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118-506: American Motors Corporation ( AMC ; commonly referred to as American Motors ) was an American automobile manufacturing company formed by the merger of Nash-Kelvinator Corporation and Hudson Motor Car Company on May 1, 1954. At the time, it was the largest corporate merger in U.S. history. American Motors' most similar competitors were those automakers that held similar annual sales levels, such as Studebaker , Packard , Kaiser Motors , and Willys-Overland . Their largest competitors were

236-401: A merger is the legal consolidation of two business entities into one, whereas an acquisition occurs when one entity takes ownership of another entity's share capital , equity interests or assets . From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity, and the distinction between the two

354-538: A bother some decline" actually began falling behind in share of sales. Moreover, a new line of redesigned cars in the full and mid-sized markets was launched in the fall of 1966. The cars won acclaim for their fluid styling, and Abernethy's ideas did work as Ambassador sales increased significantly. However, the dated designs of the Rambler Americans hurt its sales, which offset gains from Ambassador sales. There were quality control problems with introducing

472-405: A business retain just a handful of key players that would have otherwise left. Organizations should move rapidly to re-recruit key managers. It's much easier to succeed with a team of quality players that one selects deliberately rather than try to win a game with those who randomly show up to play. Mergers and acquisitions often create brand problems, beginning with what to call the company after

590-569: A business, which accrues to both categories of stakeholders, is called the Enterprise Value (EV), whereas the value which accrues just to shareholders is the Equity Value (also called market capitalization for publicly listed companies). Enterprise Value reflects a capital structure neutral valuation and is frequently a preferred way to compare value as it is not affected by a company's, or management's, strategic decision to fund

708-486: A certain size. An acquisition/takeover is the purchase of one business or company by another company or other business entity. Specific acquisition targets can be identified through myriad avenues, including market research, trade expos, sent up from internal business units, or supply chain analysis. Such purchase may be of 100%, or nearly 100%, of the assets or ownership equity of the acquired entity. A consolidation/amalgamation occurs when two companies combine to form

826-560: A decade before the Big Three offered them as options. Bendix disc brakes were made standard on the Marlin and optional on other models in 1965. This made the Marlin one of the first modern American cars with standard disc brakes, while the Big Three did not offer them until the early 1970s on most of their models to meet Federal Motor Vehicle Safety Standards . In the early part of the decade, sales were strong, thanks in no small part to

944-469: A full-sized Ford or Chevy. There was only an absence of largest-sized cars from the American Motors lineup in 1963 and 1964 The first cars bearing his signature were the 1965 models. The 1965 models were a major makeover of the new platform that had just been introduced in 1963. These were a longer Ambassador series and new convertibles for the larger models. During mid-year, a fastback , called

1062-471: A full-sized car in 1974 and was discontinued after the 1974 model year, leaving only the Matador as American Motors' full-size offering. Nash and American Motors made Ambassadors from 1927 through 1974, the longest use of the same model name for any American Motors product and, at the time, the longest continuously used nameplate in the industry. In 1974, the first-generation Matador two-door hardtop, known as

1180-473: A function of their acquisition activity. Therefore, additional motives for merger and acquisition that may not add shareholder value include: The M&A process itself is a multifaceted which depends upon the type of merging companies. The M&A process results in the restructuring of a business's purpose, corporate governance and brand identity. An arm's length merger is a merger: ″The two elements are complementary and not substitutes. The first element

1298-457: A joint research effort to consider producing an electric car that was to be powered by a "self-charging" battery. Sonotone had the technology for making sintered plate nickel–cadmium batteries that can be recharged very rapidly and are lighter than a typical automobile lead–acid battery . In 1959, American Motors hired designer Dick Teague, who had previously worked for General Motors , Packard , and Chrysler ; after Edmund E. Anderson left

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1416-433: A larger and/or longer-established company and retain the name of the latter for the post-acquisition combined entity. This is known as a reverse takeover . Another type of acquisition is the reverse merger , a form of transaction that enables a private company to be publicly listed in a relatively short time frame. A reverse merger is a type of merger where a privately held company, typically one with promising prospects and

1534-535: A life trustee for Northwestern University , a trustee for Ohio Wesleyan University and a trustee for University Hospitals of Cleveland , an affiliate of Case Western Reserve University . Nance married the former Laura Battelle in 1925; the couple had two children. Following Nance's retirement he maintained his principal residence in Hunting Valley, Ohio . Mrs. Nance died in Michigan on October 26, 1977, at

1652-742: A major property investor. Nance was born in Ironton, Ohio , Lawrence County, Ohio , in 1900 to George W. Nance and Florence Nance. He was raised on their farm. Following military service during World War I , Nance graduated from Ohio Wesleyan University in 1923; he also attended the Ohio State University where he pursued post-graduate course work. Nance began his career at the National Cash Register (NCR) in 1924, staying until 1927 when he joined General Motors ' Frigidaire division. In 1940 he left Frigidaire when he

1770-426: A merger or acquisition transaction can range from political to tactical. Ego can drive choice just as well as rational factors such as brand value and costs involved with changing brands. Beyond the bigger issue of what to call the company after the transaction comes the ongoing detailed choices about what divisional, product and service brands to keep. The detailed decisions about the brand portfolio are covered under

