...2. Introduction 1. Background of the Company [pic] Microsoft is one of the biggest software and IT companies in the world. The industry touches every region of Technology. Its current best-selling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software. They cover Operation System (Vista and Windows 7), Server and Tools Division (Windows server 2008, VB and SQL), Online Services Business division (MSN and the search engine Bing), Microsoft Business Division (Microsoft Office), and Entertainment Devices Division (smart phones, XBOX and MSN TV). Microsoft mission is to enable people and businesses throughout the world to realize their full potential. It develops software, hardware, service and solution to achieve this goal since it established at 1975 by Bill Gates and Paul Allen in Albuquerque. In 1980, Microsoft formed a partnership with IBM that allowed them to bundle Microsoft’s operating system with IBM computers, paying Microsoft a royalty for every sale. With a real big range of service IT service, we can say the client of Microsoft is unlimited, from OEM, business, and individuals. And the competition is all over from every division, such as Apple in PC Market and Google in Online Service Market. [pic] Yahoo! Was started at Stanford University in January 1994 by Jerry Yang and David Filo. Both of them were Electrical Engineering graduate students when they created a website named “Jerry and...
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...(Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: (1.2) Goal of firm Answer: b Diff: E [i]. The proper goal of the financial manager should be to maximize the firm's expected profit, since this will add the most wealth to each of the individual shareholders (owners) of the firm. a. True b. False (1.2) Goal of firm Answer: b Diff: E [ii]. If a firm has a single owner, we may say that the proper goal of a financial manager would be to maximize the firm's earnings per share. a. True b. False (1.2) Managerial incentives Answer: b Diff: E [iii]. Executive stock options are shares of stock awarded to managers on the basis of corporate performance. a. True b. False (1.2) Social welfare and finance Answer: b Diff: E [iv]. The goal of maximizing stock price is a detriment to society in that few of the actions that result in maximization of stock price also benefit society. a. True b. False (1.2) Social welfare and finance Answer: a Diff: E [v]. If a firm's managers want to maximize stock price it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate. a. True b. False (1.3) Agency Answer: b Diff: E [vi]. An agency relationship exists when one or more persons hire another person...
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...NO. 6 • DEC. 2000 Hostility in Takeovers: In the Eyes of the Beholder? G. WILLIAM SCHWERT* ABSTRACT This paper examines whether hostile takeovers can be distinguished from friendly takeovers, empirically, based on accounting and stock performance data. Much has been made of this distinction in both the popular and the academic literature, where gains from hostile takeovers result from replacing incumbent managers and gains from friendly takeovers result from strategic synergies. Alternatively, hostility could ref lect strategic choices made by the bidder or the target. Empirical tests show that most deals described as hostile in the press are not distinguishable from friendly deals in economic terms, except that hostile transactions involve publicity as part of the bargaining process. THE PERCEPTION OF HOSTILITY in American takeovers has had important connotations in both the popular and the academic literature. Unwelcome bids are often perceived to threaten at least some of the stakeholders in target corporations, leading to extensive defensive reactions by the management of the target firm. In contrast, friendly takeovers are often seen to create synergies that make both the bidder and the target firm better off ~see, for example, Mørck, Shleifer, and Vishny ~1988, 1989!!. The distinction between hostile and friendly takeovers is also important if removing an inefficient target management team creates the gains from hostile takeovers. Manne ~1965! refers to this as part...
