On Carloss Birth Essay Example For Students

On Carloss Birth Essay Final Paper On The Birth of CarlosJuan AboitesIn the reading If Rape Were Legal, the subject, Carlos, is deathly afraid of his own mortality and he is in denial about this mortality and about what kind of an effect it will have on the people he loves. For example, he is unaware of the impact his behavior will have on his kids and then subsequently on their kids, and their kids friends, etc. Carloss problem is that he is most concerned with the physical aspect of death, this is what he is most afraid of, and what he believes is the most important thing about death, the death of the physical being, something that is not quite true. The story of Carlos begins when a young psychologist was concerned about his behavior and attitude towards other members in his therapy group. He was being insensitive to the problems of others, especially of one womans trauma after being raped. Already at the beginning we see signs of a fear of physical death. His own justification at saying these things is that what he is going through (chemotherapy, the knowledge that there is no question he will die within a few years) is much worse than what these women have gone through. His reasoning is that rape is something that happens to you and then its over, that you can still go on living your life. According to Elisabeth Kubler-Ross there is no need to fear physical death, but there is reason to fear what kind of mark your personality, your self, will leave once your physical body is gone. You may view the eternal essence of your existence in terms of the impact your every mood and action has on those you touch, and then in turn, on those they touch, and on and on-even long after your life span is completed. (357) This is exactly what Carlos is missing, the realization that the things that he does will leave an impression on all of those people he has had dealings with, a very negative impression. For example, after the woman in Carlos therapy group hears the insensitive comments directe d towards her and towards her rape experience, on top of the experience itself, she may have trouble having relationships with other men, and be in a state of constant distrust at revealing her emotions and may have very much difficulty carrying on loving relationships with other men. These are the types of effects that, even after a person is dead, can have on those that are still living. This is something Carlos simply cannot realize, he is too wrapped up in feeling sorry for himself and in his problems, that he does not realize what kinds of bad things he is causing and what kind of negative effects he is having on the world. Besides being afraid, Carlos is in denial about the short time he has left to live. This denial comes naturally from being afraid. Kubler-Ross talks about denial and its effect on peoples behavior. It is the denial of death that is partially responsible for people living, empty purposeless lives (357). Here, Kubler-Ross is once again saying that the reason m ost people live empty lives is because they are id denial about their death. Since we stopped chemotherapy two months ago, I go days at a time without thinking of the cancer. Thats goddamn good, isnt it-to forget, to be free of it, to be able to live a normal life for a while (77)? Here Carlos is sure that being in denial, or forgetting about it, is a good thing. But in reality his denial only serves to desensitize himself and his compassion for other people. This can be seen in his unsupportive stance to the women and all the others in his therapy group. It possible to see how his defense system, protecting him against the fears of death, operates and how his attitude changes with the varying degrees of severity of his illness. Over the months I had been seeing Carlos, I had discovered that I could chart, with astonishing accuracy, the course of his cancer by noting the things he talked about. Whenever his cancer worsened and he was actively facing death, he rearranged his lifes p riorities and became more thoughtful, compassionate, wiser. When, on the other hand, when he was in remission, he was guided as he put it, by his pecker and grew noticeably more coarse and shallow. (77) Here the psychologist is noting that when the physical components of Carloss cancer are not readily apparent, he goes into denial about his death, he tries to forget about it. Conversely, when the cancer shows itself in a physical way, he accepts his mortality, and does what Kubler -Ross says people who realize their own mortality should do, take the time to grow and to touch people and leave your mark on people. This brings us to his fascination with women, and his desire to marry and have sex with all the women he possibly can. This is part of his defense system, part of his denial. By being so superficial with other peoples emotions, it detaches him from the idea that he is going to die, and that it is inevitable that he will not live for more than a couple of years. This defense system works in a very curious way. In all cases Carlos knows that he is going to die soon, however being detached