Asset Sales:(cont.)
- Buyer and seller file for antitrust clearance
- Third party waivers and consents are obtained (if necessary)
- Asset and liabilities transferred to buyer and buyer makes payment at closing date
- Buyer and seller negotiate and execute purchase and sale agreement. Boards of both sides approve it.
- Buyer and seller file for antitrust clearance
- Third party waivers and consents are obtained (if necessary)
- Asset and liabilities transferred to buyer and buyer makes payment at closing date
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Antitrust Review:
- The Department of Justice (DOJ) and the Federal Trade Commission (FTC) provide public guidelines to determine possible violations of the antitrust laws. Specifically:
* Vertical Mergers: The DOJ generally will not challenge vertical mergers unless it creates barriers to entry, facilitates collusion, or is designed to evade rate regulation
MERGERS AND ACQUISITIONS
• Financing an Acquisition: Legal and Regulatory Aspects
Antitrust Review:(Cont.)
* Conglomerate Mergers: They will ordinarily be challenged only ifthey involve the elimination of a potential entrant and:
a. the industry HHI* exceeds 1,800;
b. entry is difficult;
c. there are fewer than 3 other potential entrants; and
d. the market share of the acquired firm exceeds 5%
*Herfindahl-Hirschman Index (HHI) is used to measure industry concentration
MERGERS AND ACQUISITIONS