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...PeopleSoft v. Oracle: Hostilities Involved in a Takeover Precious Richey OMM 640 Business Ethics and Social Responsibility (MFF1226A) Instructor – Ken Edick Submitted: 7/23/2012 Abstract The hostile takeover of PeopleSoft by Oracle was the results of a lengthy court battle that raised many issues. One issue in particular concerned anti-trust laws and their application to technology companies. The Department of Justice, in an attempt to block the takeover, argued that a merger of this nature would lessen competition and ultimately limit customer choice. An appellant court judge ruled that this case did not meet the criterion of an anti-trust breach and ruled in favor of Oracle. Never the less, many other factors concerning the role of shareholders, the board of directors and chief officers gave rise to some grey areas. It has been speculated that the outcome of this case has paved the way for similar acquisitions in the technology arenas. The hostile take-over bid by Oracle to acquire the controlling shares of PeopleSoft was a long and drawn out acquisition. The process was marked with uncertainties, government intervention, and changed trends. Some analysis considered the move to be a merger while others considered it to be a consolidate that served as a prelude to the inevitable changes in the software market. In 2003 when Oracle’s CEO announced plans to wage an unsolicited takeover of PeopleSoft’s stock (Boatright, 2009), the decision was met with...
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...1. Why is Auhll (CEO of Circon) resisting to the takeover? How do incentives of Auhll conflict with those of other (minority) shareholders? Auhll liked challenges, he had an innovative mind and he liked to do something new and different every time. .Auhll seems to have a soft corner for lost causes, Circon was a lost cause which he had picked up to turn its performance completely. ACMI as well as Cabot fall into the same category as that of Circon Inc. Having seen success with Circon and ACMI, he had an undoubting confidence that he would turn around the performance of Cabot as he did with Circon and ACMI. His approach and belief, that he cannot be wrong had led him on a different path as that of the shareholders. The takeover bid was within the interest of the shareholders for them to enjoy heavy rewards for their holdings in the short term (the $18/share bid was at 83% premium) but Auhll strongly believed that he could obtain long term sustainable competitive advantage which will result in higher returns for shareholders in the long run. He was more concerned about the long term which would have benefited him (since he owned 11.5% share of Circon) and the insiders. Of course here he was in conflict with the minority shareholders as the minority shareholders wanted to reap short term benefits. Also, as stated in the case, he was used to being the CEO of Circon and had emotional ties with the company. He had made enough money and had a prestigious status (both financial and...
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...Investment Notes -T-Bills: Treasury bills (or T-bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. -Federal Funds: overnight borrowings between banks and other entities to maintain their bank reserves at the Federal Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. -Eurodollars: are time deposits denominated in U.S. dollars at banks outside the U.S. and thus are not under the jurisdiction of the Federal Reserve. -The term was originally coined for U.S. dollars in European banks. -There is no connection with the euro currency or Eurozone. -FRA: a forward rate agreement (FRA) is a forward contract, an over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. -Investing in International shares: -Carry trade: is a strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return. This strategy is very common in the foreign exchange market -Counter-trade: an umbrella term used to describe many different types of transactions, each “in which the seller provides a buyer with goods or services and promises in return to purchase goods or services from the buyer” ...
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...the following statements is CORRECT? | a. | Relaxant's shareholders (the ex-partners) will now be exposed to less liability. | | b. | The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. | | c. | The firm will find it more difficult to raise additional capital to support its growth. | | d. | The company will probably be subject to fewer regulations and required disclosures. | | e. | Assuming the firm is profitable, none of its income will be subject to federal income taxes. | Question 3 Which of the following statements is CORRECT? | a. | Conflicts would not exist if the Security and Exchange Commission were abolished. | | b. | The threat of takeovers reduces conflict of interest problems, but only between bondholders and stockholders. | | c. | Compensating managers with stock options can do nothing to help eliminate potential conflicts between stockholders and managers. | | d. | Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are...
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...sales are almost stagnant over the 3-year period, earnings per share have steadily declined during the same time period, and the market value of shareholder’s equity is at the moment lower than its actual book value. Furthermore, the net income is also down over this 3-year period, and this is where Pan-Europa needs to focus its efforts (capital projects should assist in this effort). Earnings per share, dividends, and shareholders’ equity all fuelled by increase in net income will become critically important to the company and its shareholders in this coming year. Increase in net income would in turn strengthen the shareholders’ equity, earnings per share and dividends, and this would discourage buying shares by those considering a hostile takeover. Trudi Lauf as a proponent of reducing leverage on the balance sheet and understanding the shareholders anxiety should lead the way of Pan-Europa. ___________________________________________________________________________ Question 2: There are three NPV – NPV at Corp WACC (10,5%), NPV at minimum ROR and equivalent annuity. Ranking all projects against each of this category provides slightly different results. However, I used NPV at Corp WACC (10,5%) as this includes the most recent estimated weighted-average cost of capital for Pan-Europa. The results are in the table below: Rank 1 2 3 4 5 6 7 8 9 10 Project Strategic acquisition Market expansion eastward Market expansion southward Development and rollout of snack foods Artificial sweetener...
