Applied Mergers and Acquisitions. Robert F. Bruner

325 200 125 1987–1996 Sample of international JVs by Singaporean firms. Johnson, Houston (2000) + 1.67% horizontal JVs +5.0% suppliers in vertical JVs 0.0% buyers in vertical JVs N/A 85 horizontal JVs 106 Vertical JVs 1991–1995 Compared returns to JV investors with returns to firms using simple contracts. Schut, van Frederikslust (undated) +0.40% (days–1,0)* 233 1987–1998 Sample of Dutch JVs. Chen, Ho, Lee, Yeo (2000) +0.96% (days–1,0)* 174 1979–1993 International JV announcements by Singaporean firms. Allen, Phillips (2000) +9.1% * alliance, JV target +0.1% alliance, JV purchaser +5.5%* no alliance, JV target –1.1% no alliance, JV purchaser +8.3% * alliance, JV with board representation, target –0.4% alliance, JV with board representation, purchaser (all estimates are around days –10,[phone] 92 92 1980–1991 Chan, Kensinger, Keown, Martin (1997) +0.64%* whole sample, day 0 +3.45%* horizontal alliance involving tech transfer +1.00% horiz, nontech +1.45%* nonhoriz, nontech +0.27% nonhoriz, tech transfer 345 1983–1992 Sample of strategic alliances. Koh, Venkatraman (1991) +0.87%* full sample +0.80%* tech exchanges subsample 0.40% licensing agreements 0.01% marketing agreements –0.13% supply agreements 175 1972–1986 Chen, Hu, Shieh (1991) +0.71%* full sample (days –1,0) 88 1979–1990 International JVs in China by U.S. firms. Crutchley et al. (1991) +1.05%† U.S. partner returns +1.08%† Japanese partner returns 82 1979–1987 Japanese-U.S. JVs. Lee, Wyatt (1990) –0.466%† full sample 109 1974–1986 McConnell, Nantel (1985) +0.73% full sample (days –1,0) + 1.10% small firm subsample +0.63% large firm subsample 210 1972–1979

      Unless otherwise noted, event date is announcement date of transaction.

*Significant at the 0.99 level or better.

†Significant at the 0.95 level.

RESTRUCTURING, REDEPLOYMENT, AND SALE

      Restructuring is a lengthy process. Donaldson (1990) documented a restructuring program (consisting of many discrete transactions) at General Mills that spanned two decades. Kaiser and Stouraitis (2001) described the restructuring of Thorn-EMI that encompassed numerous transactions and lasted 13 years. Boone and Mulherin (2001, 2002) found that the median length of targeted restructuring events is 345 days and that the investor reactions to the initial and subsequent announcements are significantly positive. Their analysis of the auction processes in these restructurings finds the highest returns from asset sales to be associated with the entry of multiple publicly owned bidders.

      Motives

      The motives for exit mirror those for entry: the adverse effects of industry turbulence; the need to exit from unattractive businesses. As Chapter 3 reveals, not all acquisitions are successes. And even for good businesses, the forces of competition, turbulence, and the life cycle can bring an end to a period of good performance. Jensen (1999) noted that “Exit problems appear to be particularly severe in companies that for long periods enjoyed rapid growth, commanding market positions, and high cash flow and profits.” (Page 583) He cited the reluctance of U.S. automobile tire manufacturers to close factories that produced the bias-ply tire when it became apparent that the radial tire product would displace it.

      SHARPEN STRATEGIC FOCUS A portfolio of unrelated business activities requires senior management to master a wide variety of industrial concepts and to monitor disparate businesses. A portfolio organized around a focused strategy can exploit executive expertise in neighboring businesses. Weston (1989) argued that dismantling inefficient conglomerates was an important motive for divestitures and restructurings.

      CORRECT “MISTAKES” AND HARVEST “LEARNING” Porter (1987) studied the acquisitions of diversified firms and found high rates of divestiture in the years following acquisition—on average, they divested 53 percent of their acquisitions within a few years. This implied to Porter a large failure rate in corporate acquisition. Weston (1989) replied that this rate of divestiture could be explained by a variety of effects such as antitrust enforcement and the harvesting of mature investments. He wrote, “Divestitures seem as likely to reflect past successes as mistaken attempts at diversification. Some are pre-planned for good business reasons. Some represent harvesting of sound investments. And some reflect organizational learning that contributes to improvements in future strategies…. Regardless of which version one accepts as the dominant explanation for divestitures—‘mistakes’ or ‘learning’—the persistently high numbers