Escolar Documentos
Profissional Documentos
Cultura Documentos
Chapter
Multinational Restructuring
Chapter Objectives
To introduce international
acquisitions by
MNCs as a form of multinational restructuring;
A15 - 2
Multinational Restructuring
Building a new subsidiary, acquiring a
company, selling an existing subsidiary,
downsizing operations, or shifting
production among subsidiaries, are all
forms of multinational restructuring.
International Acquisitions
Through an international acquisition, a firm
can immediately expand its international
business since the target is already in place,
and benefit from already-established
customer relationships.
International Acquisitions
Like any other long-term project, capital
budgeting analysis can be used to
determine whether a firm should be
acquired.
International Acquisitions
NPV = initial outlay
n
t
cash flow in period
t
t =1
(1 + k )
+ salvage value
(1 + k )n
k = the acquisitions required rate of return
n = the lifetime of the acquired firm
International Acquisitions
Note that the relevant exchange rate,
taxes, and blocked-funds restriction,
should be taken into account.
International Acquisitions
Examples of such barriers include laws
against hostile takeovers, restricted
foreign majority ownership, red tape,
and special requirements.
A15 - 8
International Acquisitions
While the Asian crisis had devastating
effects, it created an opportunity for some
MNCs to pursue new business in Asia.
International Acquisitions
In Europe, the adoption of the euro as the
local currency by several countries
simplifies the analysis that an MNC has to
perform when comparing various possible
target firms in the participating countries.
A15 - 10
A15 - 12
A15 - 13
A15 - 14
A15 - 17
A15 - 18
Other Types of
Multinational Restructuring
International Partial Acquisitions
Other Types of
Multinational Restructuring
International Acquisitions of Privatized
Businesses
Other Types of
Multinational Restructuring
International Alliances
A15 - 21
Other Types of
Multinational Restructuring
International Divestitures
Restructuring Decisions
As Real Options
Restructuring decisions may involve real
options, or implicit options on real assets.
Restructuring Decisions
As Real Options
The expected NPV of a project with real
options may be estimated as the sum of
the products of the probability of each
scenario and the respective NPV for that
scenario.
E(NPV) = pi NPVi
i
pi = probability of scenario i
NPVi = NPV for scenario i
A15 - 24
E CF E ER
Value =
t =1
j 1
j, t
1 k
j, t
E (CFj,t )
=
expected cash flows in
currency j to be received by the U.S. parent at the
end of period t
E (ERj,t )
=
expected exchange rate at
which currency j can be converted to dollars at
A15 - 25
Chapter Review
Introduction to Multinational
Restructuring
International Acquisitions
A15 - 26
Chapter Review
Factors that Affect the Expected Cash
Flows of the Foreign Target
Target-Specific Factors
Country-Specific Factors
A15 - 27
Chapter Review
Why a Targets Value May Vary Among
MNCs
Expected Cash Flows of the Target
Exchange Rate Effects on Remitted Funds
Required Return of the Acquirer
A15 - 28
Chapter Review
Other Types of Multinational Restructuring
A15 - 29
Chapter Review
Restructuring Decisions as Real Options
A15 - 30