Hurricanes in New York Essay Example for Free

Tropical storms in New York Essay Tropical storms are climate frameworks that have twists quicker than 119 km/hr, brought by extreme turn, picking up force as it is shaped in the ocean. It starts and develops over tropical maritime districts. These tropical storms are moderately littler than storms, generally having about 500km in measurement. When it is over a waterway, the air moves a counterclockwise way, yet at the highest point of the tempest, the breezes are following a clockwise bearing (What Is a Hurricane? ). Just as of late, tropical storms crushed a few states in the United States; including the incredible harm it brought to New Orleans and some more. Typhoons are powers of nature that no man can stop. It is an incredible power of nature that no man can conflict with. Regardless of how industrialized the spot is, regardless of what number of high rising structures you have, it a typhoon will hit you, it will. As studies appear, the following spot a storm could hit can be New York City. Surprising objective. â€Å"Shortly before day break on Friday, September first, climate administrations conveyed the news that everybody had been fearing significant tempest, Hurricane Ella, was off Cape Hatteras and heading for New York. At 6:30 A. M., a crisis arranging bunch assembled at the war room in Robertsons office. †(MORGENSTERN) New York City, considered as one of Americas most created urban territory yet isn't as protected as anybody might suspect with regards to a catastrophic event like that of a tropical storm. Nobody can envision how a focal point of advancement and trade, rich with enormous corporate undertakings and humungous structures could be crushed by a characteristic wonder. History of Hurricanes in New York New York has a very â€Å"colorful† history with regards to storms, despite the fact that it once in a while meets one. Path in 1821, a huge tropical storm made its essence felt when it went head on with Manhattan, leaving inhabitants in extraordinary stun when they saw the ocean levels rising in excess of ten feet in under 60 minutes. Everything was destroyed away by the tropical storm, flooding may avenues including Canal Street. Specialists state that the main thing that prevented the typhoon from totally annihilating the city was it occurred during a low tide. On the off chance that it occurred on an elevated tide, it would have brought a great deal of water and would have overwhelmed the city more. In August of 1893, a whole island got cleaned of the guide of New York totally. It was the Hog Island, an island the state of a pig, which runs for in excess of a mile in the coast south of the Rockaways. It was grown just after the Civil war, wherein numerous structures were fabricated, similar to cantinas, bathhouses and betting territories. It was produced for some conspicuous individuals, a spot where they can loosen up when they are away from work. At that point, calamity struck. It was one major occasion, wherein it took a ton from the individuals. It pulverized and sunk pontoons on the harbor or out on ocean, murdering several mariners. It wrecked a great deal of local locations, evacuated numerous trees, and truly cleaned the whole Hog’s Island. It was as high as 30 feet, moving through Brooklyn, Queens, and different zones close by crushing anything in its way. Hog’s Island was the primary circumstance wherein a storm truly evacuated a whole island (Britt). New York Hurricane Statistics â€Å"His figures disclosed to him that such an occasion had a likelihood of happening as regularly as once every sixteen yearswhat meteorologists call a sixteen-year storm. † (MORGENSTERN) According to insights, storms for the most part come to New York in a sixteen-year premise. Inside 16 years, quite possibly one typhoon would pass New York’s region. However, storms with the quality like what cleared Hog’s Island is said to hit New York in a range of 75 years or more. Be that as it may, after the occurrence on Hog’s, another monstrous typhoon cleared the city, which is a great deal sooner, not following the multi year succession. That tropical storm was known as the Long Island Express. Long Island wasn’t populated that much yet, so if that equivalent tropical storm struck the spot once more; it would without a doubt raise a great deal of frenzy and dread, in light of its quality, with winds that go for 183 miles for each hour. A significant tropical storm in New York would without a doubt make some waves. Around 78. 5% of New Yorkers in the beach front regions have never encountered a significant storm ever in their lives. It is considered that in the following 50 years, there is a 73% possibility that New York City will be hit by a tropical storm. However, with regards to a significant, extraordinarily ruinous tropical storm, there is a 26 % chance that New York will get hit in the following 50 years. With these measurements, ideally, it would help individuals in remaining alarm, being readied on the off chance that anything turns out badly, if at any point another super tropical storm would come their direction (Mandia). Specialists accept that New York City is one of the most hazardous urban communities that could get the following typhoon fiasco. They state that New York is now in third spot, following Miami, and New Orleans. These two were intensely crushed by storms in the earlier years. Building specialists state that New York represents a possibly deadly highlights and attributes. The scaffolds in New York are set so high that it could without much of a stretch get destroyed by pre-tropical storm winds, which implies that these conceivable getaway courses would be wrecked even before the typhoons are quite New York, catching all the regular citizens in the city. This abatements the chance of departure, consequently a major opportunities for a ton of lives to be lost. It is said that in a class 4 tropical storm, JFK International Airport would be lowered in 20 feet of water. The expense of tropical storm harms Experts state that if typhoons of the past would happen today, the New York City areas would endure extraordinary monetary misfortunes. It is an expected $18 billion worth of harms if at any time catastrophes like this would liable to occur. Typhoons are at fault for about 70% of safeguard property misfortune in the United States. New York’s seaside state is second as far as guaranteed waterfront property, following Florida, so this implies most likely, typhoons would put an incredible effect on the economy, for New York as well as for America, and perhaps, the world (Naparstek). Tropical storms and the economy. Specialists caution that if at any point a tropical storm reaches to or anyplace close to New York, it would doubtlessly influence the economy, for New York is the biggest, one of the most gainful urban focus in the United States. A tropical storm assault, even a low classification one, would as of now flood the runways of the JFK International Airport, in this way causing a significant mix in the flights, of potential financial specialists or speculations going back and forth out of the region. It could likewise flood the boulevards of Manhattan, contingent upon how it framed and came, and the tides, regardless of whether it is elevated tide or low tide. It could likewise cause a great deal of harms in the structures and other framework in the exceptionally urbanized zone. These misfortunes are critical to showcasing and fund, and could definitely make an irritated. New York is an overall place with regards to back, it is as of now an organization. It additionally has an enormous impact on national and universal trade. If at any time one tropical storm would hit New York making its ports shut, the New York Stock trade would truly endure. Seven days of conclusion would definitely harm the economy of America, more regrettable than tropical storm Katrina’s impact (Drye). End From Tropical Storms, to low-class typhoons, to major pulverizing storms like tropical storm Katrina and Long Island Express, they’re no different. They could all bring terrible things; the main distinction is the power of the harm. They are powers of nature in which man can't fight with, the main thing that we can do is to be readied. It is the key for endurance, and the key for the decrease of misfortunes we could understanding. References: Britt, Robert Roy. History Reveals Hurricane Threat to New York City. 2005. LiveScience. http://www. livescience. com/forcesofnature/050601_hurricane_1938. html. Drye, Willie. Typhoon Could Devastate New York, U. S. Economy, Experts Warn. 2006. National Geographic Society. http://news. nationalgeographic. com/news/2006/05/060519_hurricanes. html. Mandia, Scott A. Whats in Store for New Yorks Future? 2003. http://www2. sunysuffolk. edu/mandias/38hurricane/hurricane_future. html. MORGENSTERN, JOE. The Fifty-Nine-Story Crisis. 1995. http://www. duke. edu/~hpgavin/ce131/citicorp1. htm. Naparstek, Aaron. Tempest Tracker. 2005. http://nymag. com/nymetro/news/individuals/segments/intelligencer/12908/. What Is a Hurricane? 2001. http://www.comet.ucar.edu/nsflab/web/tropical storm/311.htm

Motherhood as Vocation

Of Woman Born: Motherhood as Experience and Institution uncovers the hardships of moms all over the place and across time through the voice and encounters of its writer, Adrienne Rich.â This exemplary bit of women's activist writing is an uncommonly applicable work considerably after the a long time since its unique publication.â Motherhood, as portrayed by Rich, is a â€Å"Sacred Calling† with a sound portion of irony.â From this depiction it isn't completely away from profundity of Rich's own understanding and view of motherhood.â In perusing the book, however, her message of parenthood as a slanted foundation turns out to be totally clear. Rich portrays her encounters in parenthood as being genuinely forgettable put something aside for the special case of â€Å"anxiety, physical exhaustion, outrage, self fault, weariness and divisions within† herself.â These sentiments appear to summarize the encounters of numerous moms and, yet, we additionally frequently know about the fine purposes of mothering, as well.â We know about the delight in hearing a kid's first words.â We know about the fun in taking a little child to the recreation center for investigation. Indeed, even the preliminaries we know about in regards to the difficulty causing youngsters to appear to be bound with an unpretentious yet glad nostalgic reflection.â Rich's appearance on parenthood, however, just appear to focus on the forlornness, fears and antagonism related with the troublesome control of motherhood.â Readers are not special to the agreeable parts of her parenthood experiences.â truth be told, perusers are made to accept that, maybe, all parenthood was for Rich was the hardships. The perspective on parenthood that perusers get from Rich's depictions is that she feels put upon, abused by the foundation of parenthood and a piece of a culture (parenthood) that is underestimated and under-appreciated.â Yet parenthood is maybe the most crucial organization of all.â So while the fundamental segments of this establishment, the moms, must leave on the excellent excursion for which they got the consecrated calling, they are not legitimately remunerated at the same time, rather, punished for participating.â â Therein, maybe, lies the greatest incongruity of all: parenthood is the foundation that keeps human progress running and, yet, this multifaceted position has gotten one of the least esteemed. Since the beginning, from Rich's perspective, moms have not gotten the profound respect they are due.â Instead, they have been abused and treated as if their jobs are normal yet not appreciated.â notwithstanding this domineeringly acknowledged impression of parenthood, ladies have been caused to feel as if their principle work as an individual is to reproduce.â Thus, ladies have been caused to feel just as they are just evident ladies through the demonstration of bearing and bringing up youngsters. At the hour of the book's composition, the Women's Movement was going all out and the miserable condition of the organization of parenthood had become considerably more pitiful.â Although ladies were entering the workforce to an ever increasing extent, moms were all the while being treated as peasants who were required to keep up their jobs of mother over all else.â But, the circumstance was turning out to be even worse.â Now, ladies were cheerful to be invited (or fairly invited) into the workforce and, yet, they were destined to be relied upon to take on everything notwithstanding parenthood! Things have dynamically deteriorated for ladies in the foundation of motherhood.â With the Women's Movement and its joining with the set up job of parenthood, ladies have purchased in to the perfect that they are, truth be told, expected to take on everything.â Women have been permitted to work the long days simply like men, yet something is distinctive between the genders: ladies are as yet expected to watch out for the kids and the family unit the same amount of as the pre-Women's Movement days. Along these lines, truly, ladies are assuming the employments of at any rate two individuals and being sold on the possibility this is the best of both worlds.â Rich's preliminaries occurred in the limits of her own family unit without the additional difficulty of attempting to fuse her working life.â In Of Woman Born: Motherhood as Experience and Institution, Rich sounds generally annoyed, in her parenthood encounters, by an incredible weariness and the absence of outside outlets accessible to her.â That is, Rich's story has all the earmarks of being one of an exhausted mother with just her kids to center on.â For somebody like Rich who had profession goals and perhaps didn't really even have the drive to have youngsters, the foundation of parenthood just served to hold her back and push her down. The foundation of parenthood is one that is positively oppressive.â I trust it is, as Rich proposes, a methods by which man centric impacts have kept up power over womankind.â However, some portion of being a mother is the craving to need to mother.â I accept that circumstances are different to some degree since the hour of the composition and an ever increasing number of ladies are seeing that they don't need to shoulder and bring up kids out of obligation.â obviously, there is the new issue that ladies want to be Superwomen and do everything, except at any rate the weight to hold up under kids is an adaptable one that can be lifted whenever wanted. Domineering goals will consistently overwhelm, however close to home decision can have a more noteworthy impact in the event that we have confidence in ourselves and our jobs in life.â Although the organization of parenthood may consistently be polluted by the features that serve to mistreat moms all over, individual decision can at last direct our place on the planet, singular jobs of parenthood and the capacity to appreciate that job in the event that it is ones genuine picked way. Â

How to Make a Good Sales Pitch in Seven Steps