1888-444: A need for financing, acquires a publicly listed shell company that has few assets and no significant business operations. The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns," while shareholders of the acquiring company are most likely to experience a negative wealth effect. Most studies indicate that M&A transactions have a positive net effect, with investors in both

2006-451: A new enterprise altogether, and neither of the previous companies remains independently owned. Acquisitions are divided into "private" and "public" acquisitions, depending on whether the acquiree or merging company (also termed a target ) is or is not listed on a public stock market . Some public companies rely on acquisitions as an important value creation strategy. An additional dimension or categorization consists of whether an acquisition

2124-448: A plain brown wrapper, instead of the previous year's glossy cover. A completely new design was also slated for the larger 1967 models. This strategy added $ 60 million in retooling costs, a significant stretch for the company. The latest models shared fewer parts and were more expensive to build. Abernethy continued his objective to position the new Rebel and Ambassador designs on an equal basis with competitive economy models marketed by

2242-537: A potential merger that would bring all the U.S. independent automakers under one corporate entity, formal discussions were never established. Any hope of those discussions moving forward ended with Mason's death in October 1954. Nance left Studebaker Packard in 1956 when the company was on the verge of insolvency, but not until he found the organization a safe-harbor relationship with airplane manufacturer Curtiss-Wright . Following his tenure at Studebaker Packard, Nance

2360-436: A refusal to participate in the Big Three's restyling race. This cost-control policy helped Rambler develop a reputation for building solid economy cars. Company officials were confident in the changing market and in 1959 announced a $ 10 million (US$ 104,520,548 in 2016 dollars) expansion of its Kenosha complex (to increase annual straight-time capacity from 300,000 to 440,000 cars). A letter to shareholders in 1959 claimed that

2478-407: A result, 1958 became AMC's first year of profitability since its formation, with $ 28 million in earnings. The Nash and Hudson brands were dropped, and Rambler became a marque in its own right and the mainstay of the company. The popular British-built Metropolitan subcompact continued as a standalone brand until it was discontinued in 1961. The prototype 1958 Nash Ambassador / Hudson Hornet , built on

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2596-489: A sedan and a wagon, for use in his popular television series Adam-12 , increasing the cars' public profile. Matadors saw fleet use as taxis, government, police, and fire vehicles in some states. In 1973, American Motors signed a licensing agreement with Curtiss-Wright to build Wankel engines for cars and Jeeps. Starting in 1974, the Matador sedan and station wagon were mildly refreshed, with new boxier front and rear ends, making it full-sized. This second-generation model

2714-434: A situation where one company splits into two, generating a second company which may or may not become separately listed on a stock exchange. As per knowledge-based views, firms can generate greater values through the retention of knowledge-based resources which they generate and integrate. Extracting technological benefits during and after acquisition is an ever-challenging issue because of organizational differences. Based on

2832-550: A special committee of independent directors; and 2) conditioned on an affirmative vote of a majority of the minority stockholders, the business judgment standard of review should presumptively apply, and any plaintiff ought to have to plead particularized facts that, if true, support an inference that, despite the facially fair process, the merger was tainted because of fiduciary wrongdoing.″ A Strategic merger usually refers to long-term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in

2950-438: A stretched Rambler platform, was renamed at the last minute as "Ambassador by Rambler". To round out the model line, American Motors reintroduced the previous 1955, 100 in (2,540 mm) wheelbase Nash Rambler as the new Rambler American with only a few modifications. This gave Rambler a compact lineup that included the reintroduced American, the 108 in (2,743 mm) wheelbase Rambler Six and Rebel V8 , as well as

3068-658: A time, both the Hornet and Gremlin could be ordered with Levi's denim interiors. The new facelifted, mid-sized AMC Matador replaced the Rebel in 1971, using an advertising campaign that asked, "What's a Matador?" In 1972, American Motors won the tender for Los Angeles Police Department cruisers, and Matadors were used by the department from 1972 until 1975, replacing the Plymouth Satellite . American Motors supplied Mark VII Limited owner Jack Webb with two Matadors,

3186-468: A total value of US$ 2,164.4 bil. Some of the largest mergers of equals took place during the dot-com bubble of the late 1990s and in the year 2000: AOL and Time Warner (US$ 164 bil.), SmithKline Beecham and Glaxo Wellcome (US$ 75 bil.), Citicorp and Travelers Group (US$ 72 bil.). More recent examples this type of combinations are DuPont and Dow Chemical (US$ 62 bil.) and Praxair and Linde (US$ 35 bil.). An analysis of 1,600 companies across industries revealed

3304-580: A week after Mason's death, Romney announced "there are no mergers under way either directly or indirectly." Romney agreed with Mason's commitment to buy S-P products. Mason and Nance had agreed that S-P would endeavor to purchase parts from American Motors in return, but S-P did not do so. As the Packard engines and transmissions were comparatively expensive, American Motors began development of its own V8 . American Motors also spent US$ 40 million developing its Double Safe Single Unit monocoque , which debuted in

3422-456: Is friendly or hostile . Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. "Serial acquirers" appear to be more successful with M&A than companies who make acquisitions only occasionally (see Douma & Schreuder, 2013, chapter 13). The new forms of buy out created since the crisis are based on serial type acquisitions known as an ECO Buyout which

3540-478: Is a co-community ownership buy out and the new generation buy outs of the MIBO (Management Involved or Management & Institution Buy Out) and MEIBO (Management & Employee Involved Buy Out). Whether a purchase is perceived as being "friendly" or "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees, and shareholders. It