from this idea, being in denial, are ways in which he can justify his being so insensitive and so shallow. Since his cancer is not actively showing itself he knows he has a little time before he is actually going to die, so he takes advantage by trying to satisfy all of his impulses, including those related to sex. When the cancer shows itself again, he knows that this time may very well be the end, and that he will never see another healthy period, so he becomes more caring and more thoughtful. He goes back and forth between the two extremes, depending on how the physical aspects of his cancer are developing. Kubler-Ross states that once we are aware of our death and of the lasting impressions we make on a vast majority of people, we are able to take the time each day, to try to grow as people and try to self-actualize ourselves to become better people. Carlos comes to accept his pending death and does exactly what Kubler-Ross describes. The way in which this change comes about, has to do with a variety of different inconsistencies in his arguments that come together as a whole and make Carols realize that the things he is doing are hurtful and that they simply arent right, as he says it. Aside from his insensitiveness and his lack of compassion, Carlos is very fond, and cares very much for his two children, one girl and one boy. During his group therapy session Carlos declared that if rape were legal he would do it from time to time. The psychologist then asks him weather or not he would want his daughter living in a society such as this. Carlos begins to see the errors of his reasoning, which soon leads to his recovery and the breakdown of his elaborate defense system. Ive never asked you before-what do you really want for (daughter) her? I want her to have a loving relationship with a man, and have a loving family. But how can this happen if her father is advocating a world of rape? If you want her to live in a loving world, then its up to you to construct that world-and you have to start with youre own behavior. You cant be outside your own law-thats the base of any ethical system.'(79) This is where Carlos starts to realize the things that Kubler -Ross was talking about when she said that after you die, you have a lasting impression on those around you and you change them, for better or for worse. Carlos is starting to realize that the things he does affect his children, and as a result, will affect the people his children come into contact with. .u2d9426b2485e66c33aaa1fcf131a232a , .u2d9426b2485e66c33aaa1fcf131a232a .postImageUrl , .u2d9426b2485e66c33aaa1fcf131a232a .centered-text-area { min-height: 80px; position: relative; } .u2d9426b2485e66c33aaa1fcf131a232a , .u2d9426b2485e66c33aaa1fcf131a232a:hover , .u2d9426b2485e66c33aaa1fcf131a232a:visited , .u2d9426b2485e66c33aaa1fcf131a232a:active { border:0!important; } .u2d9426b2485e66c33aaa1fcf131a232a .clearfix:after { content: ""; display: table; clear: both; } .u2d9426b2485e66c33aaa1fcf131a232a { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u2d9426b2485e66c33aaa1fcf131a232a:active , .u2d9426b2485e66c33aaa1fcf131a232a:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u2d9426b2485e66c33aaa1fcf131a232a .centered-text-area { width: 100%; position: relative ; } .u2d9426b2485e66c33aaa1fcf131a232a .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u2d9426b2485e66c33aaa1fcf131a232a .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u2d9426b2485e66c33aaa1fcf131a232a .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u2d9426b2485e66c33aaa1fcf131a232a:hover .ctaButton { background-color: #34495E!important; } .u2d9426b2485e66c33aaa1fcf131a232a .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u2d9426b2485e66c33aaa1fcf131a232a .u2d9426b2485e66c33aaa1fcf131a232a-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u2d9426b2485e66c33aaa1fcf131a232a:after { content: ""; display: block; clear: both; } READ: The Grapes Of Wrath Essay Another inconsistency comes from his firm belief in reincarnation, he believes that people come back as other vehicles of life. This is one of the final aspects of his defense system. This is to reroute any fears of his physical death. The idea that he will return as soon as he dies provides a certain degree of comfort to him. His dream dealing with the green Hondas highlights something that he overlooked when he originally used this idea to comfort himself. This is the idea that, depending on how good you are and how much of a good person you are determine how good your life will be the next time around. These inconsistencies may seem obvious from a removed perspective, however to someone who employs them as part of a psychological defense system against their death; these types of things dont come so clearly. These realizations made Carlos aware of many things he was doing wrong, as well as the idea that his essence, the impressions that he leaves on people, will always live on. Th at this is whats important to put out so that you can leave positive impressions, instead of negative ones. I urged Carlos to differentiate between his core self, and other peripheral attributes or