How to Make a Good Sales Pitch in Seven Steps Creating a perfect and effective sales pitch might prove to be a difficult task. This is due to the fact that while creating a sales pitch, you dont just hurl information at your customer the way a baseball player pitches a baseball at a batter.If you want to create an effective sales pitch, you have to walk a two-way street â€" a conversation where you ask real questions after listening to the buyer, and then offer them a solution to the problems they are faced with.A good sales pitch is key to making sales.It is no secret that if you have a bad sales pitch, it will be very difficult to make good sales. Your sales pitch should not only be appealing, but it should also make your product or service distinct from the others.An excellent sales pitch creates a great first impression.Therefore, sales professionals spend much time working hard to create a perfect pitch that is memorable and delivers positive initial impact.If you want a presentation that incites interest rather than yawns, one that holds captive the attention of your audience for a very long time and finally wins them over, you have to be adequately prepared with relevant buyer information, and a captivating pitch that makes the buyer become actively in the discussion.Although creating a sales pitch sounds simple, you have to consciously put some effort into creating an effective one while working hard not to stray from the script.The art of creating captivating sales pitches is one that is perfected over time. With constant practice, you will be able to create many captivating and mesmerizing sales pitch.Here are seven tips to get you on your way to a more effective sales pitch.1. DO YOUR RESEARCHYou are not likely to make many sales if you prepare your sales pitch using general knowledge.As already mentioned, a sales pitch is not just about tossing information at the buyer anymore. The importance of crafting a pitch that specifically addresses the situations of your client cannot be overemphasized. Before you can make a perfect pitch, you must adequately understand your customer.This all boils down to the fact that you have to carry out extensive research on your customer so that you can increase your chances of closing deals.Research has shown that about 80% of salespeople are not usually aligned with the needs of their buyer. The focus is not on you during a sales conversation it has to be on the buyer.It is not about why you like a product, but how the product can help the buyer.After you have carried out your research, you are able to sell the value of your product and not the price.Hammer home the value of your product because value always beat price.Before presenting your pitch to the buyer, you should conduct a thorough research on their industry, their company and also competitors and find out if youre speaking with the decision maker of their company.When you first make contact with them, ensure you ask the right questions that can help you tailor your message to addr ess the specific needs of your buyer and ease the deal to the next step.If you are able to research well into your buyer, you will be able to easily eliminate unnecessary noise and distractions, and keep your buyer engaged. Let them know you understand their business by delivering a specific message that highlights the features of your product which matters to them the most.With adequate research, youll be able to deliver a different sales pitch every time you meet a new company.This can’t be emphasized enough. If you always come in with a story from only your angle, will it be any wonder why it doesn’t resonate with your audience?Also, try to back up your claims with facts and statistics. In a survey conducted by Dimension Research, 90% of respondents claimed that their buying decisions were influenced by reading positive online reviews.Armed with this knowledge, your pitch should contain compelling facts and statistics that back up your claims.Be sure to include case studies a nd testimonials which contain figures and statistics to prove that your product or service has shown to be successful over the years. If you claim you can solve your buyer’s main problems, prove it with facts.According to Jane Porter in Entrepreneur, there are some bases you have to cover prior to pitching.Your amazing concept will not get the attention of investors without your ability to demonstrate that you possess the level of business acumen necessary to structure and propel an idea to success.2. KEEP YOUR INTRODUCTION CLEAR AND CONCISEThe length of your pitch is as important as the content of the entire pitch. A pitch that is too long will cause your buyer to lose interest and fail to read on.People are not ready to read or listen to long recitations about yourself, your achievements, history about your company and so on.Therefore, it is wise not to begin your sales pitch this way.Information about you and your company is readily available online and your prospect will most probably have gone through it already.However, writing your pitch to the perfect length will spark and maintain the buyers interest right through to the end. It is okay to keep your introduction brief then move on quickly to the more engaging juicy stuff in your pitch.In order to keep your sales pitch short, you should follow the rules of thumb by creating half of what you think will be needed for a 15-minute presentation.If your audience finds it interesting and captivating enough, they will ask for more. It is better to arouse the curiosity of your clients and have them beg for more than to over-deliver, bore them out, and put them to sleep.Be strict with your word count so that you can avoid information overload. You have to find the perfect hook, something that will make them find the pitch interesting, something that appeals to them and will make them keep on reading or listening.If you plan to send your sales pitch via email, you need to be able to craft the perfect subject li ne.Your opening sentence or subject line should be able to capture your buyers attention.Your introduction makes a lot of difference and will determine if your client will keep on reading, or simply dismiss your pitch altogether.Many people communicate, but very few connect.Your hook needs to communicate the story of your business while also establishing a connection with the buyers needs. Getting these two aspects right will help you successfully engage your customer and convince them to continue reading your pitch.You need to be as clear as day and employ the use of simple, easy to understand language. It is super easy to be blind to your own jargon because they make perfect sense to you.However, since youll be dealing with both expert and non-expert customers, you may have to use simple language that your non-expert customers will find very easy to translate.If you want to be sure about how easy your sales pitch is to understand, you can test your sales pitch on someone at home o r on your friends who are not experts.They can help you pinpoint the jargon you need to replace with plain English.Short and sweet does the trick. What is worse than your pitch getting ignored by your prospect because it is simply too long and complex? 3. DO THE LISTENINGLet the buyer do most of the talking.Although this might sound pretty strange after all the long hours youve put into the preparation of your sales pitch, it is as important as the sales pitch itself.Let the buyer talk.That you feel you have covered every base does not mean that you know everything.Dont be so overzealous or overconfident that you just keep on rattling on from your script. If your sales pitch will be good and effective, it is high time you put your script down, open-mindedly go into the pitch, focus on the buyer, and let the buyer do most of the talking.When you deliver your pitch, take the time to listen your buyer, give insightful responses to their questions or objections, and follow-up with thoug htful questions.This step is important because it helps you to have a perfect understanding of your clients business needs and therefore ultimately help you to close the deal. Active listening backed up with asking the right questions, can go a long way in helping you adjust your sales message, and shape it to one that sounds really attractive to the buyer.Try to understand the goals they have and the hurdles they have to overcome and build your conversation around this, focusing on how your products can meet their needs. It is very important to give a listening ear to your prospective clients.Dont think about another deal when in a conversation with a prospective client. Practice active listening.Active listening proves that youre putting the buyer’s needs first. Your sales pitch should be more of a healthy conversation than a mere business presentation. This will make both parties feel good at the end of the talk. Remember, this can only happen if you keep your ears open. 4. SOL VE REAL PROBLEMSOnce your buyer has become convinced to continue listening to you or reading your pitch, you need to then show how you can help them.A prior conversation with the buyer makes it easier for you to be aware of the issues which your buyer faces, and will be help you highlight which of their problems your product or service can solve.When you write your pitch, make sure you directly address the issues that your buyer faces. Focus on whats new or different in your product or service and explain how your product or service can help them fix these problems. If you tackle their problems head-on, your customers will feel that you have genuinely listened to them by taking their needs into account and providing a solution.This is the best way to prove the brilliance and uniqueness of what you have to offer. Once you have enchanted your buyer, it becomes easier to sell to them. A enchanted sale is different from a simple sale because with enchantment, you showed to have the othe r persons best interest at heart.It’s no news that a customer will give attention and respond to products or services that solve a current problem. A successful sales pitch must, therefore, acknowledge that problem and provide a solution.Let each sales pitch speak directly to the unique challenges of the business you’re pitching.Hone your messages on the features of the product that your customer will most benefit from.You need to go all out to ensure that your potential customers see how your product provides essential solutions to their major problem.5. TELL A STORY TO CREATE A CONNECTIONSuccess in sales is almost always all about connecting with the prospective buyer. And to establish a connection, you could tell a story.Have you ever told a story in your sales pitch?Everyone likes to hear some sort of story that they can connect to. In your next sales pitch, try telling the story of your brand.Remember, short and sweet does the trick.Telling the story of your brand and produ ct can make your sales pitch successfully enchant the customer.However, to create a stronger connection between you and your customers, storytelling has to be effectively done. Buyers will only be able to connect if they can relate to your brand on a personal level.The more connection they feel, the more reason they feel they have to buy from you. Storytelling is not just some off-the-head idea and has actually been scientifically proven to boost sales.Neuro-linguistic programming has shown that all humans run 99% subconsciously and 1% consciously. Stories can create such strong connecting because they allow the subconscious mind (99%) of the prospect to see the valuable application of the solutions your product or service claim to solve.This is made possible because when you pair the stories of your brand and product with facts and figures, you can ignite the desire in people to want to know more.6. RESPECTFULLY ADDRESS OBJECTIONSLearn to get ahead of potential problems. Since ever y product has some shortfalls, you should anticipate reservations that your prospective buyer may have and address them proactively.While reviewing your sales pitch, be sure that the pitch addresses potential sales objections that may come up during the presentation.Objections and questions from the buyer will reveal new grounds to cover in your next sales pitch because even after your thorough research and your answers to a customers problem, there might be some grounds that you have failed to cover. A salesperson will most likely encounter sales objections within these four buckets: Budget, Authority, Need, and Time (popularly known as BANT).Be absolutely prepared to discuss and answer objections from each of these areas. Although you may not have a detailed response to all four, be prepared to discuss each. The key here is that you offer a valuable reply to your buyer.You have to discover if your target audience already has a product that is similar to yours. If you have knowledg e of your competition, you will have to highlight the distinctive features that differentiate your product from the competition.For example, if from your research you discover that your buyer has a low budget, you can talk about how much money your product can save them.After several face-to-face meetings, you’ll be able to fully hone your objection-response based on the feedback you receive during those meetings.However, before amassing such knowledge and experiences, you can handle objections by leveraging customer and product research.7. ASK FOR THE SALEYoure a salesperson and your major goal is to close deals and make sales.Although it is crucial to listen to your buyer, you should not just pack up after delivering your pitch, shrug your shoulders and wait expectantly for the customer to make the next move.It is astounding to know that 85% of the time, a salesperson ends an interaction with a prospect without ever asking for the sale! Yes, you read that correctly, 85%! Before any sales pitch can be complete, there has to be a call to action that will help your buyer make a decision.If the customer is not ready to make a decision on the sale yet, keep the prospect on the journey by adequately following-up the prospect with a meeting or a trial period.The customer shouldnt call the shots. It is not wise to wait for the customer to make the call to action. If you fail to be proactive, it could result in losing the contract. It is your duty to give your buyer clear instructions on what they need to do next. What do they have to do next?Of course, they have to order for your product or service! Tell them if they have to click on a link to your website, or place a call to your company Immediately.Don’t be shy to ask for the sale, you are a salesperson! You’ve come this far, why stop now?Whatever action you expect your client to take, ensure it is clear with a well-written call to action.CONCLUSIONCongratulations! If you have read this through, you will hav e discovered how to make an excellent sales pitch, so never give an under-prepared presentation.Keep your pitch clear youll have your buyers attention. Repeatedly review and trim excesses until your pitch is as concise as possible without losing the intent.Okay, now youre fully ready to close your next deal. Dont get too nervous. Be confident because youve put a lot of effort and mental energy into your sales pitch; you know your product, you know your buyer, you know how your product will help the buyer, youre ready to listen, you have a story to tell, youre solving a real problem, youre ready for any objection, and of course, youre ready to ask for the sale.Remember, you attract what you think! I really do hope these tips helped. See you at the top!

