Chapter 1 - An introduction to mergers, acquisitions, and other restructuring activities

Abstract

The underlying dynamics of mergers and acquisitions (M&As) have changed in recent years and are likely to continue to do so in a world undergoing great turmoil amid accelerating technological change, a COVID-19–induced global recession, and protracted trade frictions. The focus in this chapter is on how these undercurrents will impact M&As and why they will tend to continue to cluster in domestic and cross-border waves. The implications for M&As of protectionism and the new Biden administration in the United States are explored. The chapter also introduces a variety of legal structures and strategies that are used to restructure corporations and how they could change in the future, as well as how the increasing role of corporate socially responsible investing affects M&As. Moreover, the historical role of the various participants in the M&A process and how their role could change in the future are explained. Alternatives to M&As are also identified. Reflecting the latest studies, this chapter addresses why mergers more often than not pay off for the target and acquirer shareholders and bondholders, as well as for society. These concepts are illustrated in case studies involving different types of deals. The chapter concludes with a discussion of whether the traditional objective of the firm to maximize shareholder value is consistent with the view that firms must address the needs of all stakeholders and how these views can affect the way we view M&As.