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...behaviour of the management in the event of a acquisition2. Often times when an acquisition occurs, the management of the acquired firm will not stay with the new firm, meaning that their will not benefit from the acquisition, but would rather suffer if the acquisition occurs. As such they might be inclined to try to prevent the acquisition, and not act in the best interest of the shareholders3. The Golden Parachute serves to ensure that the management acts in the best interest of the shareholders by providing a mechanism to protect their own personal self interest. Another objective that is often talked about would be that of an anti-takeover mechanism4. The Golden Parachute serves as a antitakeover mechanism in a number of ways, but in summary it is assumed to increase the cost of acquisition making the company less attractive for takeover. Through the course of this paper, we hope to learn a number of things about the whole Golden Parachute situation. Firstly, focusing on it being a tool to control the behaviour of the 1 Richard A....
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...*Adapted from Colorado State University http://writing.colostate.edu Executive Summaries Executive Summaries are much like any other summary in that their main goal is to provide a condensed version of the content of a longer report. The executive summary is usually no longer than 10% of the original document. It can be anywhere from 1-10 pages long, depending on the report's length. Executive summaries are written literally for an executive who most likely DOES NOT have the time to read the original. * Executive summaries make a recommendation * Accuracy is essential because decisions will be made based on your summary by people who have not read the original * Executive summaries frequently summarize more than one document Processes for Writing an Executive Summary Executive summaries are typically written for longer reports. They should not be written until after your report is finished. Before writing your summary, try: * Summarizing the major sections of your report. You might even copy text from your report into the summary and then edit it down. * Talking aloud or even tape recording yourself summarizing sections of your report. Questions to Ask Yourself as You Write * What is your report about? * Why is it important? * What is included in the report? * What is included in each section? * Executive Summaries * Concise Statement * As a cover sheet to your document, an executive summary need not go into ANY mention of...
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...on employees below senior executive management. Problem definition December 1993: Charlotte Beers assesses the progresses made by the company after she became CEO: she realizes that clients love the Brand Stewardship concept, but most employees, below executive levels, have not embraced the newly created Vison. The problem I will focus in this document is the following: the majority of employees did not embrace the new Vison. I will analyze why this is a key problem, why it is happening and I will propose steps to accomplish more acceptance. Analysis Brief Background Major events have shaped the history of the company in the recent years: first the hostile takeover, 1989, then the loss of key accounts and credibility in the business. Many key senior employees have left in the 2 years following the takeover. The company Vison has been: “just keep doing the same thing, just better”, but the world around has been changing. The marketing business has clearly become more global in nature, with "mergers to form mega-agencies and the concept of transporting brands around the world", and customers are demanding for “more service at lower costs”. Re-creation Technically the type of organizational change Beers has to face as new CEO of the company is called re-creation: it’s a change introduced in response to an immediate demand, in this case the loss of customers and image. The research indicates that fewer than one in ten re-creations succeed [Leadership for Organizational...