3658-426: Is a triangular merger, where the target company merges with a shell company wholly owned by the buyer, thus becoming a subsidiary of the buyer. In a "forward triangular merger ", the target company merges into the subsidiary, with the subsidiary as the surviving company of the merger; a "reverse triangular merger" is similar except that the subsidiary merges into the target company, with the target company surviving

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3776-425: Is between two competitors in the same industry. A vertical merger occurs when two firms combine across the value chain, such as when a firm buys a former supplier (backward integration) or a former customer (forward integration). When there is no strategic relatedness between an acquiring firm and its target, this is called a conglomerate merger (Douma & Schreuder, 2013). The form of merger most often employed

3894-399: Is combined into another entity by operation of the corporate law statute(s) of the jurisdiction of the merging entities. In a transaction structured as a merger or an equity purchase, the buyer acquires all of the assets and liabilities of the acquired entity. In a transaction structured as an asset purchase, the buyer and seller agree on which assets and liabilities the buyer will acquire from

4012-425: Is complete, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement," or "asset purchase agreement" depending on the structure of the transaction. Such contracts are typically 80 to 100 pages long and focus on five key types of terms: Following the closing of a deal, adjustments may be made to some of the provisions outlined in the purchase agreement, such as

4130-426: Is important because the directors have the capability to act as effective and active bargaining agents, which disaggregated stockholders do not. But, because bargaining agents are not always effective or faithful, the second element is critical, because it gives the minority stockholders the opportunity to reject their agents' work. Therefore, when a merger with a controlling stockholder was: 1) negotiated and approved by

4248-412: Is normal for M&A deal communications to take place in a so-called "confidentiality bubble," wherein the flow of information is restricted pursuant to confidentiality agreements. In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the board and/or management of the target is unwilling to be bought or the target's board has no prior knowledge of

4366-725: Is not always clear. Most countries require mergers and acquisitions to comply with antitrust or competition law . In the United States , for example, the Clayton Act outlaws any merger or acquisition that may "substantially lessen competition" or "tend to create a monopoly ", and the Hart–Scott–Rodino Act requires notifying the U.S. Department of Justice 's Antitrust Division and the Federal Trade Commission about any merger or acquisition over

4484-415: Is possible only when resources are exchanged and managed without affecting their independence. A corporate acquisition can be structured legally as either an "asset purchase" in which the seller sells business assets and liabilities to the buyer, an "equity purchase" in which the buyer purchases equity interests in a target company from one or more selling shareholders or a "merger" in which one legal entity

4602-464: Is provided by full-service investment banks- who often advise and handle the biggest deals in the world (called bulge bracket ) - and specialist M&A firms, who provide M&A only advisory, generally to mid-market, select industries and SBEs. Highly focused and specialized M&A advice investment banks are called boutique investment banks . The dominant rationale used to explain M&;A activity

4720-487: Is that acquiring firms seek improved financial performance or reduce risk. The following motives are considered to improve financial performance or reduce risk: Megadeals—deals of at least one $ 1 billion in size—tend to fall into four discrete categories: consolidation, capabilities extension, technology-driven market transformation, and going private. On average and across the most commonly studied variables, acquiring firms' financial performance does not positively change as

4838-718: The Big Three — Ford , General Motors , and Chrysler . American Motors' production line included small cars —the Rambler American , which began as the Nash Rambler in 1950, Hornet , Gremlin , and Pacer ; intermediate and full-sized cars , including the Ambassador , Rambler Classic , Rebel , and Matador ; muscle cars , including the Marlin , AMX , and Javelin ; and early four-wheel drive variants of

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4956-512: The Eagle and the Jeep Wagoneer , the first true crossovers in the U.S. market. Regarded as "a small company deft enough to exploit special market segments left untended by the giants", American Motors was widely known for the design work of chief stylist Dick Teague , who "had to make do with a much tighter budget than his counterparts at Detroit's Big Three", but "had a knack for making

5074-553: The Hornet range of compact cars. The Hornet and the later Gremlin shared platforms . The Gremlin, the first North American-built subcompact, sold more than 670,000 units from 1970 through 1978. The Hornet became American Motors' best-selling passenger car since the Rambler Classic, with more than 860,000 units sold when production ended in 1977. The Hornet platform continued to be built under various models through 1987. For

5192-534: The Hudson's Bay Company merged with the rival North West Company . The Great Merger Movement was a predominantly U.S. business phenomenon that happened from 1895 to 1905. During this time, small firms with little market share consolidated with similar firms to form large, powerful institutions that dominated their markets, such as the Standard Oil Company , which at its height controlled nearly 90% of

5310-480: The Marlin , was added. It competed directly with cars like the Dodge Charger , but AMC's "family-sized" fastback emphasized personal-luxury . The continuing quest "in the business world's toughest race – the grinding contest against the Big Three automobile makers" also meant annual styling changes requiring large expenditures. American Motors's management total confidence "that the new 1965 models would stem

5428-405: The "Big Three" introduced ever-larger cars, American Motors followed a "dinosaur-fighter" strategy. George W. Romney 's leadership focused the company on the compact car, a fuel-efficient vehicle 20 years before there was a real need for them. This gave Romney a high profile in the media. Two core strategic factors came into play: (1) the use of shared components in American Motors products and (2)

