As with the M&A market, the key question we face with corporate restructuring is,
how does this transaction create value for our shareholders?
For example, let's say our Chicago operations have fallen in value such that
they're worth only $800,000 to us.
Simply selling the business for $800,000 in cash does nothing for
our shareholders, in that once again, it's a zero NPV.
All we've done is converted a fixed asset to a liquid asset, cash.
We'll spend some time working through the rationale for
these type of transactions later in the module.
So, where to next?
Firstly, we'll set the scene by describing the actual mechanics of an acquisition.
Then using tools based upon discounted cash flow analysis,
we're going to develop a framework for understanding the circumstances
under which a merger will create value for our shareholders.
We then switch our attention to identifying the factors that drive value
creation in the M&A market before changing gears slightly to refocus on
how firms might create value not by getting bigger, but
instead by restructuring into a smaller entity.