sometimes publicly declare that they have retained an investment bank to evaluate "strategic alternatives," which typically indicates that the board of directors has solid intentions to sell the company.
Risks: The professional liability claim experience of the target firm
should be considered from the perspectives of firm culture, practice management, and quality control.
For example, research has shown that departure rates of executives from the acquired firms depend on factors related to the acquirer-target relationship and the integration approach such as preacquisition performance differences between the acquiring and target firms
, friendliness of the takeover, and removal of autonomy from target firm
executives (Hambrick and Cannella 1993; Lubatkin et al.
Monday also saw the announcement of a flurry of M&A activities and the share of the target firms
Alongside these political and security concerns, many of the target firms
in recent SWF transactions, particularly those in the financial services area, were negotiating from a position of relative weakness.
In the next section, we discuss the characteristics of target firms
that prior research suggests are related to goodwill and develop hypotheses.
Abraaj, which has raised a series of funds from a combination of institutional and high net worth investors, is one of the few firms seeking majority stakes in target firm
and concentrates resources in post-acquisition management; its returns on investment range from 35 to 84%.
To value these international target firms
, acquiring firms use tangible assets and intangible assets as tools.
Alternatively, when low levels of ownership are purchased, target firms
continue to possess the autonomy necessary to adopt resource deployment patterns unaffected by the norms of other organizational units within the acquiring firm.
One 2003 article, summarizing the findings of prior studies, concludes that the shareholders of target firms
do benefit, but that gains to the acquirer's shareholders are usually close to zero--or even worse.
Another plan is to target firms
considering job cuts, such as Speke's Glaxo plant which will shed 700 staff by mid-2004.
Acquiring and target firms
can exhibit pre-merger differences in either levels of compensation or in compensation mix, including salary and performance-based components such as bonuses, restricted stock, long-term incentive plans, and stock options.