5546-1078: The "flying brick" due to its poor aerodynamics in NASCAR competition, was replaced with a sleek, smoothly shaped, and radically styled two-door coupe. The model received praise for its design, including "Best Styled Car of 1974" by Car and Driver magazine, customer satisfaction, and sold almost 100,000 coupes over five years. The Matador Coupe shared few components with the Matador sedan and station wagon other than suspension, drive train, some trim, and interior parts. In 1974, American Motors's AM General subsidiary began building urban transit buses in cooperation with Flyer Industries of Winnipeg , Manitoba. A total of 5,431 Metropolitan buses, including 219 electric trolley buses , were built before production ceased in 1979. Production of diesel buses had ceased in 1978, with only trolley bus production taking place in 1979. The AMC Pacer , an innovative all-new model introduced in March 1975 and marketed as "the first wide small car",

5664-727: The ( NASCAR ) champion during the early 1950s; the Wasp now used the former engine of the Hudson Jet. The Nash Ambassador and Statesman continued with overhead- valve and L-head sixes, respectively. Hudson and Nash cars had different front suspensions. Trunk lids were interchangeable, but other body panels, rear window glass, dash panels, and braking systems differed. The Hudson Hornet, Wasp, and their Nash counterparts had improved ride, visibility, and fuel economy because of their lighter unitized Nash body. The larger Nash and Hudson range did not sell well, and AMC lost money each year. Dismayed with

5782-599: The 117 in (2,972 mm) wheelbase Ambassador. Sales of Ramblers soared in the late 1950s partly because of American Motors' focus on the compact car and its marketing efforts. These included sponsoring the hugely popular Walt Disney anthology television series and as an exhibitor at the Disneyland theme park in Anaheim, California. George Romney himself pitched the Rambler product in television commercials. While

5900-622: The 1954 Packard acquisition of the Studebaker Corporation , creating the Studebaker Packard Corporation in 1954. While the Studebaker merger appeared to be in the best interests of both automakers, Studebaker failed to provide Packard with a full disclosure of its tenuous cash position, jeopardizing both marques. While Nance had held informal talks with George W. Mason of Nash Kelvinator about

6018-551: The 1956 model year. In mid-1956, the 352 cu in (5.8 L) Packard V8 and TwinUltramatic transmission were phased out and replaced by American Motors's new V8 and by GM Hydra-Matic and Borg-Warner transmissions. American Motors combined the Nash and Hudson product lines under a common manufacturing strategy in 1955, with the production of Nashes and Hudsons consolidated at the Nash plant in Kenosha. The Detroit Hudson plant

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6136-496: The 1968 model year cars, which required a neutral position between reverse and drive, while General Motors still offered a shift selector that had reverse immediately next to low gear (PNDSLR) well into the 1960s. Unique in the U. S. automotive industry, American Motors offered adjustable front seat backrests from their Nash-origin, and in 1964, the Classic and Ambassador were equipped with standard dual reclining front seats nearly

6254-564: The A-pillar forward, the Ambassador was redesigned and stretched 7 inches (178 mm) to become the biggest ever, just as the 1973 Arab Oil Embargo sparked gasoline rationing across the nation. The additional length was due to a new front-end design and more substantial energy-absorbing bumpers required of all automobiles sold in the U.S. Sales of all large cars fell due to economic problems and rising gasoline prices. The Ambassador became

6372-447: The Big Three as an equal. The "frantic 1953–54 Ford/GM price war" devastated the remaining "independent" automakers. The reasons for the merger between Nash and Hudson included helping cut costs and strengthen their sales organizations to meet the intense competition expected from autos' Big Three. One quick result from the merger was the doubling up with Nash on purchasing and production, allowing Hudson to cut prices an average of $ 155 on

6490-421: The Big Three. American Motors did not have their own electric car program as did the Big Three, and after some negotiation, a contract was drawn in 1967 with Gulton Industries to develop a new battery based on lithium and a speed controller designed by Victor Wouk. A nickel-cadmium battery powered 1969 Rambler station wagon demonstrated the power systems that according to the scientist was a "wonderful car". This

6608-800: The Great Merger Movement were able to keep their dominance in their respective sectors through 1929, and in some cases today, due to growing technological advances of their products, patents , and brand recognition by their customers. There were also other companies that held the greatest market share in 1905 but at the same time did not have the competitive advantages of the companies like DuPont and General Electric . These companies such as International Paper and American Chicle saw their market share decrease significantly by 1929 as smaller competitors joined forces with each other and provided much more competition. The companies that merged were mass producers of homogeneous goods that could exploit

6726-642: The Great Merger Movement. James J. Nance James John Nance (19 February 1900 – 21 July 1984) was an American industrialist who became president of the Studebaker-Packard Corporation . Later, he was chief executive of the Central National Bank of Cleveland, chairman of the executive committee of Montgomery Ward and chairman of the board of trustees of the Cleveland State University and

6844-518: The Pacer and Matador Coupe drained capital that might otherwise have been invested in updating the more popular Hornet and Gremlin lines so that toward the end of the 1970s, the company faced the growing energy crisis with aged products that were uncompetitive in hotly contested markets. However, "AMC used cars, as far back as 1967, had the advantage of good warranty coverage … so most owners were conscious of low-cost car maintenance … AMC units became some of

