632598256894

8 “Cisco Changes Tack in Takeover Game,” Wall Street Journal, April 17, 2008, A1.
9 For a more thorough discussion of this topic, see Weston et al. (1998), Chapter 5.
10 Wall Street Journal, November 30, 2000, B4.
11 Ibid.
12 See Harvard Business School Case 285053, Gulf Oil Corp.—Takeover, for a complete discussion
of this value creation.
13 We assume all cash flows continue in perpetuity. To value a perpetual cash flow, simply divide the
amount of the cash flow by the discount rate; in this case, $1.25 million per year ÷ 20% = $6.25
million.
14 For an explanation of Porter‟s Five Forces see www.quickmba.com/strategy/porter.shtml.
15 See Andrade, Mitchell, and Stafford (2001).
16 Prior to June 30, 2001, the pooling of interests method was also permissible. Under pooling, the
assets of the two firms were combined, or pooled, at their historical book values. There was no
revaluation of assets to reflect market value and therefore no creation of goodwill.
17 Stephen Grocer, “M&A in 2007: Inside the Numbers,” Deal Journal, Wall Street Journal, January
3, 2008.
18 Grant Thornton International Ltd., “Mergers and Acquisitions: Opportunities for Global Growth,”
International Business Report, 2008.
References
Agrawal, Anup, Jeffrey F. Jaffe, and Gershon N. Mandelker. 1992. The post-merger performance of
acquiring firms: A re-examination of an anomaly. Journal of Finance 47 (September): 1605-1621.
Andrade, Gregor, Mark Mitchell, and Erik Stafford. 2001. New evidence and perspectives on mergers.
Journal of Economic Perspectives 15 (2): 103-120.