activities. Then he had to disidentify with the non-core parts: they might represent what he liked, or did, or valued-but they were not him, not his central being. Carlos had been intrigued by this construct. Not only did it explain his defensiveness at work, but he could extend disidentification model to pertain to his own body. In other words, even, though his body imperiled, he himself, his vital essence was intact. (85) This is exactly what Kubler-Ross was talking about when she described the part of you that made an impression, that lived on, it was his essence. From this point on, Carlos became a different person. He realized that the things he was doing only served as a way to preoccupy his mind and settle his fears about death. He began to act as if every day were his last day alive and worked to better himself and to better the people around him, so that his essence would live, for generations to come, in a positive light. The reason he started off detaching himself was because of fear. This lead to denial, which led to the creation of his many defense systems against these kinds of emotions of fear and uncertainty. All of which he was able to come to terms with and face, so that he could start being compassionate and caring, and leaving his mark positive mark on the rest of the world. Bibliography:

Hamlet (Revenge) Essays (979 words) - Characters In Hamlet

Hamlet (Revenge) Hamlet (Revenge) Revenge. Revenge causes one to act blindly through anger, rather thanthrough reason. It is based on the principle of an eye for an eye, butthis principle is not always an intelligent theory to live by. YoungFortinbras, Laertes, and Hamlet were all looking to avenge the deaths oftheir fathers. They all acted on emotion, and this led to the downfall oftwo, and the rise to power of one. Since the Heads of the three majorfamilies were each murdered, the eldest sons of these families sworevengeance, and two of the three sons died while exacting their acts ofvengeance, revenge is a major theme in the Tragedy of Hamlet. There were three major families in the Tragedy of Hamlet. These were thefamily of King Fortinbras, the family of Polonius, and the family of KingHamlet. The heads of each of these families are all slaughtered within theplay. Fortinbras, King of Norway, was killed by King Hamlet; slain bysword during a man to man battle. "...our valiant Hamlet-for so this side ofour known world esteem'd him-did slay this Fortinbras." This entitled KingHamlet to the land that was possessed by Fortinbras because it was writtenin a seal'd compact. Polonius was an advisor to the King, and father toLaertes and Ophelia. He was nosy and arrogant, and he did not trust hischildren. He was killed by Young Hamlet while he was eves dropping on aconversation between Hamlet and his mother. "How now! A rat? Dead, for aducat, dead!" King Hamlet was the King of Denmark, and Hamlet's father. He had killed King Fortinbras, only to be killed by his brother, Claudius. "...My offense is rank, it smells to heaven; A brother's murder..." Each ofthese events effected the sons of the deceased in the same way, it enragedthem. Every one of the three eldest sons had one thing in common, they allwanted revenge for a slaughtered father. In the time in which this play isset, avenging the murder of a father was part of one's honor, and had to bedone. All of the three sons swore vengeance, and then acted towardsgetting revenge for the deaths of their fathers. Young Fortinbras was deeply enraged by the death of his father, and hewanted revenge against Denmark because of this occurrence. Fortinbraswanted to, by force, regain the lands that had been lost by his father toDenmark. "...Now sir, young Fortinbras...as it doth well appear unto ourstate-but to recover of us, by strong hand and terms compulsative, thoseforesaid lands so by his father lost..." Claudius sends messengers to talkto Fortinbras' uncle, the new King of Norway. He forbid Fortinbras toattack Denmark, and instead convinced him to attack the Poles to vent hisanger. "...His nephew's levies, which to him appear'd to be a preparation'gainst the Polack; But better look'd into, he truly found it was againstyour highness...On Fortinbras; which he, in brief, obeys, receives rebukefrom Norway, and, in fine, makes vow before his uncle never more to givethe assay of arms against your majesty." Laertes found out about his father's death, and immediately returnedhome. He confronted the King and accused him of the murder of his father. Claudius told Laertes that Hamlet was responsible for his father's death. He then decides to kill Hamlet to avenge the death of his father. He andClaudius concoct a plot to kill Hamlet. Hamlet dies of wounds from thepoisoned tipped sword Laertes used. "...Hamlet, thou art slain...Thetreacherous instrument is in thy, unbated and envenom'd..." Hamlet was deeply sorrowed by his father's death. He spoke to a ghost, andthis ghost stated that his father's death was a murder, by the hand of hisuncle, Claudius. "The serpent that did sting thy father's life now wearshis crown." Hamlet was astonished, and then swore vengeance for hisfather's death. He