6962-505: The Pacer instead. The fuel economy was better than the expected rotary engine's, but the I6's gas mileage was relatively low in light of the new focus on energy efficiency. Also, as the Pacer shared few components other than the drivetrain with other American Motors cars, it was expensive to make, and the cost increased when sales fell steeply after the first two years. The Pacer line was discontinued in mid-1980. Development and production costs for

7080-645: The United States had ended, and its Canadian operations ceased in 1966. The "Big Three", plus the smaller American Motors, Kaiser Jeep , International Harvester , Avanti , and Checker companies were the remaining North American auto manufacturers. Abernethy believed that American Motors's reputation of building reliable, economical cars could translate into a new strategy that could follow AMC buyers as they traded into larger, more expensive vehicles. American Motors, in reality, had produced large cars throughout its history. The Rambler Ambassadors were as large as

7198-632: The Wasp line, and up to $ 204 on the more expensive Hornet models. After the merger, AMC had its first profitable quarter during the second three months of 1955, earning $ 1,592,307, compared to a loss of $ 3,848,667 during the same period in the previous year. Mason also entered into informal discussions with James J. Nance of Packard to outline his strategic vision . Interim plans were made for American Motors to buy Packard Ultramatic automatic transmissions and Packard V8 engines for certain American Motors products. In July 1954, Packard acquired Studebaker . The new Studebaker-Packard Corporation (S-P) made

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7316-450: The acquiring company's stock, issued to the shareholders of the acquired company at a given ratio proportional to the valuation of the latter. They receive stock in the company that is purchasing the smaller subsidiary. There are some elements to think about when choosing the form of payment. When submitting an offer, the acquiring firm should consider other potential bidders and think strategically. The form of payment might be decisive for

7434-512: The acquisition so the team can focus on projects for their new employer). In recent years, these types of acquisitions have become common in the technology industry, where major web companies such as Facebook , Twitter , and Yahoo! have frequently used talent acquisitions to add expertise in particular areas to their workforces. Merger of equals is often a combination of companies of a similar size. Since 1990, there have been more than 625 M&A transactions announced as mergers of equals with

7552-514: The assets and liabilities that pertain solely to the unit being sold, determining whether the unit relies on services from other parts of the seller's organization, transferring employees, moving permits and licenses, and safeguarding against potential competition from the seller in the same business sector after the transaction is completed. From an economic point of view, business combinations can also be classified as horizontal, vertical and conglomerate mergers (or acquisitions). A horizontal merger

7670-433: The brake system. Only Cadillac also included this safety feature six years before U.S. safety regulations required it on all cars. Rambler also was an early pioneer in offering an automatic shift indicator sequence (P R N D2 D1 L, where if one selected "D2", the car started in second gear, while "1" began in first gear) on its "Flash-O-Matic" transmission which is similar to today's "PRNDSL" shift pattern, made mandatory for

7788-446: The business either through debt, equity, or a portion of both. Five common ways to "triangulate" the enterprise value of a business are: Professionals who value businesses generally do not use just one method, but a combination. Valuations implied using these methodologies can prove different to a company's current trading valuation. For public companies, the market based enterprise value and equity value can be calculated by referring to

7906-482: The buyer and target companies seeing positive returns. This suggests that M&A creates economic value, likely by transferring assets to more efficient management teams who can better utilize them. (See Douma & Schreuder, 2013, chapter 13). There are also a variety of structures used in securing control over the assets of a company, which have different tax and regulatory implications: The terms " demerger ", " spin-off " and "spin-out" are sometimes used to indicate

8024-469: The buyer. Hence, the analysis should be done from the acquiring firm's point of view. Synergy-creating investments are started by the choice of the acquirer, and therefore they are not obligatory, making them essentially real options . To include this real options aspect into analysis of acquisition targets is one interesting issue that has been studied lately. See also contingent value rights . Mergers are generally differentiated from acquisitions partly by

8142-467: The company in 1961, Teague was named principal designer and in 1964, vice president. To stay competitive, American Motors produced a wide range of products during the 1960s and added innovations long before the "Big Three" introduced them. For example, the Rambler Classic was equipped with a standard tandem master cylinder in 1962 that provided stopping ability even if there was a failure in

8260-404: The company saw a $ 11.8 million loss. In response, Romney launched a massive public relations campaign, traveling 70,000 miles (112,654 kilometres) nationwide in 12 months. Romney spoke at union halls, dinners, churches, fairgrounds, and radio and TV stations. He was anywhere where he could get the word out about Rambler. Rambler sales took off in 1958, up 58.7%, and 425 new dealers were signed up. As

8378-533: The company to reach an agreement on August 26, 1961, with the United Auto Workers for a profit sharing plan that was new in the automobile industry. Its new three-year labor contract included generous annual improvement pay increases, and automatic cost-of-living raises. However, in 1962, Romney resigned to run for Governor of Michigan . His replacement was Roy Abernethy , American Motors' successful sales executive. By 1964, Studebaker production in

8496-462: The company's current account), liquidity ratios might decrease. On the other hand, in a pure stock for stock transaction (financed from the issuance of new shares), the company might show lower profitability ratios (e.g. ROA). However, economic dilution must prevail towards accounting dilution when making the choice. The form of payment and financing options are tightly linked. If the buyer pays cash, there are three main financing options: M&A advice