What Motivates Individual Students And Engages Them

Determining what motivates individual students and engages them in a classroom, is as essential as it is challenging. In a classroom setting, faculty must know how to use motivation and engagement together to enhance students’ learning outcomes (Woolfolk Margetts, 2007). Although student engagement is seen as a necessary element for learning, it needs the support of motivation to serve as a prerequisite. Furthermore, motivation sets the foundation for implementing learner-centered approaches to learning. Unfortunately today’s teachers are confronted by larger class sizes, fast-paced academic calendars, and standardized assessments that force them to lump all students together (Toshalis Michael, 2012). When students feel engaged both†¦show more content†¦3. Separating unmotivated students from motived ones does more harm than good; this approach is most likely to exacerbate existing motivational dispositions and intellectual capacities. 4. When students are presented with opportunities to make choices and to have some say so about the situation, they are more likely to be more motivated and engaged in an activity. 5. Not all students are engaged even when they are motived. They need to be taught self-regulation skills to stay on task, set goals, monitor their learning, and feel free to change their strategies when needed. 6. Technologies has many benefits; however, there can be a distraction to productivity and cognitive complexity in learning. Students need to realize that they need to â€Å"unplug†, and how to focus on one activity at a time. Student Engagement Student engagement is considered a predictor of student achievement (Laven Burgess, 2011; Price Baker, 2012; Reyes et al., 2012). Student engagement is generally viewed as the degree in which a student is involved, or feels connected in a variety of educationally purposeful activities (Axelson Fick, 2010). To facilitate engagement, institutions are finding that they must create resources to address students who are academically inadequate, lack social skills, lack an educational plan, or clear goals, unfamiliarity with the institution, and other outside responsibilities (Clounch,

Race Is NOT a Factor in Capital Punishment - 1086 Words

The death penalty’s main argument is morality. Is it wrong or is it right to sentence someone to death for a crime. The idea of capital punishment stems back from the world’s earliest known societies (Garland, 2011). In the United States today the death penalty is used as form of punishment in 32 states. America is a country of opinion, Americans have their own outlook on everything and the death penalty is no different. Many Americans feel capital punishment is wrong and unethical; while other Americans feel it is ethical and needed. The death penalty can be traced all the way back to the 18th Century B.C. in Babylon to the Hammurabi Codes (â€Å"Introduction to the Death Penalty,† 2014). The Hammurabi codes had 25 different crimes that were†¦show more content†¦What this accomplishes is the offender will sit in a jail cell for the remainder of his life with no chance of getting out. Does knowing the criminal will be locked in a jail cell for the rest o f his or her life help the victim’s family sleep at night? In most cases it does not. People who view the death penalty as a wrong sort of punishment would most likely change their mind if it was a member of their family who was murdered (Meranze, 2011). What does the death penalty do that life without parole could not do? The death penalty gives the families closure of their lost loved one. The idea of one sitting in a jail cell for the rest one’s life does not give closure to most families. Deterrence is another big reason the death penalty is still used in the United States (â€Å"Death Penalty,† 2014). If potential criminals see criminals put to death, would it stop them from committing a crime? The answer is unclear, but a survey was done of criminologists in 1996 and roughly eleven percent believed that the death penalty was a deterrent to other criminals (â€Å"Death Penalty,† 2014). The same survey was done again in 2008 and the percent was nearly cut in half, six percent of the criminologists believed the death penalty was a deterrent (â€Å"Death Penalty,† 2014). The death penalty information center explains that the criminologists that were surveyed do not believe that the death penalty lowers murder rates in states that enforce capital punishment. The criminologists alsoShow MoreRelatedEssay on Should the Death Penalty be Abolished?3057 Words   |  13 Pagesabolished? The death penalty does one thing it â€Å"kills.† It temporarily takes away the pain for someone’s loss, but in the end it does not bring back the person you loved. The death penalty has been considered to be one of the most cruel and unusual punishments for sentencing criminals. I do not believe the death penalty should exist, even when the most heinous crimes have been committed. The death penalty will always be a debatable topic because no one should have the right to decide who should liveRead MoreFootwear Industries in Bangladesh: Problems Prospects.17204 Words   |  69 PagesSciences SUBMITTED BY : A bu Tariq Mohammad Zaki ID # 041-439-551 November 27th, 2012. North South University FOOTWEAR INDUSTRIES IN BANGLADESH: PROBLEM S PROSPECTS. TABLE OF CONTENTS CONTENTS Executive Summary 1. Introduction 1.1 Origin o f the Report 1.2 Objectives 1.3 Scope 1.4 Definitions Concepts 1.5 Methodology 1.5.1 Overall Approach 1.5.2 Analysis And Presentation 2. A Brief Look Into The Footwear Industries In Bangladesh: 2.1 Types Of Footwear Industries: 2.2 Location of LeatherRead MoreGender Roles : African Americans2913 Words   |  12 Pagesspecific genders, (Kaiser, C. R., Miller, C. T. 2009). It concerns the processes of how gender roles socialize and interact with each other in society as a whole and as an individual, (Stockard Johnson, 1980; Thomas, 1986). Gender role deals with identity and at times are conceptualized as the acceptance and identification with social roles and behaviors associated with being biologically female or male. It includes cognitive and affective factors that reflect the way one see s oneself and theRead MoreChildren in Conflict to the Law12401 Words   |  50 Pagesin conditions of poverty that undermine the functioning of protective social networks around them. In addition, there are also various factors that push children to commit acts that are in conflict with the law. Major factors are breakdown of families, inadequate parental supervision, economic hardships, lack of recreational services , harsh corporal punishment on children, peer influence, inadequate educational system, sexual abuse and exploitation, HIV/AIDS and substance abuse. Cited in FrancisoRead MoreCNPC CSR report25861 Words   |  104 Pagesour employees are also the key to our competitiveness. It is impossible for the Company to achieve sustainable growth without the engagement of all our employees. us build a friendly relationship between employees of different nationalities, races and religions that features mutual respect, equality, trust and cooperation. In addition, we are actively supporting education. In Africa, the Middle East, the Asia-Pacific, Central Asia and Latin America where we operate, we have invested a greatRead MoreImportance of Research Data14647 Words   |  59 PagesImportance of good quality data and DATA ANALYSIS for Research Methods INTRODUCTION Conducting a survey is often a useful way of finding something out, especially when `human factors are under investigation. Although surveys often investigate subjective issues, a well-designed survey should produce quantitative, rather than qualitative, results. That is, the results should be expressed numerically, and be capable of rigorous analysis. The data obtained from a study may orRead MoreInstitutions as a Fundamental Cause of Long-Run14323 Words   |  58 PagesINSTITUTIONS AS A FUNDAMENTAL CAUSE OF LONG-RUN GROWTH DARON ACEMOGLU 1 , Department of Economics, MIT, 50 Memorial Drive E52-3806, Cambridge, MA 02142 e-mail: damn@mit.edu SIMON JOHNSON Sloan School o f h f a ~ g e m e n t , MIT, 50 Memorial Drive, Cambridge, MA 02142 e-mail: sjohnson@mit.edu JAMES A. ROBINSON Deparhnent of Government, WCFIA, Harvard University, 1033 Massachusetts Avenue, Cambridge, MA 02138 e-mail: jmbinson@gov.harvard.edu Contents Abstract Keywords 1. Introduction Read MoreRise and Decline of the Muslim Ummah9373 Words   |  38 Pagesthreatened the Jews and which He meted out to them overtook the Muslim Ummah. The following Divine warning was fulfilled exactly: We sent against you our servants, given to terrible. warfare. They entered the very i1~11ost parts of your homes and ~ O W ~ I S . (Al-Qur an 17 : 5 ) In this connection, large armies of Crusaders swarmed from the West and in 1099, not only the sanctity of Al-Aqsa Mosque was defiled, there was also a massacre in Jerusalem on such a vast scale that even the WesternRead MoreStephen P. Robbins Timothy A. Judge (2011) Organizational Behaviour 15th Edition New Jersey: Prentice Hall393164 Words   |  1573 Pagesvii viii CONTENTS 2 2 The Individual Diversity in Organizations 39 Diversity 40 Demographic Characteristics of the U.S. Workforce 41 †¢ Levels of Diversity 42 †¢ Discrimination 42 Biographical Characteristics 44 Age 44 †¢ Sex 46 †¢ Race and Ethnicity 48 †¢ Disability 48 †¢ Other Biographical Characteristics: Tenure, Religion, Sexual Orientation, and Gender Identity 50 Ability 52 Intellectual Abilities 52 †¢ Physical Abilities 55 †¢ The Role of Disabilities 56 Implementing Diversity ManagementRead MoreHbr When Your Core Business Is Dying74686 Words   |  299 Pages 66 Finding Your Next Core Business Chris Zook 78 Promise-Based Management: The Essence of Execution Donald N. Sull and Charles Spinosa 90 The Leadership Team: Complementary Strengths or Conï ¬â€šicting Agendas? Stephen A. Miles and Michael D. Watkins 100 Avoiding Integrity Land Mines Ben W. Heineman, Jr. 20 33 FORETHOUGHT HBR CASE STUDY Why Didn t We Know? Ralph Hasson 45 FIRST PERSON Preparing for the Perfect Product Launch THOU SHALT †¦page 58 James

Excellence in Financial Management Free Essays

string(420) " Free Cash Flow EBIT\$ 400 Less Cash Taxes \(130\) Operating Profits after taxes 270 Add Back Depreciation 75 Gross Cash Flow 345 Change in Working Capital 42 Capital Expenditures \(270\) Operating Free Cash Flow 117 Cash from Non Operating Assets \* 10 Free Cash Flow\$ 127 \* Investments in Marketable Securities In addition to paying out cash for capital investments, we may find that we have some fixed obligations\." Excellence in Financial Management Course 7: Mergers Acquisitions (Part 2) Prepared by: Matt H. Evans, CPA, CMA, CFM Part 2 of this course continues with an overview of the merger and acquisition process, including the valuation process, post merger integration and anti-takeover defenses. The purpose of this course is to give the user a solid understanding of how mergers and acquisitions work. We will write a custom essay sample on Excellence in Financial Management or any similar topic only for you Order Now This course deals with advanced concepts in valuation. Therefore, the user should have an understanding of cost of capital, forecasting, and value based management before taking this course. This course is recommended for 2 hours of Continuing Professional Education. In order to receive credit, you will need to pass a multiple choice exam which is administered over the internet at www. exinfm. com/training Published June 2000 Chapter 4 Valuation Concepts Standards As indicated in Part 1 of this Short Course, a major challenge within the merger and acquisition process is due diligence. One of the more critical elements within due diligence is valuation of the Target Company. We need to assign a value or more specifically a range of values to the Target Company so that we can guide the merger and acquisition process. We need answers to several questions: How much should we pay for the target company, how much is the target worth, how does this compare to the current market value of the target company, etc.? It should be noted that the valuation process is not intended to establish a selling price for the Target Company. In the end, the price paid is whatever the buyer and the seller agree to. The valuation decision is treated as a capital budgeting decision using the Discounted Cash Flow (DCF) Model. The reason why we use the DCF Model for valuation is because: Discounted Cash Flow captures all of the elements important to valuation. ? Discounted Cash Flow is based on the concept that investments add value when returns exceed the cost of capital. ? Discounted Cash Flow has support from both research and within the marketplace. The valuation computation includes the following steps: 1. Discounting the future expected cash flows over a forecast period. 