then proceeded to try and prove his uncle's guilt, andthen finally kills him while he himself is dying of poisoned woundsinflicted by Laertes during their duel. "The point envenomed too! Thenvenom, to thy work...Here, thou incestuous, murderous, damned Dane, drink offthis potion,-is thy union here? Follow my mother." This left the Kingdead, and his father's death avenged. The lack of thought used in exacting the revenge led to the deaths of bothLaertes and Hamlet. Laertes planned with Claudius to kill Hamlet with thepoisoned tipped sword, but they had not thought that the sword might beused against them. With Laertes believing the King's accusations thatHamlet had murdered his father, he was in a blind rage, and would notlisten to Hamlet's explanation and apology. "I am satisfied in nature...tomy revenge...I stand aloof...and will no reconcilement...But till that time, I doreceive your offer'd love like love, and will not wrong it.". He

Domestic Violence Treatment Plan Essays

Domestic Violence Treatment Plan Essays Domestic Violence Treatment Plan Essay Domestic Violence Treatment Plan Essay The patient/family will understand the impact and influences those cultural and spiritual traditions, practices, and beliefs have on health and wellness. 1. Discuss the potential role of cultural/spiritual traditions, practices and beliefs in achieving and maintaining health and wellness. Refer to clergy services, traditional healers, or other culturally appropriate resources. 2. Explain that traditional medicines/treatments should be reviewed with the healthcare provider to determine if there are positive or detrimental interactions with prescribed treatment. Explain that the medical treatment plan must be followed as prescribed to be effective. DISEASE PROCESS/CONDITION The patient/family will understand that domestic violence is a chronic and preventable condition involving a specific pattern of behaviors, beliefs, attitudes, and feelings. 1. Explain that domestic violence can become a chronic condition and has its roots in low-self worth, fears of abandonment or being alone, and can be seeded in early childhood or adolescence. Examples can be: real or imagined abandonment by caretakers, witnessing violence within the family, being a victim of abuse or neglect, having a emotionally-unavailable parent (alcoholic or depressed). 2. Explain co-dependency as it relates to domestic violence. Discuss the patient’s and family members’ attitudes toward their dependency. 3. Discuss the patient/family member’s abusive/violent/controlling behavior and/or pattern of victimization. 4. Discuss the role of alcohol and substance abuse as it relates to domestic violence. 5. Explain that the natural course of domestic violence is one of escalation and that without intervention it will not resolve. FOLLOW-UP The patient/family will understand the importance of follow-up and will make a plan to keep follow-up appointments. 1. Discuss the importance of follow-up care. 2. Discuss the procedure for obtaining follow-up appointments. 3. Emphasize that appointments should be kept. 4. Discuss the plan of action for situations that are dangerous or life threatening. INFORMATION AND REFERRAL The patient/family will receive information and referral for alternative or additional services as needed or desired. . Provide the patient/family with alternative or additional sources for care and services. 2. Provide the patient/family with assistance in securing alternative or additional resources as needed. LITERATURE The patient/family will receive literature about domestic violence. 1. Provide the patient/family with literature on domestic violence. 2. Discuss the conten t of the literature. PREVENTION The patient/family will understand risk factors and behaviors that predispose to domestic violence and develop a plan to avoid relationships and situations which may result in domestic violence. . Explain predisposing risk factors for domestic violence, including a pathological need for control, alcohol and/or substance abuse, history of child abuse and/or domestic violence in the family of origin, etc. 2. Explain that environmental stressors, physiologic changes, and illnesses may precipitate violent behavior in persons who are predisposed to violent behaviors. 3. Discuss the progression of domestic violence from verbal/emotional abuse such as shouting and name-calling to physical violence such as shoving to injury and death. Explain that the natural course of domestic violence is one of escalation and that without intervention it will not resolve. 4. Discuss how to identify â€Å"red flag† behaviors in current or potential partners: a. Excessive jealousies and accusations of cheating a. b. Monitoring time and excessive questioning b. Alienation from friends and family c. Verbal abuse (criticizing, name calling) d. Rummaging through personal belongings e. Other excessive controlling behaviors 5. Develop a plan of care to avoid violent relationships. PSY PSYCHOTHERAPY The patient will understand the goals and process of psychotherapy. 