8614-435: The company's history of building small cars, which came into vogue in 1961. In both 1960 and 1961, Ramblers ranked in third place among U. S. automobile sales, up from third on the strength of small-car sales, even in the face of a lot of new competition. Romney's strategic focus was very successful, as reflected in the firm's healthy profits year after year. The company became completely debt-free. The financial success allowed

8732-469: The company's share price and components on its balance sheet. The valuation methods described above represent ways to determine value of a company independently from how the market currently, or historically, has determined value based on the price of its outstanding securities. Most often value is expressed in a Letter of Opinion of Value (LOV) when the business is being valued informally. Formal valuation reports generally get more detailed and expensive as

8850-420: The content analysis of seven interviews, the authors concluded the following components for their grounded model of acquisition: An increase in acquisitions in the global business environment requires enterprises to evaluate the key stake holders of acquisitions very carefully before implementation. It is imperative for the acquirer to understand this relationship and apply it to its advantage. Employee retention

8968-430: The control of the buyer modified. If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders. The risk is removed with a cash transaction. Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results. For example, in a pure cash deal (financed from

9086-422: The de-emphasis of the Rambler brand because he believed the public associated it too strongly with economy cars and that it was hindering the sale of American Motors' other models at a time when mid and luxury car sales were robust. As a result, he ordered that for 1966, the Ambassador and Marlin were to be badged purely as a product of American Motors. The strategy shift at first seemed to be working because sales of

9204-701: The decade's muscle car boom, most notably the AMX . At the same time, the Javelin served as the company's entrant into the sporty pony car market created by the Plymouth Barracuda and the Ford Mustang . Additional operating cash was derived in 1968 through the sale of Kelvinator Appliance, once one of the firm's core operating units. The Kelvinator divestiture left American Motors a downsized company solely manufacturing automobiles. The Rambler marque

9322-405: The efficiencies of large volume production. In addition, many of these mergers were capital-intensive. Due to high fixed costs, when demand fell, these newly merged companies had an incentive to maintain output and reduce prices. However more often than not mergers were "quick mergers". These "quick mergers" involved mergers of companies with unrelated technology and different management. As a result,

9440-468: The efficiency gains associated with mergers were not present. The new and bigger company would actually face higher costs than competitors because of these technological and managerial differences. Thus, the mergers were not done to see large efficiency gains, they were in fact done because that was the trend at the time. Companies which had specific fine products, like fine writing paper, earned their profits on high margin rather than volume and took no part in

9558-473: The global oil refinery industry. It is estimated that more than 1,800 of these firms disappeared into consolidations, many of which acquired substantial shares of the markets in which they operated. The vehicle used were so-called trusts . In 1900 the value of firms acquired in mergers was 20% of GDP . In 1990 the value was only 3% and from 1998 to 2000 it was around 10–11% of GDP. Companies such as DuPont , U.S. Steel , and General Electric that merged during

9676-585: The iconic Jeep brand of light trucks and SUVs, as well as Kaiser-Jeep's government contracts – notably the M151 line of military Jeeps and the DJ-Series postal Jeeps. American Motors also expanded its international network. The military and special products business was reconstituted as "American Motors General Products Division", later reorganized as AM General . In 1970, American Motors consolidated all passenger cars under one distinct brand identity and debuted

9794-421: The introduction of new compact cars by American Motors' large domestic competitors (for the 1960 model year) "signals the end of big-car domination in the U.S." and that American Motors predicts small-car sales in the U.S. may reach three million units by 1963. American Motors was also beginning to experiment with non-gasoline-powered automobiles. On April 1, 1959, American Motors and Sonotone Corporation announced

9912-440: The long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process. The term "acqui-hire" is used to refer to acquisitions where the acquiring company seeks to obtain the target company's talent, rather than their products (which are often discontinued as part of

10030-440: The merger. Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent. Under the U.S. Internal Revenue Code , a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, them whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in

10148-614: The most of his employer's investment". After periods of intermittent independent success, Renault acquired a significant interest in American Motors in 1979, and the company was ultimately acquired by Chrysler in 1987. In January 1954, Nash-Kelvinator Corporation began the acquisition of the Hudson Motor Car Company (in what was called a merger ). The new corporation would be called the American Motors Corporation. An earlier corporation with

10266-429: The most value from a business assessment, objectives should be clearly defined and the right resources should be chosen to conduct the assessment in the available timeframe. As synergy plays a large role in the valuation of acquisitions, it is paramount to get the value of synergies right; as briefly alluded to re DCF valuations. Synergies are different from the "sales price" valuation of the firm, as they will accrue to

10384-408: The new 320 cu in (5.2 L) Packard V8 engine and Packard's Ultramatic automatic transmission available to American Motors for its 1955 Nash Ambassador and Hudson Hornet models. When Mason died in 1954, George W. Romney succeeded him. Ironically, Romney had once been offered Nance's job. In 1948, Romney received offers from Packard for the post of chief operating officer and from Nash for

10502-582: The new corporate logo. However, "American Motors" and "AMC" were used interchangeably in corporate literature well into the 1980s. The branding issue was further complicated when the company's Eagle all-wheel drive passenger cars were marketed as the American Eagle in the 1980s. In the late 1960s, Kaiser Industries Corporation decided to leave the automotive industry and sought a buyer for its money-losing Kaiser Jeep division. American Motors' vice president for manufacturing, Gerald C. Meyers , headed