2. Adding a terminal value to cover the period beyond the forecast period. 3. Adding investment income, excess cash, and other non-operating assets at their present values. . Subtracting out the fair market values of debt so that we can arrive at the value of equity. Before we get into the valuation computation, we need to ask: What are we trying to value? Do we want to assign value to the equity of the target? Do we value the Target Company on a long-term basis or a short-term basis? For example, the valuation of a company expected to be liquidated is different from the valuation of a going concern. Most mergers and acquisitions are directed at acquiring the equity of the Target Company. However, when you acquire ownership (equity) of the Target Company, you will assume the outstanding liabilities of the target. This will increase the purchase price of the Target Company. Example 1 – Determine Purchase Price of Target Company Ettco has agreed to acquire 100% ownership (equity) of Fulton for $ 100 million. Fulton has $ 35 million of liabilities outstanding. Amount Paid to Acquire Fulton$ 100 million Outstanding Liabilities Assumed 35 million Total Purchase Price$ 135 million Key Point ( Ettco has acquired Fulton based on the assumption that Fulton’s business will generate a Net Present Value of $ 135 million. For publicly traded companies, we can get some idea of the economic value of a company by looking at the stock market price. The value of the equity plus the value of the debt is the total market value of the Target Company. Example 2 – Total Market Value of Target Company Referring back to Example 1, assume Fulton has 2,500,000 shares of stock outstanding. Fulton’s stock is selling for $ 60. 00 per share and the fair market value of Fulton’s debt is $ 40 million. Market Value of Stock (2,500,000 x $ 60. 00) $ 150 million Market Value of Debt 40 million Total Market Value of Fulton$ 190 million A word of caution about relying on market values within the stock market; stocks rarely trade in large blocks similar to merger and acquisition transactions. Consequently, if the publicly traded target has low trading volumes, then prevailing market prices are not a reliable indicator of value. Income Streams One of the dilemmas within the merger and acquisition process is selection of income streams for discounting. Income streams include Earnings, Earnings Before Interest Taxes (EBIT), Earnings Before Interest Taxes Depreciation Amortization (EBITDA), Operating Cash Flow, Free Cash Flow, Economic Value Added (EVA), etc. In financial management, we recognize that value occurs when there is a positive gap between return on invested capital less cost of capital. Additionally, we recognize that earnings can be judgmental, subject to accounting rules and distortions. Valuations need to be rooted in â€Å"hard numbers. † Therefore, valuations tend to focus on cash flows, such as operating cash flows and free cash flows over a projected forecast period. Free Cash Flow One of the more reliable cash flows for valuations is Free Cash Flow (FCF). FCF accounts for future investments that must be made to sustain cash flow. Compare this to EBITDA, which ignores any and all future required investments. Consequently, FCF is considerably more reliable than EBITDA and other earnings-based income streams. The basic formula for calculating Free Cash Flow (FCF) is: FCF = EBIT (1 – t ) + Depreciation – Capital Expenditures + or – Net Working Capital ( 1 – t ) is the after tax percent, used to convert EBIT to after taxes. Depreciation is added back since this is a non-cash flow item within EBIT Capital Expenditures represent investments that must be made to replenish assets and generate future revenues and cash flows. Net Working Capital requirements may be involved when we make capital investments. At the end of a capital project, the change to working capital may get reversed. Example 3 – Calculation of Free Cash Flow EBIT$ 400 Less Cash Taxes (130) Operating Profits after taxes 270 Add Back Depreciation 75 Gross Cash Flow 345 Change in Working Capital 42 Capital Expenditures (270) Operating Free Cash Flow 117 Cash from Non Operating Assets * 10 Free Cash Flow$ 127 * Investments in Marketable Securities In addition to paying out cash for capital investments, we may find that we have some fixed obligations. You read "Excellence in Financial Management" in category "Papers" A different approach to calculating Free Cash Flow is: FCF = After Tax Operating Tax Cash Flow – Interest ( 1 – t ) – PD – RP – RD – E PD: Preferred Stock Dividends RP: Expected Redemption of Preferred Stock RD: Expected Redemption of Debt E: Expenditures required to sustain cash flows Example 4 – Calculation of Free Cash Flow The following projections have been made for the year 2005: ? Operating Cash Flow after taxes are estimated as $ 190,000 ? Interest payments on debt are expected to be $ 10,000 ? Redemption payments on debt are expected to be $ 40,000 ? New investments are expected to be $ 20,000 The marginal tax rate is expected to be 30% After Tax Operating Cash Flow$ 190,000 Less After Tax Depreciation ($10,000 x (1 – . 30)) ( 7,000) Debt Redemption Payment (40,000) New Investments (20,000) Free Cash Flow$ 123,000 Discount Rate Now that we have some idea of our income stream for valuing the Target Company, we need to de termine the discount rate for calculating present values. The discount rate used should match the risk associated with the free cash flows. If the expected free cash flows are highly uncertain, this increases risk and increases the discount rate. The riskier the investment, the higher the discount rate and vice versa. Another way of looking at this is to ask yourself – What rate of return do investors require for a similar type of investment? Since valuation of the target’s equity is often the objective within the valuation process, it is useful to focus our attention on the â€Å"targeted† capital structure of the Target Company. A review of comparable firms in the marketplace can help ascertain targeted capital structures. Based on this capital structure, we can calculate an overall weighted average cost of capital (WACC). The WACC will serve as our base for discounting the free cash flows of the Target Company. Basic Applications Valuing a target company is more or less an extension of what we know from capital budgeting. If the Net Present Value of the investment is positive, we add value through a merger and acquisition. Example 5 – Calculate Net Present Value Shannon Corporation is considering acquiring Dalton Company for $ 100,000 in cash. Dalton’s cost of capital is 16%. Based on market analysis, a targeted cost of capital for Dalton is 12%. Shannon has estimated that Dalton can generate $ 9,000 of free cash flows over the next 12 years. Using Net Present Value, should Shannon acquire Dalton? Initial Cash Outlay$ (100,000) FCF of $ 9,000 x 6. 1944 * 55,750 Net Present Value $ ( 44,250) * present value factor of annuity at 12%, 12 years. Based on NPV, Shannon should not acquire Dalton since there is a negative NPV for this investment. We also need to remember that some acquisitions are related to physical assets and some assets may be sold after the merger. Example 6 – Calculate Net Present Value Bishop Company has decided to sell its business for a sales price of $ 50,000. Bishop’s Balance Sheet discloses the following: Cash$ 3,000 Accounts Receivable 7,000 Inventory 12,000 Equipment – Dye 115,000 Equipment – Cutting 35,000 Equipment – Packing 30,000 Total Assets$ 202,000 Liabilities 80,000 Equity 122,000 Total Liab Equity$ 202,000 Allman Company is interested in acquiring two assets – Dye and Cutting Equipment. Allman intends to sell all remaining assets for $ 35,000. Allman estimates that total future free cash flows from the dye and cutting equipment will be $ 26,000 per year over the next 8 years. The cost of capital is 10% for the associated free cash flows. Ignoring taxes, should Allman acquire Bishop for $ 50,000? Amount Paid to Bishop$ (50,000) Amount Due Creditors (80,000) Less Cash on Hand 3,000 Less Cash from Sale of Assets 35,000 Total Initial Cash Outlay$ (92,000) Present Value of FCF’s for 8 years at 10% – $ 26,000 x 5. 3349 138,707 Net Present Value (NPV)$ 46,707 Based on NPV, Allman should acquire Bishop for $ 50,000 since there is a positive NPV of $ 46,707. A solid estimation of incremental changes to cash flow is critical to the valuation process. Because of the variability of what can happen in the future, it is useful to run cash flow estimates through sensitivity analysis, using different variables to assess â€Å"what if† type analysis. Probability distributions are used to assign values to various variables. Simulation analysis can be used to evaluate estimates that are more complicated. Valuation Standards Before we get into the valuation calculation, we should recognize valuation standards. Most of us are reasonably aware that Generally Accepted Accounting Principles (GAAP) are used as standards to guide the preparation of financial statements. When we calculate the value (appraisal) of a company, there is a set of standards known as â€Å"Uniform Standards of Professional Appraisal Practice† or USAAP. USAAP’s are issued by the Appraisals Standards Board. Here are some examples: To avoid misuse or misunderstanding when Discounted Cash Flow (DCF) analysis is used in an appraisal assignment to estimate market value, it is the responsibility of the appraiser to ensure that the controlling input is consistent with market evidence and prevailing attitudes. Market value DCF analysis should be supported by market derived data, and the assumptions should be both market and property specific. Market value DCF analysis is intended to reflect the expectations and perceptions of market participants along with available factual data. In developing a real property appraisal, an appraiser must: (a) be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a creditable appraisal; (b) not commit a substantial error of omission or co-omission that significantly affects an appraisal; (c) not render appraisal services in a careless or negligent manner, such as a series of errors that considered individually may not significantly affect the result of an appraisal, but which when considered in aggregate would be misleading. Another area that can create some confusion is the definition of market value. This is particularly important where the Target Company is private (no market exists). People involved in the valuation process sometimes refer to IRS Revenue Ruling 59-60 which defines market value as: The price at which the property could change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts. A final point about valuation standards concerns professional certification. Two programs directly related to valuations are Certified Valuation Analyst (CVA) and Accredited in Business Valuations (ABV). The CVA is administered by the National Association of CVA’s (www. nacva. com) and the ABV is administered by the American Institute of Certified Public Accountants (AICPA – www. aicpa. org). Enlisting people who carry these professional designations is highly recommended. Chapter 5 The Valuation Process We have set the stage for valuing the Target Company. The overall process is centered around free cash flows and the Discounted Cash Flow (DCF) Model. We will now focus on the finer points in calculating the valuation. In the book Valuation: Measuring and Managing the Value of Companies, the authors Tom Copland, Tim Koller, and Jack Murrin outline five steps for valuing a company: 1. Historical Analysis: A detail analysis of past performance, including a determination of what drives performance. Several financial calculations need to be made, such as free cash flows, return on capital, etc. Ratio analysis and benchmarking are also used to identify trends that will carry forward into the future. 