1. Review the reason for the initial referral for therapy as part of the care plan. 2. Explain that therapy may include individual, group, psycho-educational /therapeutic, talking circles, or other modalities. 3. Emphasize the importance of keeping all appointments and that full participation and follow-up are critical to treatment success. 4. Emphasize the importance of openness and honesty with the therapist. 5. Discuss issues of safety, confidentiality, and responsibility. . Explain to the patient that the therapist and the patient will establish goals and duration of therapy together. SAFETY The patient, family members, and other victims will understand the pattern of domestic violence will make a plan to end the violence, will develop a plan to ensure safety of everyone in the environment of violence, and will implement that plan as needed. 1. Be sure family members and other victims are aware of shelters and ot her support options available in their area. Make referrals as appropriate. 2. Review co-dependency. . Assist to develop a plan of action that will insure safety of all people in the environment of violence. STRESS MANAGEMENT The patient will understand the role of stress management in domestic violence. 1. Explain that uncontrolled stress often exacerbates domestic violence. 2. Discuss that stress may exacerbate adverse health behaviors such as increased tobacco, alcohol or other substance use, all of which can increase the risk of domestic violence. 3. Emphasize the importance of seeking professional help as needed to reduce stress. 4. Discuss various stress management strategies which may help maintain a healthy lifestyle. Examples may include: a. Becoming aware of your own reactions to stress b. Recognizing and accepting your limits c. Talking with people you trust about your worries or problems d. Setting realistic goals e. Getting enough sleep f. Maintaining a reasonable diet g. Exercising regularly h. Taking vacations i. Practicing meditation, self-hypnosis, and positive imagery j. Practicing physical relaxation methods such as deep breathing or progressive uscular relaxation k. Participating in spiritual or cultural activities 5. Provide referrals as appropriate. TREATMENT The patient/family will understand the co-morbidity of domestic violence with other conditions and the potential long-term interventions which may include psychotherapy, medication, and support groups. 1. Review the nature of domestic violence as a treatable condition. 2. Explain that both the patient and the family need to acknowledge and take responsibility for their respective contributions to the family dysfunction. . Review the treatment options available, including individual and group therapy as well as the potential risk or contraindications of other options, such as family or couples counseling. 3. Discuss the importance of individual or group psychotherapy in: a. addressing co-dependency b. changing negative cognitions/low self esteem c. healing precipitating childhood and adulthood factors of past abuse, neglect, and abandonment d. treating associated conditions, such as depression and posttraumatic stress disorder

The Act of Rent-Seeking Crucially Cost in Late-Developing Countries Essay

The Act of Rent-Seeking Crucially Cost in Late-Developing Countries - Essay Example Rent-seeking as the advance in nature and governments are playing the central roles in facilitating it (Bardhan 2005, pp30-60). Rent seeking occurs today in a situation where a certain organization sets its prices too high without considering the interests of its customers or in a situation where the government forms a legislation favoring a certain group of people. Demonizing of rent-seeking acts is referred to as the measures used to criticize or to show the bad picture of rent-seeking acts. Non-governmental organizations and societies normally do demonize of rent-seeking acts. However, in some instances, government organizations emphasizing in transparency are formulated to regulate on rent-seeking acts. Rent seeking acts are majorly responsible for the development of labor unions and political parties. Morally rent-seeking is unacceptable, and it deprives other people their rights. The unfortunate situation is that countries that are more involved in demonizing rent seeking are e conomically back wise. A perfect example is developing countries that every year is not experiencing a large economic growth and is stagnating economically. While in countries like Britain where rent-seeking got minimal restrictions are more developed. Therefore, in some way demonizing rent seeking has greatly contributed to the sluggish economic growth, in developing countries. In order to draw conclusions regarding this subject, a proper understanding of rent-seeking, economic development, and political economy of rent-seeking is under discussion in this paper. A government restriction on economic activities is a common practice in economies that are market-oriented. The government restrictions result in a series of rents that in most cases attract large completion among concerned parties. Although the competition is legal, rent seeking in some cases takes a different connotation that is illegal in nature.