10620-587: The new full-sized cars and persistent rumors of the company's demise because of its precarious cash flow. Consumer Reports ' negative ratings for American Motors' safety did not help. During this time, AMC's international sales were expanding. From only 18,000 cars five years ago, the 1965 model year AMC sold 74,420 vehicles in Canada, Europe, and Latin America. AMC remained the most significant U.S. seller of autos in both France and Germany. Abernethy also called for

10738-460: The number two position in the company. Although the Packard offer would have paid more, Romney decided to work under Mason because he thought Nash had a brighter future. Studebaker-Packard president James Nance refused to consider merging with American Motors unless he could take the top position (Mason and Nance were former competitors as heads of the Kelvinator and Hotpoint , respectively), and

10856-417: The offer. Hostile acquisitions can, and often do, ultimately become "friendly" as the acquirer secures endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the terms of the offer and/or through negotiation. "Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of

10974-446: The purchase price. These adjustments are subject to enforceability issues in certain situations. Alternatively, certain transactions use the 'locked box' approach, where the purchase price is fixed at signing and based on the seller's equity value at a pre-signing date and an interest charge. The assets of a business are pledged to two categories of stakeholders: equity owners and owners of the business' outstanding debt. The core value of

11092-407: The redesigned 1965 and 1966 Ambassadors improved, even as AMC's overall production decreased from the record level achieved in 1963. However, corporate earnings per share were a meager 27 cents per share, the lowest since AMC made its famous compact car comeback in 1958. Investors received a message of the changing fortune of the automaker when the company's 1966 annual financial report was delivered in

11210-504: The results, Romney decided in 1956 that the company's future lay with the compact Rambler line. Romney halted production on the new large cars and focused entirely on the new Rambler Six and V8 introducing them in 1956, despite being scheduled for a 1957 release. Sales of the new Ramblers were poor, and sales of the Hudson and Nash models were almost non-existent, resulting in a $ 31.7 million operating loss for 1956. Sales improved in 1957, but

11328-446: The rewards for M&A activity were greater for consumer products companies than the average company. For the period 2000–2010, consumer products companies turned in an average annual TSR of 7.4%, while the average for all companies was 4.8%. Given that the cost of replacing an executive can run over 100% of his or her annual salary, any investment of time and energy in re-recruitment will likely pay for itself many times over if it helps

11446-584: The same name, co-founded by Louis Chevrolet , had existed in Plainfield, New Jersey, from 1916 through 1922 before merging into the Bessemer–American Motors Corporation. The Nash-Kelvinator/Hudson deal was a straight stock transfer (three shares of Hudson listed at 11 + 1 ⁄ 8 , for two shares of American Motors and one share of Nash-Kelvinator listed at 17 + 3 ⁄ 8 , for one share of American Motors) and finalized in

11564-448: The seller. Asset purchases are common in technology transactions in which the buyer is most interested in particular intellectual property but does not want to acquire liabilities or other contractual relationships. An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company that is not a separate legal entity. Divestitures present a variety of unique challenges, such as identifying

11682-442: The seller. With pure cash deals, there is no doubt on the real value of the bid (without considering an eventual earnout). The contingency of the share payment is indeed removed. Thus, a cash offer preempts competitors better than securities. Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers. Third, with a share deal the buyer's capital structure might be affected and

11800-414: The size of a company increases, but this is not always the case as the nature of the business and the industry it is operating in can influence the complexity of the valuation task. Objectively evaluating the historical and prospective performance of a business is a challenge faced by many. Generally, parties rely on independent third parties to conduct due diligence studies or business assessments. To yield

11918-522: The spring of 1954, forming the fourth-biggest auto company in the U.S. with assets of US$ 355 million and more than $ 100 million in working capital . The new company retained Hudson CEO A.E. Barit as a consultant and he took a seat on the board of directors . Nash's George W. Mason became president and CEO. Mason, the architect of the merger, believed that the survival of the U.S.'s remaining independent automakers depended on their joining to form one multiple-brand company capable of challenging

12036-490: The target company to the buyer. The documentation of an M&A transaction often begins with a letter of intent . The letter of intent generally does not bind the parties to commit to a transaction, but may bind the parties to confidentiality and exclusivity obligations so that the transaction can be considered through a due diligence process involving lawyers, accountants, tax advisors, and other professionals, as well as business people from both sides. After due diligence

12154-492: The team sent to evaluate Kaiser's Jeep factories. Although opposed by AMC's top management, Chapin made a significant decision in February 1970 to purchase Kaiser Jeep for $ 70 million. Although it was a gamble, Chapin believed Jeep vehicles would complement American Motors' passenger car business. The Jeep market was also a market in which the Big Three had no presence, and therefore there was no competition. American Motors gained

12272-658: The topic brand architecture . Most histories of M&A begin in the late 19th century United States. However, mergers coincide historically with the existence of companies. In 1708, for example, the East India Company merged with an erstwhile competitor to restore its monopoly over the Indian trade. In 1784, the Italian Monte dei Paschi and Monte Pio banks were united as the Monti Reuniti. In 1821,

12390-547: The transaction and going down into detail about what to do about overlapping and competing product brands. Decisions about what brand equity to write off are not inconsequential. And, given the ability for the right brand choices to drive preference and earn a price premium, the future success of a merger or acquisition depends on making wise brand choices. Brand decision-makers essentially can choose from four different approaches to dealing with naming issues, each with specific pros and cons: The factors influencing brand decisions in

