Reasons for Takeover Bids Socially & Non- Socially

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1) Move assets to their most desired uses; 2) Create synergies, 3) Force mgmt. to be efficient

  1. Moves assets to their most desired uses: Move assets together, become more valuable than they are apart
  2. Creates synergies: B/c ACC owns leafs + raptors is a way more efficient building than if it only owned one of them
  3. Forces management to be efficient: Threat of being taken over forces management to behave properly

Non-Socially Useful Reasons for Takeover Bids

  1. 1) Premium for acquirer; 2) empire building; 3) creating monopolies; 4) tax advantages
  2. Premium for themselves: IF buying companies under-value, taking premium for themselves which doesn’t help anyone
  3. Empire building: Combine assets with no synergies (at one time, Labatt owned TSN, beer, food, etc. – didn’t make bus sense)
  4. Creates Monopolies: If no price pressure, just keep charging more
    1. w/ takeover bids: people often argue it’s a monopoly and that we should stop it (e.g. Star trying to take over Sun Media ^ showed that advertisement in Toronto was cheaper than in SK ^ so much competition for advertising in Toronto, keeps prices down, if TorStar bought Sun Media, prices would go up)
  5. Tax Advantages: Not helpful for anyone if this is the reason you’re doing it

You can grab notes on other topic from here.


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