1.5. Legal and regulatory environment (1) – antitrust motives

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来自 Moscow Institute of Physics and Technology 的课程

Mergers and Acquisitions – The Relentless Pursuit of Synergy

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Moscow Institute of Physics and Technology

Mergers and Acquisitions – The Relentless Pursuit of Synergy

1 个评分

课程 4（共 5 门，Specialization Understanding Modern Finance）

The area of mergers and acquisitions (M&As) is special in finance. Incredible amounts of money are employed in such transactions. Deals draw a lot of public attention and dispute. Oftentimes, stories look more like fairy tales rather than financial reality. The key idea in any M&A transaction is to create value through a potentially synergetic activity. To this end, it is important to have a clear motive and implementation plan. Of special importance are the correct valuation, proper financing, and actual deal completion. But this is not the end – value mostly accrues from the post-merger integration. The understanding of the motives of various stakeholders is instrumental in the analysis of the potential creation of value. The learners will gain insight into the core value creating M&A strategies. They will be able to use the obtained knowledge and skills to successfully advance in their career at a financial institution, as well as in the area of financial management at non-financial businesses. Finally, the Course is very helpful in successful completion of the Specialization’s Final Project.

从本节课中

Why M&As? Stakeholders, Framework and Process. Legal and Regulatory Environment. Accounting and Tax Issues an Overview

In Week 1 we paint the big picture of the M&A field. We identify the value creation as the key motive behind these deals. In order to analyze the value creation process, we introduce the stakeholders’ approach and study stakeholders’ motives in some detail. Then we discuss the idea of synergy as the core objective of a successful M&A transaction and its pitfalls. We introduce the framework and process of M&As and discuss the overall environment of these transactions – legal and regulatory issues (especially, antitrust motives), accounting treatment of M&As, and some important tax considerations. We will see how the transaction environment and treatment influence the potential of successful implementation of a transaction and the corresponding value creation.

1.1. Introduction: Why study M&As?5:43

1.2. The stakeholders’ paradigm14:30

1.3. Buzzwords and challenges. Synergy11:03

1.4. Studying M&As – framework and process11:42

1.5. Legal and regulatory environment (1) – antitrust motives9:51

1.6. Legal and regulatory environment (2) – other issues11:59

1.7. M&As – some accounting issues11:00

1.8. M&As – some tax considerations13:17

与讲师见面

Konstantin Kontor
Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

Let's proceed with our analysis of legal and regulatory environment.

In this episode, we will pay special attention to the anti-trust

motive in the legislation that is passed in the US.

And similar piece of legislation that are passed in other countries.

So the idea here is that, historically,

when first large transactions took place, they were horizontal.

So the company in one industry was buying its competitor in the same industry.

And all that resulted in monopolization.

And here, I'd like to say a few words about that.

So why is that so?

So I put the antitrust motive.

And it very fast became clear that monopolization is bad.

Well, although all companies would be willing to enjoy monopoly for

some period of time.

These are the words of a famous Austrian economist, Josef Schumpeter,

that he wrote in 1919.

But still,

the damage produced by monopolization was recognized really quickly.

And here, I would like to put some, quote, theoretical background.

There are two major theories or approaches with respect to monopolization,

or better say, concentration of industry.

One is called the structural theory.

And that was,

A major idea all the way up to 1960s.

Basically, it says that companies,

that concentration and monopolization is the special

move that is aimed at achieving efficiency.

So companies engage in collusion,

in monopolization, whatever.

So they are trying to become bigger so that

their size will allow them to enjoy advantage over some smaller players.

So the efficiency, in this case, is the result of concentration.

And therefore, you can say that m and a.

So caution, you have to watch it.

So this is kind of bad.

There is another theory that is prevailing now that

is called dynamic competition theory.

That basically, tells the opposite.

That says that concentration is not the pretext for efficiency.

Rather, it's the result of efficiency.

Concentration.

The result of efficiency.

So it basically says that companies grow and

then they see that now they are becoming more efficient.

And because they are more efficient,

they buy other companies that are less efficient.

And that is beneficial for the economy.

And all that leads to the idea that you have to analyze them,

these transactions, keeping that in mind.

Now, the fact that this is sort of the prevailing story right now is that dynamic

competition model is more consistent with the idea of fast technology change.

With the idea that, oftentimes, if you do the job better

than others that the fact that you can enjoy almost a monopoly or

clearly a huge market share, is not automatically harmful for everyone.

You can see that now there are huge IT giants that sometimes enjoy,

almost, a monopoly in their segments.

But that still is only because they're doing better.

So they do not really, so they push their competitors out of the market,

not because they're strong, but because their products are better.

So that goes with all these products on Internet,

that happens with products like various social media,

with messengers and others.

So sometimes you see that if the barriers may be low,

it is easy to start another product.

But if people are not using that, not buying that, then that all adds up to

the fact that one or a few big companies, they actually dominate the market.

Now, this actual motive, historical the past more than 100 years,

that resulted in a fact that certain laws have been passed in the United States.

And now we would say a few words about them.

So this is like major, US antitrust laws.

Well, the oldest and the most famous one is the Sherman Act.

That was passed as early as 1890.

That basically was and Sherman Act was specifically

aimed at prevention of gun threats, conspiracies and

actions, as we put it, in restraints of commerce.

So that's restraints of competition.

And that was in a special article that was aimed against actual or

attempted monopolization.

And it's been over 120 years

that this act is enforced in the United States.

And huge cases, they were investigated, and

they went to courts on the basis of Sherman Act.

Another one that is also quite old, this is Clayton Act

that was first passed in 1914, over 100 years ago.

So I would put that here.

It's against monopolization, like this.

Here, the Clayton Act barred, Purchase of stock.

If, again, that would result in the potential monopolization.

Well, the Clayton Act it still left a loophole open.

You could buy the assets of this company.

And then it was amended in 1950.

So this asset purchases that I would also put them like this.

And then there is another piece here that was

the Hart-Scott-Rodino it was called

an Antitrust Improvements Act, this is 1976.

The main idea here was that before you could sue the company for

something that has already happened.

Now, the Hart-Scott-Rodino Act also put some emphasis on,

I would put before the transaction.

So you had to have some notifications,

you have to disclose information before so that people could judge that.

Not waiting until it's a day after affair.

So while these are the most fundamental laws.

There are obviously lots other and these are federal laws.

There are lots of state laws that

regulate the anti-trust motives.

And anti-trust, they analyze motives in everyday transactions in the US.

But that is only part because anti-trust is only one motive.

And what follows, in the next episode,

we will talk about some other US federal laws that

also make up this background for M and A activity.

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