Team and Team Processes Essay Example | Topics and Well Written Essays - 500 words

Team and Team Processes - Essay Example Every staff in a medical institution regardless of their role should have an ethical responsibility of pointing out errors when they detect one (Grant, 2011). The experience in the case of Nurse B is caused by acts of neglect and imperfection. In the medical field, the level of imperfection should be close to nil to avoid exposing patients to risks. In the work compiled by Marshall (2010), the act of regret in a medical institution may be caused by a fatal of occurrence in the practice. To avoid such scenarios, nurses are called upon to be vigilant in pointing out problem and errors whenever they detect one. According to Grant (2011) nurse should make sure that medical practices are well mitigated from risks. This can be done by reporting any medical change in patients to the appropriate doctor, asking for assistance in case of doubt when administering medical services and following the instructions provided by the doctors almost perfectly (Marshall, 2010). At this point the importan ce of teamwork and processes are important. Each member of a specific team should ensure that every other member of the group is operating on the required and appropriate instructions (Marshall, 2010). Nurse B raised concerns about the responsibility of nurses and their reaction to problems and errors. From the complaints, one could easily argue that some nurses feel not obligated to point out errors committed by the senior staff or the doctors. In creating awareness on this issue, the nurse should be equipped with the responsibility of effectively pointing out an error regardless of the position of the staff involved. This can be done by effectively increasing the level at which doctors and health instructors value the concerns of the nurses. Another intervention may be creating working groups in an institution comprising on one senior staff who could speak n behalf of the other nurses. As seen in the work of Marthaler & Kelly (2010) nurses feel more comfortable to report to a respondent.

The Anti-War Message of In the Lake of the Woods and How I Learned to Essay

The Anti-War Message of In the Lake of the Woods and How I Learned to Sweepp - Essay Example This is because of the manner or style that the both Alvarez and O’Brien applied in expressing their ideas. In terms of style, both authors definitely differ and this can be attributed also to the fact that the historical context of the novel and poem are not the same. In terms of substance, they also have some differences which is again brought about the different social, emotional, and historical context of the characters created. Apparently, the differences stem from the fact that the authors’ involvement in the war that they were protesting against also differed. Nevertheless, each expressed profoundly through their respective literary works their opposition to the war due to bases that they have tackled through the characters they created. In the Lake of the Woods is a story of how one individual had to fight his own personal battles long after the Vietnam War ended. As the writer, O’Brien may well be considered as an authority on the subject because he too was once an infantryman in the said war. He did not only see the bloodshed or understood why these happened; he was very much involved in it. He was not a third party observer; he played an active role. O’Brien, therefore, felt what the rest of the American servicemen experienced while they were fighting a war they believed should not be fought. As his book apparently proves, he was one of the many soldiers who fought a war that he opposes. His opposition to the war though is presented through the perspective of the soldier and not from the vantage point of the anti-war and non-soldier activist that was more popular during the times when the Vietnam War was at its peak. Because of this, O’Brien credibly presents the arguments against the war using psychological and emotional bases. He may have cited the J.W. Appel and G.W. Beebe when he wrote that â€Å"psychiatric casualties are as inevitable as gunshot and shrapnel wounds in warfare.† (O’Brien 27) Howev er, he did so not because he believes that such conclusion is intellectually accurate but because he saw his comrades suffer psychological problems resulting from the war and he himself may have felt the same too. John Wade, the main character in the story, is basically personification of O’Brien’s argument against the war. It must be emphasized though that such argument could be best defended and promoted only when the psychological issues arise, which obviously occurs after the individual goes home from the battlefront; a condition which is often regarded as post-traumatic stress disorder. The conditions surrounding Julia Alvarez are much different to those of O’Brien and her poem How I Learned to Sweep is greatly influenced by these. Alvarez saw the war from the perspective of a non-participant. She found it disgusting not because it directly affects her personally. She did not suffer psychological and emotional issues arising from it but she did see the viol ence and bloodshed that people had to go through for being in the war. While O’Brien felt the horrors that his fellow soldiers went through, Alvarez expressed pity for both the fighters and civilians caught in the war. In the Lake of the Woods is the result of O’Brien’s empathy while Alvarez displayed sympathy in her poem. In the poem, she wrote the lines â€Å"I swept all the harder when/ I watched a dozen of them die.† (Alvarez) Obviously, the poet depicted how she reacted upon the sight of so much death.