2. Performance Forecast: It will be necessary to estimate the future financial performance of the target company. This requires a clear understanding of what drives performance and what synergies are expected from the merger. 3. Estimate Cost of Capital: We need to determine a weighed average cost of capital for discounting the free cash flows. 4. Estimate Terminal Value: We will add a terminal value to our forecast period to account for the time beyond the forecast period. 5. Test Interpret Results: Finally, once the valuation is calculated, the results should be tested against independent sources, revised, finalized, and presented to senior management. Financial Analysis We start the valuation process with a complete analysis of historical erformance. The valuation process must be rooted in factual evidence. This historical evidence includes at least the last five years (preferably the last ten years) of financial statements for the Target Company. By analyzing past performance, we can develop a synopsis or conclusion about the Target Company’s future expected performance. It is also i mportant to gain an understanding of how the Target Company generates and invests its cash flows. One obvious place to start is to assess how the merger will affect earnings. P / E Ratios (price to earnings per share) can be used as a rough indicator for assessing the impact on earnings. The higher the P / E Ratio of the acquiring firm compared to the target company, the greater the increase in Earnings per Share (EPS) to the acquiring firm. Dilution of EPS occurs when the P / E Ratio Paid for the target exceeds the P / E Ratio of the acquiring company. The size of the target’s earnings is also important; the larger the target’s earnings are relative to the acquirer, the greater the increase to EPS for the combined company. The following examples will illustrate these points. Example 7 – Calculate Combined EPS Greer Company has plans to acquire Holt Company by exchanging stock. Greer will issue 1. shares of its stock for each share of Holt. Financial information for the two companies is as follows: Greer Holt Net Income$ 400,000 $ 100,000 Shares Outstanding 200,000 25,000 Earnings per Share$ 2. 00$ 4. 00 Market Price of Stock$ 40. 00$ 48. 00 Greer expects the P / E Ratio for the combined company to be 15. Combined EPS = ($ 400,000 + $ 100,000) / (200,000 shares + (25,000 x 1. 5)) = $ 500,000 / 237,500 = $ 2. 11 Expected P / E Ratio x 15 Expected Price of Stock$ 31. 65 Before we move to our next example, we should explain exchange ratios. The exchange ratio is the number of shares offered by the acquiring company in relation to each share of the Target Company. We can calculate the exchange ratio as: Price Offered by Acquiring Firm / Market Price of Acquiring Firm Example 8 – Determine Dilution of EPS Romer Company will acquire all of the outstanding stock of Dayton Company through an exchange of stock. Romer is offering $ 65. 00 per share for Dayton. Financial information for the two companies is as follows: Romer Dayton Net Income$ 50,000 $ 10,000 Shares Outstanding 5,000 2,000 Earnings per Share$ 10. 00$ 5. 00 Market Price of Stock$ 150. 00 P / E Ratio 15 1) Calculate shares to be issued by Romer: $ 65 / $ 150 x 2,000 shares = 867 shares to be issued. 2) Calculate Combined EPS: ($ 50,000 + $ 10,000) / (5,000 + 867) = $ 10. 23 3) Calculate P / E Ratio Paid: Price Offered / EPS of Target or $ 65. 00 / $ 5. 00 = 13 4) Compare P / E Ratio Paid to current P / E Ratio: Since 13 is less than the current ratio of 15, there should be no dilution of EPS for the combined company. 5) Calculate maximum price before dilution of EPS: 15 = price / $ 5. 0 or $ 75. 00 per share. $ 75. 00 is the maximum price that Romer should pay before EPS are diluted. It is important to note that we do not want to get overly pre-occupied with earnings when it comes to financial analysis. Most of our attention should be directed at drivers of value, such as return on capital. For example, free cash flow and economic value added are much more important drivers of value than EPS and P / E Ra tios. Therefore, our financial analysis should determine how does the target company create value – does it come from equity, what capital structure is used, etc.? In order to answer these questions, we need to: 1. Calculate value drivers, such as free cash flow. 2. Analyze the results, looking for trends and comparing the results to other companies. 3. Looking back historically in order to ascertain a â€Å"normal† level of performance. 4. Analyzing the details to uncover how the Target Company creates value and noting what changes have taken place. Value Drivers Three core financial drivers of value are: 1. Return on Invested Capital (NOPAT / Invested Capital) 2. Free Cash Flows 3. Economic Value Added (NOPAT – Cost of Capital) NOPAT: Net Operating Profits After Taxes A value driver can represent any variable that affects the value of the company, ranging from great customer service to innovative products. Once we have identified these value drivers, we gain a solid understanding about how the company functions. The key is to have these value drivers fit between the Target Company and the Acquiring Company. When we have a good fit or alignment, management will have the ability to influence these drivers and generate higher values. In the book Valuation: Measuring and Managing the Value of Companies, the authors break down value drivers into three categories: Type of Value DriverManagement’s Ability to Influence Level 1 – GenericLow Level 2 – Business UnitsModerate Level 3 – OperatingHigh For example, sales revenue is a generic value driver (level 1), customer mix would be a business unit value driver (level 2), and customers retained would be an operating value driver (level 3). Since value drivers are inter-related and since management will have more influence over level 3 drivers, the key is to ascertain if the merger will give management more or less influence over the operating value driver. If yes, then a merger and acquisition could lead to revenue or expense synergies. Be advised that you should not work in reverse order; i. e. from level 1 down to level 3. For example, an increase in sales pricing will add more value to level 1, but in the long-run you will hurt customers retained (level 3) and thus, you may end-up destroying value. Once we have identified value drivers, we can develop a strategic view of the Target Company. This strategic view along with drivers of value must be considered in making a performance forecast of the Target Company. We want to know how will the Target Company perform in the future. In order to answer this question, we must have a clear understanding of the advantages that the Target Company has in relation to the competition. These competitive advantages can include things like customer mix, brand names, market share, business processes, barriers to competition, etc. An understanding of competitive advantages will give us insights into future expected growth for the Target Company. Forecasting Performance Now that we have some insights into future growth, we can develop a set of performance scenarios. Since no-one can accurately predict the future, we should develop at least three performance scenarios: . Conservative Scenario: Future growth will be slow and decline over time. 2. General Industry Scenario: Continued moderate growth similar to the overall industry. 3. Improved Growth Scenario: Management has the ability to influence level 1 value drivers and we can expect above average growth. Keep in mind that performance scenarios have a lot of assumptions and many of these assumptions are based on things like future competition, new technologies, changes in the economy, changes in consumer behavior, etc. The end-result is to arrive at a â€Å"most likely† value between the different scenarios. Example 9 – Overall Value per Three Scenarios You have calculated three Net Present Value’s (NPV) over a 12 year forecast period. Based on your analysis of value drivers, strategies, competition, and other variables, you have assigned the following values to each scenario: ScenarioProbability xNet Present Value =Expected Value Conservative 20% $ 180,000$ 36,000 Normal 65% 460,000 299,000 M A Growth 15% 590,000 88,500 Overall Value of Target Company$ 423,500 The Valuation Model should include a complete set of forecasted financial statements. Usually a set of forecasted financial statements will start with the Sales Forecast since sales is a driver behind many account balances. A good sales forecast will reflect future expected changes in sales prices, volumes, and other variables. NOTE: For more information about preparing forecasted financial statements, refer to Short Course 2 – Financial Planning Forecasting. Two important points when preparing your forecast are: Historical Perspective: Make sure the pieces of your forecast fit together and flow from historical performance. Historical values are very important for predicting the future. You can gain an historical perspective by simply plotting financial trends (see Example 10). Forecast Period: Your forecast period should cover a long enough period for the target company to reach a stable and consistent performance level. For example, a company has reached a stable point when it can earn a constant rate of return on capital for an indefinite period and the company has the ability to reinvest a constant proportion of earnings back into the business. Rarely is the forecast period less than seven years. When in doubt, use a longer forecast than a shorter forecast. The final step in forecasting the financials is to estimate the value drivers and verify the value drivers against historical facts. As we indicated, three core drivers are return on capital, free cash flow, and economic value added. Make sure you test your results; are key drivers consistent with what has happened in the past, what are the trends for future growth, what are the competitive trends, how will this impact performance, etc.? Example 10 – Plotting Historical Trends to help with preparing forecasted financial statements 1990 1991 1992 1993 1994 Operations: Growth in Revenues 14% 12% 11% 11% 10% Growth in Margins 7% 7% 6% 5% 5% Working Capital: Cash 2% 2% 2% 3% 3% Accts Rec 12% 13% 13% 13% 14% Accts Payable 4% 4% 5% 5% 5% Investments: Assets to Sales 30% 31% 28% 29% 28% Return on Capital 14% 12% 13% 13% 12% When we have completed the Valuation Model, we will have a set of forecasted financial statements supporting each of our scenarios: Forecasted Income Statement – 3 Scenarios ? Forecasted Balance Sheet – 3 Scenarios ? Forecasted Free Cash Flows – 3 Scenarios ? Forecasted Return on Capital – 3 Scenarios ? Forecasted Performance Ratios – 3 Scenarios Example 11 – Forecasted Income Statement for Scenario 2 – Moderate ($ million) 2001 2002 2003 2004 2005 2006 2007 Revenues $ 6. 50$ 6. 70 $ 6. 85 $6. 95 $7. 05 $7. 09 $7. 12 Less Operating 3. 20 3. 30 3. 41 3. 53 3. 65 3. 72 3. 78 Less Depreciation . 56 . 54 . 2 . 85 . 80 . 77 . 72 EBIT 2. 74 2. 86 2. 92 2. 57 2. 60 2. 60 2. 62 Less Interest . 405 . 380 . 365 . 450 . 440 . 410 . 390 Earnings Before Tax 2. 335 2. 480 2. 555 2. 12 2. 16 2. 19 2. 23 Less Taxes . 780 . 810 . 870 . 650 . 660 . 71 . 73 Net Income 1. 555 1. 670 1. 685 1. 470 1. 500 1. 48 1. 50 Terminal Values It is quite possible that free cash flows will be generated well beyond our forecast period. Therefore, many valuations will add a terminal value to the valuation forecast. The terminal value represents the total present value that we will receive after the forecast period. Example 12 – Adding Terminal Value to Valuation Forecast Net Present Value for forecast period (Example 9) $ 423,500 Terminal Value for beyond forecast period 183,600 Total NPV of Target Company$ 607,100 There are several approaches to calculating the terminal value: Dividend Growth: Simply take the free cash flow in the final year of the forecast, add a nominal growth rate to this flow and discount the free cash flow as a perpetuity. Terminal value is calculated as: Terminal Value = FCF ( t + 1 ) / wacc – g ( t + 1 ) refers to the first year beyond the forecast period wacc: weighted average cost of capital g: growth rate, usually a very nominal rate similar to the overall economy It should be noted that FCF used for calculating terminal values is a normalized free cash flow (FCF) representative of the forecast period. Example 13 – Calculate Terminal Value Using Dividend Growth You have prepared a forecast for ten years and the normalized free cash flow is $ 45,000. The growth rate expected after the forecast period is 3%. The wacc for the Target Company is 12%. ($ 45,000 x 1. 