12508-578: The very best buys on the used car market" by 1975. The 1977 Gremlin had redesigned headlights, grille, rear hatch, and fascia. For economy in the fuel crisis, American Motors offered the car with a more fuel-efficient Volkswagen -designed Audi 4-cylinder engine 2.0 L (122 cu in). The engine was expensive for American Motors to build, and the Gremlin retained the less costly but less economical 232 cu in (3.8 L) as standard equipment. Mergers and acquisitions Technically,

12626-406: The way in which they are financed and partly by the relative size of the companies. Various methods of financing an M&A deal exist: Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the (indirect) control of the bidder's shareholders. Payment in the form of

12744-732: The year before Tax Credits and deferred Tax Assets. By this time the board had lost confidence in Abernethy due to his vast spending which had unstabilized the company and each year under his leadership the company had suffered substantial financial losses. As a result, Abernethy was forced into taking an "early retirement" from American Motors on January 9, 1967. Abernethy was replaced by Roy D. Chapin Jr. (son of Hudson Motors founder Roy D. Chapin ). Chapin quickly instituted changes to American Motors's offerings and tried to regain market share by focusing on younger demographic markets. Chapin's first decision

12862-781: Was a subcompact designed to provide the comfort of a full-sized car. Its pre-production development coincided with tightened U.S. federal passenger emissions and auto safety regulations. The Pacer sold well its first two years with 262,772 combined units sold in the US. With the Arab Oil Embargo of 1973, General Motors aborted the Wankel rotary engine around which the Pacer had been designed, as its fuel consumption exceeded that of conventional engines with similar power. Therefore, American Motors's existing 258 and 232 cu in (4.2 and 3.8 L) AMC Straight-6 engines were used in

12980-474: Was also the start of other "plug-in"-type experimental American Motors vehicles developed with Gulton – the Amitron city concept car and later the similar Electron . Although the new models were well received by the motor industry media, the last quarter sales for AMC ended September 30, 1966 (AMC was not on a calendar fiscal year) were disappointing. The company recorded a balance sheet loss of $ 12,648,000 for

13098-668: Was continued with the Nash Statesman restyled as the "new" Hudson Wasp and the Nash Ambassador restyled as the Hudson Hornet . Although the cars shared the same body shell, they were at least as different from one another as Chevrolet and Pontiac. Hudsons and Nashes each used their engines as they had previously: the Hudson Hornet continued to offer the 308 cu in (5.0 L) I6 that had powered

13216-476: Was converted to military contract production and eventually sold. The separate Nash and Hudson dealer networks were retained. The Hudsons were redesigned to harmonize with Nash's body styles. The fast-selling Nash Rambler model was sold as a Nash and a Hudson in 1955 and 1956. These badge-engineered Ramblers, and similarly the small Metropolitans, were identical except for the hubcaps, nameplates, and other minor trim. The pre-existing full-size Nash product line

13334-415: Was discontinued for the larger 1968 domestic models, leaving only the small Rambler American as the last product to bear the name through 1969. The Rambler brand continued to be used only for export markets, with Mexico being the last market to use it in 1983. From 1970, American Motors was the brand used for all American Motors passenger cars, and all vehicles from that date bore the American Motors name and

13452-545: Was named as the first chairman of the board of trustees of Cleveland State University , a position that he held until 1970. Cleveland State named its business college in his honor (renaming it in June 2011 to honor another board of trustees chair, Monte Ahuja) and its library holds Nance's personal papers Archived 2006-01-06 at the Wayback Machine . In addition to his tenure on the board of CSU, Nance also served as

13570-700: Was named vice president of Ford 's Mercury Edsel Lincoln Division, but resigned under pressure from top Ford executives in 1959 when Edsel 's sales were poor. He left the automobile business following his tenure with Ford and became president and CEO of Central National Bank of Cleveland, Ohio in 1960, being elevated to the position of chairman and CEO in 1962. According to Nance he left the automobile industry because while there he had learned that everything depended on money and who controlled it. Following his retirement from Central National, Nance established his own consulting firm in Cleveland, Ohio . In 1964 Nance

13688-596: Was named vice president of Zenith Radio Corporation of Chicago. Nance was named CEO of General Electric 's Hotpoint brand in 1945 and CEO of the Packard Motor Car Company in 1952. While at Studebaker Packard, Nance moved to separate the Packard Clipper range of vehicles into a stand-alone brand, Clipper . He also expedited the development of Packard's first V8 engine and automatic transmission, Ultramatic . Nance helped to orchestrate

13806-509: Was produced virtually unchanged until 1978. Sagging sales and tight finances resulted in the discontinuation of the Matador line after the 1978 model leaving American Motors to focus almost exclusively on its Hornet platform -based cars and the Jeep line. From 1970, the Rebel and Ambassador were identical from the A-pillar back. The Ambassador continued as AMC's upmarket model with higher trim, more equipment, and air conditioning as standard. From

13924-452: Was to cut the price of the Rambler to within $ 200 of the basic Volkswagen Beetle . Innovative marketing ideas included making air conditioning standard on all 1968 Ambassador models (available as a delete option). This made American Motors the first U.S. automaker to make air conditioning standard equipment on a line of cars, preceding even luxury makes such as Lincoln , Imperial , and Cadillac . The company introduced exciting entries for

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