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...Finance VII Cases in Finance Executive Team Summaries (3-4 pages) 1. Introduction a. Main facts of the case: Ben & Jerry is being a victim of a hostile takeover. Because they aren’t reaching their full potential. They’ve been increasing their revenues, but, with a slower rate than their main competitors, making them nearly mediocre. They have a very strong commitment with the community, with social responsible programs and with organizations like Greenpeace. b. Most important Characteristics of the company studied in the case i. Industry FOOD Industry ii. Position in its industry Medium-Low iii. Main competitors Dreyer’s, Eskimo Pie, TCBY & Yocream. 2. Answer the Questions presented at the end of the 1st session and reviewed and answered in the second session. A- Why Ben & Jerry became target of a takeover? Because Ben & Jerry has not generated the returns and has not increased the shareholders wealth at the level that is expected from this company. 3. Analysis of Financial Information (Exhibits) c. What information do the exhibits present? In the exhibit 1 shows an increase on sales and a reduction to their long-term debt but it doesn’t represent their full potential. Exhibit 2 shows the highs & lows of Ben & Jerry comparing them with their close competition in those years. Exhibit 3 and Exhibit 4 show just some information referring to different things about internal...
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...Final Exam Page 1 1. (TCO A) Which of the following is NOT normally regarded as being a barrier to hostile takeovers? (Points : 5) Abnormally high executive compensation Targeted share repurchases Shareholder rights provisions Restricted voting rights Poison pills 2. (TCO F) Which of the following statements is correct? (Points : 5) The NPV, IRR, MIRR, and discounted payback (using a payback requirement of 3 years or less) methods always lead to the same accept/reject decisions for independent projects. For mutually exclusive projects with normal cash flows, the NPV and MIRR methods can never conflict, but their results could conflict with the discounted payback and the regular IRR methods. Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR over the regular IRR. If a firm uses the discounted payback method with a required payback of 4 years, then it will accept more projects than if it used a regular payback of 4 years. The percentage difference between the MIRR and the IRR is equal to the project’s WACC. 3. (TCO D) Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company's last dividend...
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...Pills. [2] Impact of Poision Pills on Stock Prices. [3] List the Preliminary Takeover Steps: a) Bidding Strategies b) Casual Pass c) Bear Hugs [4] What is Tender Offers Throughout the years many acquisitions have been hostile, which has led to companies to creative preventative and defensive takeover methods. Preventative is used as a way to reduce the likelihood of a takeover, and defensive measure (active measures) are used afer a hostile bid has been issued. Keeping the company successful with shares at a high cost prevents short-term gain takeover. There are two hypothesis that explain the impact on management and stockholders during a hostile takeover. Management Entrnechment hypothesis states that nonparticipating stockholders experience a reduction in wealth when management tries to stop a takeover, where Shareholders interests hypotheiss states that stockholders’ wealth rises when management prevent takeover. Companies today monitor it’s shareholders and the percentage that they own as a way to foresee a potential hostile takeover. Many companies even sell and provide their employees with shares because they are more likely to oppose a takeover, whereas an investor shareholder will more likely to favor a takeover. When an increase of trading occurs, the company gets a clue in that a bidder may be preparing to takeover the company. Once an acquirer has purchased a large amount of the company shares, it...
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...Case Questions. A. Williams, 2002. 1. Evaluate the terms of the proposed $900 million financing from the perspective of both parties. How would you calculate the return to investors in this transaction? If you need more information, what information do you need? 2. What is the purpose of each of the terms of the proposed financing? 3. Conduct an analysis of Williams’ sources and uses of funds during the first half of 2002. How do you expect these numbers to evolve over the second half of 2002? What is the problem facing Williams? How did it get into this situation? How has it tried to address the problem it is facing? 4. Some might describe Williams as “financially distressed”. What evidence is there that Williams’ business may be compromised as a result of its previous financial decisions? 5. As the CEO of Williams, would you recommend accepting the proposed $900 million financing offer? If not, what alternatives would you pursue? B. Dividend Policy at Linear Technology. 1. Describe Linear Technology payout policy. 2. What are Linear’s financing needs? Should Linear return cash to its shareholders? What are the tax consequences of keeping cash inside the firm? 3. If Linear were to pay out its entire cash balance as a special dividend, what would be the effect on value? On the share price? On earnings? On earnings per share? What if Linear repurchased shares instead? Assume a 3% rate of interest. 4. What should...
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