03) / (. 12 – . 03) = $ 46,350 / . 09 = $ 515,000 If we wanted to exclude the growth rate in Example 13, we would calculate terminal value as $ 46,350 / . 12 = $ 386,250. This gives us a much more conservative estimate. Adjusted Growth: Growth is included to the extent that we can generate returns higher than our cost of capital. As a company grows, you must reinvest back into the business and thus free cash flows will fall. Therefore, the Adjusted Growth approach is one of the more appropriate models for calculating terminal values. Terminal Value = EBIT ( 1 – tr) ( 1 – g / r ) / wacc – g tr: tax rateg: growth rater: rate of return on new investments Example 14 – Calculate Terminal Value Using Adjusted Growth Normalized EBIT is $ 60,000 and the expected normal tax rate is 30%. The overall long-term growth rate is 3% and the weighted average cost of capital is 12%. We expect to obtain a rate of return on new investments of 15%. $ 61,800 ( 1 – . 30 ) ( 1 – . 03 / . 15 ) / (. 12 – . 03) = $ 43,260 ( . 80 ) / . 09 = $ 384,533 If we use Free Cash Flows, we would have the following type of calculation: Earnings Before Interest Taxes (EBIT)$ 60,000 Remove taxes (1 – tr ) x . 70 Operating Income After Taxes 42,000 Depreciation (non cash item) 12,000 Less Capital Expenditures ( 9,000) Less Changes to Working Capital ( 1,000) Free Cash Flow 44,000 Growth Rate @ 3% x 1. 03 Free Cash Flow ( t + 1 ) 45,320 Adjust Growth Return on Capital x . 80 Adjusted FCF ( t + 1 ) 36,256 Divided by wacc – g or . 12 – . 03 . 09 Terminal Value$ 402,844 EVA Approach: If your valuation is based on economic value added (EVA), then you should extend this concept to your terminal value calculation: Terminal Value = NOPAT ( t + 1 ) x ( 1 – g / rc ) / wacc – g NOPAT: Net Operating Profits After Taxesrc: return on invested capital Terminal values should be calculated using the same basic model you used within the forecast period. You should not use P / E multiples to calculate terminal values since the price paid for a target company is not derived from earnings, but from free cash flows or EVA. Finally, terminal values are appropriate when two conditions exist: 1. The Target Company has consistent profitability and turnover of capital for generating a constant return on capital. . The Target Company is able to reinvest a constant level of cash flow because of consistency in growth. If these two criteria do not exist, you may need to consider a more conservative approach to calculating terminal value or simply exclude the terminal value altogether. Example 15 – Summarize Valuation Calculation Based on Expected Values under Three Scenarios Present Value of FCFà ¢â‚¬â„¢s for 10 year forecast period$ 62,500 Terminal Value based on Perpetuity 87,200 Present Value of Non Operating Assets 8,600 Total Value of Target Company 158,300 Less Outstanding Debt at Fair Market Value: Short-Term Notes Payable ( 6,850) Long-Term Bonds (25 year Grade BB) ( 26,450) Long-Term Bonds (10 year Grade AAA) ( 31,900) Long-Term Bonds ( 5 year Grade BBB) ( 22,700) Present Value of Lease Obligations ( 17,880) Total Value Assigned to Equity 52,520 Outstanding Shares of Stock 7,000 Value per Share ($ 52,520 / 7,000)$ 7. 50 Example 16 – Calculate Value per Share You have completed the following forecast of free cash flows for an eight year period, capturing the normal business cycle of Arbor Company: Year FCF 2001$ 1,550 002 1,573 2003. 1,598 2004. 1,626 2005. 1,656 2006. 1,680 2007. 1,703 2008. 1,725 Arbor has non-operating assets of $ 150. These assets have an estimated present value of $ 500. Based on the present value of future payments, the present value of debt is $ 2,800. Terminal value is calculated using the dividend growth model. A nominal growth rate of 2% will be used. Arbor’s targeted cost of capital is 14%. A rbor has 3,000 shares of stock outstanding. What is Arbor’s Value per Share? Year FCF x P. V. @ 14%Present Value 2001$ 1,550. 8772$ 1,360 2002 1,573. 7695 1,210 003. 1,598. 6750 1,079 2004. 1,626. 5921 963 2005. 1,656. 5194 860 2006. 1,680. 4556 765 2007. 1,703. 3996 681 2008. 1,725. 3506 605 Total Present Value for Forecast Period $ 7,523 Terminal Value = ($ 1,725 x 1. 02) / (. 14 – . 02) = 14,663 Value of Non Operating Assets 500 Total Value of Arbor 22,686 Less Value of Debt( 2,800) Value of Equity 19,886 Shares Outstanding 3,000 Value per Share$ 6. 63 Special Problems Before we leave valuations, we should note some special problems that can influence the valuation calculation. Private Companies: When valuing a private company, there is no marketplace for the private company. This can make comparisons and other analysis very difficult. Additionally, complete historical information may not be available. Consequently, it is common practice to add to the discount rate when valuing a private company since there is much more uncertainty and risk. Foreign Companies: If the target company is a foreign company, you will need to consider several additional variables, including translation of foreign currencies, differences in regulations and taxes, lack of good information, and political risk. Your forecast should be consistent with the inflation rates in the foreign country. Also, look for hidden assets since foreign assets can have significant differences between book values and market values. Complete Control: If the target company agrees to relinquish complete and total control over to the acquiring firm, this can increase the value of the target. The value assigned to control is expressed as: CV = C + M CV: Controlling Value C: Maximum price the buyer is willing to pay for control of the target company M: Minority Value or the present value of cash flows to minority shareholders. If the merger is not expected to result in enhanced values (synergies), then the acquiring firm cannot justify paying a price above the minority value. Minority value is sometimes referred to as stand-alone value. Chapter 6 Post Merger Integration We have now reached the fifth and final phase within the merger and acquisition process, integration of the two companies. Up to this point, the process has focused on putting a deal together. Now comes the hard part, making the merger and acquisition work. If we did a good job with due diligence, we should have the foundation for post merger integration. However, despite due diligence, we will need to address a multitude of issues, such as: ? Finalizing a common strategy for the new organization. We need to be careful not to impose one strategy onto the other company since it may not fit. ? Consolidating duplicative services, such as human resources, finance, legal, etc. ? Consolidating compensation plans, corporate policies, and other operating procedures. ? Deciding on what level of integration should take place. ? Deciding on who will govern the new organization, what authority people will have, etc. It is ironic that in many cases, senior management is actively involved in putting the merger together, but once everything has been finalized, the job of integrating the two companies is dumped on middle level management. Therefore, one of the first things that should happen within post merger integration is for senior management to: ? Develop an overall plan for integrating the two companies, including a time frame since synergy values need to be recovered quickly. If synergy values are dependent upon the target’s customers, markets, assets, etc. , then a fast integration process should be planned. If expected synergies come from strategies and intellectual capital of the target, a more cautious approach to integration may be appropriate. ? Directing and guiding the integration process, establishing governance, and assigning project managers to integration projects. ? Leading change through great communication, bringing people together, resolving issues before they magnify, establishing expectations, etc. Once the two companies announce their merger, an entire set of dynamics goes into motion. Uncertainty and change suddenly impact both companies. Several issues need to be managed to prevent the escape of synergy values. Managing the Process The integration of two companies is managed within a single, centralized structure in order to reduce duplication and minimize confusion. A centralized structure is also needed to pull everything together since the integration process tends to create a lot of divergent forces. A Senior Project Team will be responsible for managing post merger integration (PMI). This includes things like coordination of projects, assigning task, providing support, etc. As previously indicated, it is important for both senior management and middle management to share in the integration process: Senior ManagementSenior Project Team Cultural Social IntegrationFunctional Integration Strategic Fit between the CompaniesSelection of Best Practices CommunicationSet up Task Forces Identify Critical Issues Problem Solving The Senior Project Team will consist of representatives from both companies, covering several functional areas (human resources, marketing, operations, finance, etc. ). Team members should have a very strong understanding of the business since they are trying to capture synergy values throughout PMI. Special task forces will be established by the Senior Project Team to integrate various functions (finance, information technology, human resources, etc. ). Task forces are also used to address specific issues, such as customer retention, non-disruption of operations, retention of key personnel, etc. Task forces can create sub-teams to split an issue by geographic area, product line, etc. All of these teams must have a clear understanding of the reasons behind the merger since it is everybody’s job to capture synergies. There is no way senior management can fully identify all of the expected synergies from a merger and acquisition. It is not unusual for some task forces to begin meeting before the merger is announced. If integration begins before announcement of the merger, team members will have to act in a confidential manner, exercising care on who they share information with. The best approach is to act as though a merger will not take place. Example 17 – Timeline leading up to Post Merger Integration (PMI) June 21, 1998: Officers from both companies plan post merger integration. July 17, 1998: Orientation meeting for key management personnel from both companies. July 30, 1998: Project Managers are assigned to Task Forces. August 16, 1998: Launch Task Forces. August 27, 1998: Critical Issues are identified by Task Forces. Set goals and time frames. October 26, 1998: Task Force develops detail plan for PMI. October 30, 1998: Reach consensus on final plan. November 6, 1998: Officers from both companies approve detail integration plans. November 11, 1998: Operating (action steps) are outlined for implementing the PMI Plan. January 17, 1999: Begin Post Merger Integration Example 18 – Outline for Post Merger Integration (PMI) by Senior Task Force or Senior Project Team 1. Assess current situation – where do we stand? 2. Collect information and identify critical issues for integration. 3. Develop plans to resolve critical issues. 