Effect of MA Strategy on Shareholder Value

Effect of MA Strategy on Shareholder Value The aim of this project is to examine whether the decision of large UK companies looking to pursue a merger/acquisition strategy will affect shareholder value. The data analyzed in this study will determine if there is a positive or negative correlation in shareholder wealth when a merger/acquisition occurs. The research for this project will be conducted through the analysis of 40 different large UK companies that were merged or acquired by other UK based firms prior to 2002. The data will be obtained from the Bloomberg website. Further research and analysis on the topic will include information obtained from books, journals and reliable internet sources. To test the value of shareholder wealth when a merger/acquisition is pursued, different models will be used which includes Capital Asset Pricing Model, Efficient Capital Markets, Equilibrium Models, and Market Model (Event Studies and Abnormal Returns Methodology). The hypothesis that will be tested in this study is: H0 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will increase. H1 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will remain unchanged or will decrease. The first chapter will give a brief overview of mergers and acquisitions and introduce the reader to recent merger trends in the UK and different types of takeovers. The second chapter will be an in-depth analysis of past research studies which includes: examining different ways a company pays for a bid in a merger, exploring shareholder and managerial wealth perspectives, and analyzing long term post-merger performance of target and bidder firms. Chapter three presents the research methodology used in wealth gain studies and also states the methodology adopted for this dissertation. Chapter four analyzes and discusses the findings in context to wealth gain effects of mergers and acquisitions among the large UK companies chosen for this study. Chapter five concludes this research and highlights possible areas that may require further investigation. EXECUTIVE SUMMARY Mergers and acquisitions have become important events in todays rapidly changing business environment and have been the subject of many research studies. Reasons as to why companies may pursue a merger or acquisition strategy could be to reduce costs to achieve economies of scale or to reduce competition due to increased market power. Mergers and acquisitions have also been known to facilitate entry into new markets or industries and increase the level of effectiveness in a company by eliminating inefficient management. Mergers and acquisitions worldwide have tended to follow a pattern of waves, with there being periods of frantic takeover activity followed by relatively calmer periods. The main objective of financial theory is to maximize shareholder wealth therefore all decisions are taken with the aim of maximizing shareholder value. The purpose of this research is to re-examine the shareholder wealth gain criterion with regards to mergers and acquisitions within the United Kingdom. The objective of this study is to find out if shareholders of large UK companies benefit from the acquisition decisions made by the managers. Past research studies on post-acquisition performance of acquiring and target firms have mixed results. To determine if there is an increase or decrease in shareholder value from corporate takeovers, the Market Model and Event Study Methodology will be used in this study. The hypothesis developed in this study aims to support the argument that mergers and acquisitions are profitable events and lead to an increase in shareholder value. This study however concluded that merger and acquisitions among the large UK organizations chosen did not lead to an increase of shareholder value for both target and bidder firms. These results might not be entirely accurate due to various reasons such as size effects and the firms chosen in this study are from different industries. Other factors such as acquisition financing and acquisition motives also may have an effect on shareholder value however the testing of these factors is outside the scope of the following study. CHAPTER 1: OVERVIEW OF MERGERS AND ACQUISTIONS The following chapter briefly examines the benefits that a merger is expected to generate for both the target firm and the acquiring firm. The historical pattern of takeover activity in the UK from 1964-1992 is discussed to show merger and acquisition (MA) trends and recent MA activity abroad and within the UK will also be highlighted among large UK companies in 2008. In addition, the definition of mergers and acquisitions is provided and the second part of chapter one introduces the reader to different types of mergers used to create value for an organization. 