4. Obtain consensus and agree on PMI Plan. 5. Train personnel, prepare for integration, work out logistics, map out the process, etc. 6. Implement PMI Plan – conduct meetings, setup teams, provide direction, make key decisions, etc. 7. Revise the PMI Plan – measure and monitor progress, make adjustments, issue progress reports to executive management, etc. . Delegate – Move the integration process down into lower levels of the organization, allow staff personnel to control certain integration decisions, etc. 9. Complete – Move aggressively into full integration, coordinate and communicate progress until integration is complete. Decision Making Post merger integration (PMI) will require very quick decision-making. This is due in part to the fact that fast integration’s work better than slow integration’s. The new organization has to be established quickly so people can get back to servicing customers, designing products, etc. The more time people spend thinking about the merger, the less likely they will perform at high levels. Many decisions within PMI will be difficult, such as establishing the new organizational structure, re-assigning personnel, selling-off assets, etc. However, it is necessary to get these decisions behind you as quickly as possible since the synergy meter is running. In addition, failure to act will leave the impression of indecisiveness and inability to manage PMI. In order to make decisions, it is necessary to define roles; people need to know who is in charge. People who are responsible for integration should be highly skilled in coordinating projects, leading people, and thinking on their feet while staying focused on the strategies behind the merger and acquisition. People Issues Productivity and performance will usually drop once a merger is announced. The reason is simple; people are concerned about what will happen. In the book The Complete Guide to Mergers and Acquisitions, the authors note that â€Å"at least 360,000 hours of lost productivity can be lost during an acquisition of just a thousand person operation. † Quick and open communication is essential for managing people issues. Constant communication is required for addressing the rumors and questions that arise within PMI. People must know what is going on if they are expected to remain focused on their jobs. Communication should be deep and broad, reaching out to as many people as possible. Face to face communication works best since there is an opportunity for feedback. Even cursory communication is better than no communication at all. â€Å"Get all the facts out. Give people the rationale for change, laying it out in the clearest, most dramatic terms. When everybody gets the same facts, they’ll generally come to the same conclusion. Only after everyone agrees on the reality and resistance is lowered can you get buy-in to the needed changes. † – Jack Welch, CEO, General Electric It is also a good idea to train people in change management. Most people will lack the knowledge and skills required for PMI. Immediately after the merger is announced, key personnel should receive training in how to manage change and make quick decisions. People must feel competent about their abilities to pull off the integration. Managing Resistance The failure to manage resistance is a major reason for failed mergers. Resistance is natural and not necessarily indicative of something wrong. However, it cannot be ignored. Four important tools for managing resistance are: Communicate: As we just indicated, you have to make sure people know what is going on if you expect to minimize resistance. Rumors should not be the main form of communication. The following quote from a middle level manager at a meeting with executive management says it all: â€Å"How can I tell my people what needs to be done to integrate the two companies, when I have heard nothing about what is going on. † Training: As we just noted, people must possess the necessary skills to manage PMI. Investing in people through training can help achieve â€Å"buy-in† and thus, lower resistance. Involvement: Resistance can be reduced by including people in the decision making process. Active engagement can also help identify problem areas. Alignment: One way to buffer against resistance is to align yourself with those people who have accepted the merger. Ultimately, it will be the non-resistors who bring about the integration. Do not waste excessive resources on detractors; they will never come around. Closing the Cultural Gap One of the biggest challenges within PMI is to close the cultural divide between the two companies. Cultural differences should have been identified within Phase II Due Diligence. One way of closing the cultural gap is to invent a third, new corporate culture as opposed to forcing one culture onto another company. A re-design approach can include: ? Reducing the number of rules and policies that control people. In today’s empowered world, it has become important to unleash the human capacities within the organization. ? Create a set of corporate policies centered around the strategic goals and objectives of the new organization. ? Implement new innovative approaches to human resource management, such as the 360-degree evaluation. Eliminate various forms of communication that continue with the â€Å"old way† of doing things. ? Re-enforce the new ways with incentive programs, rewards, recognition, special events, etc. Specific Areas of Integration As we move forward with the integration process, a new organizational structure will unfold. There will be new reporting str uctures based on the needs of the new company. Structures are built around workflows. For best results, collaboration should take place between the two companies; mixing people, combining offices, sharing facilities, etc. This collaboration helps pull the new organization together. As noted earlier, a centralized organization will experience less difficulty with PMI than a decentralized organization. Collaboration is also enhanced when there are: ? Shared Goals – The more common the goals and objectives of the two companies, the easier it is to integrate the two companies. ? Shared Cultures – The more common the cultures of the two companies, the easier the integration. ? Shared Services – The closer both company’s can come to developing a set of shared services (human resource management, finance, etc. ), the more likely synergies can be realized through elimination of duplicative services. Many functional areas will have to be integrated. Each will have its own integration plan, led by a Task Force. Two areas of concern are compensation and technologies. Compensation Plans: It is important to make compensation plans between the two companies as uniform as possible. Failure to close the compensation gap can lead to division within the workforce. Compensation plans should be designed based on a balance between past practices and future needs of the company. Since lost productivity is a major issue, compensation based on performance should be a major focus. Technologies: When deciding which information system to keep between the two companies, make sure you ask yourself the following questions: ? Do we really need this information? ? Is the information timely? ? Is the information accurate? ? Is the information accessible? One of the misconceptions that may emerge is to retain the most current, leading-edge technology. This may be a mistake since older legacy systems may be well tested and reliable for future needs of the organization. If both systems between the two companies are outdated, a whole new system may be required. Retaining Key Personnel Mergers often result in the loss of key (essential) personnel. Since synergies are highly dependent upon quality personnel, it will be important to take steps for retaining the high performers of the Target Company. The first step is to identify key personnel. Ask yourself, if these people were to leave, what impact would it have on the company? For example, suppose a Marketing Manager decided to resign, resulting in the loss of critical customers. Other people may be critical to strategic thinking and innovation. Once you have a list of key personnel, the next step is to determine what motivates essential personnel. Some people are motivated by their work while others are interested in climbing the corporate ladder. Retention programs are designed around these motivating factors. The third step is to implement your retention programs. Personally communicate with key personnel; let them know what their position will be in the new company. If compensation is a motivating factor, offer key personnel a â€Å"stay† bonus. If people are motivated by career advancement, invite them to important management meetings and have them participate in decision making. Don’t forget to reinforce retention by recognizing the contributions made by key personnel. It is also a good idea to recruit key personnel just as if you would recruit any other key management position. This solidifies the retention process. Finally, you will need to evaluate and modify retention programs. For example, if key people continue to resign, then conduct an exit interview and find out why they are leaving. Use this information to change your retention programs; otherwise, more people will be defecting. Retaining Customers Mergers will obviously create some disruptions. One area where disruptions must be minimized is customer service. Once a merger is announced, communicate to your customers, informing them that products and services will not deteriorate due to the merger. Additionally, employees directly involved with customer service cannot be distracted by the merger. If customers are expected to defect, consider offering special deals and programs to reinforce customer retention. As a minimum, consider setting up a customer hotline to answer questions. Finally, do not forget to communicate with vendors, suppliers, and others involved in the value chain. They too are your customers. Measuring PMI The last area we want to touch on is measurement of post merger integration (PMI). Results of the integration process need to be captured and measured so that you can identify problem areas and make corrections. For example, are we able to retain key personnel? How effective is our communication? We need answers to these types of questions if we expect success in PMI. One way of ensuring feedback is to retain the current measurement systems that are in place; especially those involved with critical areas like customer service and financial reporting. Day to day operations will need to be monitored for sudden changes in customer complaints, return merchandise, cancelled orders, production stoppages, etc. New measurements for PMI will have to be simple and easy to deploy since there is little time for formal design. For example, in one case the PMI relied on a web site log to capture critical data, identify synergy projects, and report PMI progress. On-line survey forms were used to solicit input and identify problem areas. A clean and simple approach works best. A measurement system starts with a list of critical success factors (CSF) related to PMI. These CSF’s will reflect the strategic outcomes associated with the merger. For example, combining two overlapping business units might represent a CSF for a merger. From these CSF’s, we can develop key performance indicators. Collectively, a complete system known as the Balanced Scorecard can be used to monitor PMI. Process leaders are assigned to each perspective within the scorecard, collecting the necessary data for measurement. Example 19 – Balanced Scorecard for Post Merger Integration (PMI) PerspectiveKey Performance Indicator Customers- Retention of Existing Customers – Efficiency in Delivering Services Financial- Synergy Components Captured to Date â€Å"- Timely Financial Reporting â€Å"- Timely Cash Flow Management Operational- Completion of Systems Analysis â€Å"- Reassignments to all Operating Units â€Å"- Resources Allocated for Workloads Human Resource- Percentage of Personnel Defections â€Å"- Change Management Training â€Å"- Co mmunication Feedbacks Organizational- Cultural Gaps between company’s â€Å"- Number of Critical Processes Defined â€Å"- Lower level involvement in integration Chapter 7 Anti-Takeover Defenses Throughout this entire short course (parts 1 2), we have focused our attention on making the merger and acquisition process work. In this final chapter, we will do just the opposite; we will look at ways of discouraging the merger and acquisition process. If a company is concerned about being acquired by another company, several anti-takeover defenses can be implemented. As a minimum, most companies concerned about takeovers will closely monitor the trading of their stock for large volume changes. Poison Pills One of the most popular anti-takeover defenses is the poison pill. Poison pills represent rights or options issued to shareholders and bondholders. These rights trade in conjunction with other securities and they usually have an expiration date. When a merger occurs, the rights are detached from the security and exercised, giving the holder an opportunity to buy more securities at a deep discount. For example, stock rights are issued to shareholders, giving them an opportunity to buy stock in the acquiring company at an extremely low price. The rights cannot be exercised unless a tender offer of 20% or more is made by another company. This type of issue is designed to reduce the value of the Target Company. Flip-over rights provide for purchase of the Acquiring Company while flip-in rights give the shareholder the right to acquire more stock in the Target Company. Put options are used with bondholders, allowing them to sell-off bonds in the event that an unfriendly takeover occurs. By selling off the bonds, large principal payments come due and this lowers the value of the Target Company. Golden Parachutes Another popular anti-takeover defense is the Golden Parachute. Golden parachutes are large compensation payments to executive management, payable if they depart unexpectedly. Lump sum payments are made upon termination of employment. The amount of compensation is usually based on annual compensation and years of service. Golden parachutes are narrowly applied to only the most elite executives and thus, they are sometimes viewed negatively by shareholders and others. In relation to other types of takeover defenses, golden parachutes are not very effective. Changes to the Corporate Charter If management can obtain shareholder approval, several changes can be made to the Corporate Charter for discouraging mergers. These changes include: Staggered Terms for Board Members: Only a few board members are elected each year. When an acquiring firm gains control of the Target Company, important decisions are more difficult since the acquirer lacks full board membership. A staggered board usually provides that one-third are elected each year for a 3 year term. Since acquiring firms often gain control directly from shareholders, staggered boards are not a major anti-takeover defense. Super-majority Requirement: Typically, simple majorities of shareholders are required for various actions. However, the corporate charter can be amended, requiring that a super-majority (such as 80%) is required for approval of a merger. Usually an â€Å"escape clause† is added to the charter, not requiring a super-majority for mergers that have been approved by the Board of Directors. In cases where a partial tender offer has been made, the super-majority requirement can discourage the merger. Fair Pricing Provision: In the event that a partial tender offer is made, the charter can require that minority shareholders receive a fair price for their stock. Since many states have adopted fair pricing laws, inclusion of a fair pricing provision in the corporate charter may be a moot point. However, in the case of a two-tiered offer where there is no fair pricing law, the acquiring firm will be forced to pay a â€Å"blended† price for the stock. Dual Capitalization: Instead of having one class of equity stock, the company has a dual equity structure. One class of stock, held by management, will have much stronger voting rights than the other publicly traded stock. Since management holds superior voting power, management has increased control over the company. A word of caution: The SEC no longer allows dual capitalization’s; although existing plans can remain in effect. Recapitalizations One way for a company to avoid a merger is to make a major change in its capital structure. For example, the company can issue large volumes of debt and initiate a self-offer or buy back of its own stock. If the company seeks to buy-back all of its stock, it can go private through a leveraged buy out (LBO). However, leveraged recapitalizations require stable earnings and cash flows for servicing the high debt loads. And the company should not have plans for major capital investments in the near future. Therefore, leveraged recaps should stand on their own merits and offer additional values to shareholders. Maintaining high debt levels can make it more difficult for the acquiring company since a low debt level allows the acquiring company to borrow easily against the assets of the Target Company. Instead of issuing more debt, the Target Company can issue more stock. In many cases, the Target Company will have a friendly investor known as a â€Å"white squire† which seeks a quality investment and does not seek control of the Target Company. Once the additional shares have been issued to the white squire, it now takes more shares to obtain control over the Target Company. Finally, the Target Company can do things to boost valuations, such as stock buy-backs and spinning off parts of the company. In some cases, the target company may want to consider liquidation, selling-off assets and paying out a liquidating dividend to shareholders. It is important to emphasize that all restructurings should be directed at increasing shareholder value and not at trying to stop a merger. Other Anti Takeover Defenses Finally, if an unfriendly takeover does occur, the company does have some defenses to discourage the proposed merger: 1. Stand Still Agreement: The acquiring company and the target company can reach agreement whereby the acquiring company ceases to acquire stock in the target for a specified period of time. This stand still period gives the Target Company time to explore its options. However, most stand still agreements will require compensation to the acquiring firm since the acquirer is running the risk of losing synergy values. 2. Green Mail: If the acquirer is an investor or group of investors, it might be possible to buy back their stock at a special offering price. The two parties hold private negotiations and settle for a price. However, this type of targeted repurchase of stock runs contrary to fair and equal treatment for all shareholders. Therefore, green mail is not a widely accepted anti-takeover defense. 3. White Knight: If the target company wants to avoid a hostile merger, one option is to seek out another company for a more suitable merger. Usually, the Target Company will enlist the services of an investment banker to locate a â€Å"white knight. † The White Knight Company comes in and rescues the Target Company from the hostile takeover attempt. In order to stop the hostile merger, the White Knight will pay a price more favorable than the price offered by the hostile bidder. 4. Litigation: One of the more common approaches to stopping a merger is to legally challenge the merger. The Target Company will seek an injunction to stop the takeover from proceeding. This gives the target company time to mount a defense. For example, the Target Company will routinely challenge the acquiring company as failing to give proper notice of the merger and failing to disclose all relevant information to shareholders. 5. Pac Man Defense: As a last resort, the target company can make a tender offer to acquire the stock of the hostile bidder. This is a very extreme type of anti-takeover defense and usually signals desperation. One very important issue about anti-takeover defenses is valuations. Many anti-takeover defenses (such as poison pills, golden parachutes, etc. ) have a tendency to protect management as opposed to the shareholder. Consequently, companies with anti-takeover defenses usually have less upside potential with valuations as opposed to companies that lack anti-takeover defenses. Additionally, most studies show that anti-takeover defenses are not successful in preventing mergers. They simply add to the premiums that acquiring companies must pay for target companies. Proxy Fights One last point to make about changes in ownership concerns the fact that shareholders can sometimes initiate a takeover attempt. Since shareholders have voting rights, they can attempt to make changes within a company. Proxy fights usually attempt to remove management by filling new positions within the Board of Directors. The insurgent shareholder(s) will cast votes to replace the current board. Proxy fights begin when shareholders request a change in the board. The next step is to solicit all shareholders and allow them to vote by â€Å"proxy. † Shareholders will send in a card to a designated collector (usually a broker) where votes are tallied. Some important factors that will influence the success of a proxy fight are: 1. The degree of support for management from shareholders not directly involved in the proxy fight. If other shareholders are satisfied with management, then a proxy fight will be difficult. 2. The historical performance of the company. If the company is starting to fail, then shareholders will be much more receptive to a change in management. 3. A specific plan to turn the company around. If the shareholders who are leading the proxy fight have a plan for improving performance and increasing shareholder value, then other shareholders will probably support the proxy fight. Proxy fights are less costly than tender offers in changing control within a company. However, most proxy fights fail to remove management. The upside of a proxy fight is that it usually brings about a boost in shareholder value since management is forced to act on poor performance. It is worth noting that proxy fights are sometimes led by former managers with the Target Company who recognize what needs to be done to turn the company around. In any event, studies clearly show that changes in management are much more likely to occur externally (tender offers) as opposed to internally (proxy fights). Course Summary A merger is like a marriage; the two partners must be compatible. Each side should add value so that together the two are much stronger. Unfortunately, many mergers fail to work. Overpaying for the acquisition is a common mistake because of an incomplete valuation model. Therefore, it is essential to develop a complete valuation model, including analysis under different scenarios with recognition of value drivers. A good starting point for determining value is to extend the Discounted Cash Flow Model since it corresponds well to market values. Core value drivers (such as free cash flows) should be emphasized over traditional type earnings (such as EBITDA). Some key points to remember in the valuation process include: 1. Most valuations will focus on valuing the equity of the Target Company. 2. The discount rate used should match-up with the associated risk of cash flows. . The forecast should focus on long-term cash flows over a period of time that captures a normal operating cycle for the company. 4. The forecast should be realistic by fitting with historical facts. 5. A comprehensive model is required based on an understanding of what drives value for the company. 6. The final forecast should be tested against independent sources. If pre merger pha ses are complete, we can move forward to integrate the two companies. This will require the conversion of information systems, combining of workforces, and other projects. Many failures can be traced to people problems, such as cultural differences between the companies, which can lead to resistance. Additionally, if you fail to retain key personnel, the integration process will be much more difficult. The best defense against personnel defections is to have a great place to work. If the company has a bad reputation as an employer, then defections will surely occur. Some of the risk factors associated with post merger integration are: 1. What level of integration do we implement? 2. What can we do to retain key personnel? 3. How serious are the cultural differences between the companies? . What kinds of conflicts and competition can we expect during integration? 5. To what extent do the people of both company’s understand the merger? 6. Who will govern and control the new company? Success with post merger integration is improved when: 1. The two companies have a history of effective planning and strategizing. 2. The two companies have a history of successful change management. 3. The merger will improve the strategies How to cite Excellence in Financial Management, Papers