1.1 Benefits to Mergers and Acquisitions Activity The main objective for an acquiring firm is to grow and expand its assets, sales and market shares. Other specific reasons for entering into a merger bid are reflected in the benefits that are expected to be generated which include: Exploiting scale economies Obtain synergy Enter into new markets To restore growth impetus To acquire market power To reduce dependence on existing or perhaps risky activities With the above mentioned benefits to MA activity, it should also be noted that takeovers most likely to succeed are those approached with a strategic focus, incorporating a detailed analysis of the objectives of the takeover, the possible alternatives and how the acquired company can be integrated in the new parent (Pike and Neale). 1.2 Trends in UK Merger Activity There has been an increasing trend of MA activity in the UK over the past few decades, with there being periods of high takeover activity followed by relatively slower periods as can be seen by the graph below. Figure 1.0 History of UK MA Activity Source: National Statistics, 2002 The highest peaks in takeovers are during the period 1984-1989. During this time, the average size of an acquisition had grown significantly from 9.64 million to 20.38 million. As per Sudarsanam (1995) the main reason for this was because the stock market in the UK, along with the harmony with the rest of the world stock markets experienced a strong bull phase which culminated in the October 1987 crash. Furthermore, the 1980s also experienced divestments on a large scale which meant companies would sell off divisions or subsidiaries to other firms of the divested parts in a management buyout. This increase in acquisitions and divestments had shown significant amount of corporate restructuring in the UK and thus led to new organizational innovations such as management buyouts and management buyins, as well as by financial innovations like high-leverage buyouts and mezzanine finance (Sudarsanam, 1995).As can be seen from the graph above, the UK MA market has experienced a relatively le aner period, which has continued till date. The main reasons that can be attributed to this are the various world catastrophes and the overall global economic slowdown. As per the office of National Statistics, the largest significant transaction recorded during the first quarter of 2008 was the acquisition by Imperial Tobacco Group Plc of Altadis S.A. for a press reported value of 9.3 billion. Another significant transaction was the acquisition by Carillion Plc of Alfred McAlpine Plc for a reported value of approximately 0.5 billion. For quarter one in 2008, the number of transactions reported for acquisitions in the UK by UK companies has been the lowest reported since quarter one 2003. Other recent major UK mergers acquisitions (2008) are as follows: Table 1.0 Recent Acquisitions in the UK by UK Companies Company Value in million Carillion Plc acquiring Alfred McAlpine Plc 554 Willmott Dixon Ltd acquiring Inspace Plc 133 easyJet Plc acquiring GB Airways Ltd 104 iimia MitonOptimal Plc acquiring Midas Capital Partners Ltd 100 Source: National Statistics, 2008 Table 2.0 Recent Acquisitions abroad by UK Companies Company Value in million Imperial Tobacco Group Plc acquiring Altadis S.A. 9339 Reckitt Benckiser Group Plc acquiring Adams Respiratory Therapeutics 1100 Scottish and Southern Energy Plc acquiring Airtricity Holdings Ltd 808 SABMiller Plc acquiring Koninklijke Grolsch N.V 606 Ineos Group Ltd acquiring Kerling AS 429 429 Standard Chartered Plc acquiring American Express Bank Ltd 413 Kesa Electricals Plc disposing of BUT SAS 389 Source: National Statistics, 2008 1.3 Definitions and Different Types of Mergers and Acquisitions Although the terms merger, acquisition and takeover are used interchangeably, technical differences do exist. A merger is when corporations come together to combine and share their resources to achieve a common set of objectives (Sudarsanam, 1995). The shareholders of the two combined corporations will continue to be joint owners. An acquisition is when one firm purchases the assets or shares of another firm however the shareholders of the acquired firm continue being owners of that firm. A takeover is the acquisition by one company of the share capital of another in exchange for cash, ordinary shares, loan stock or a combination of these (Pike and Neale). This distinction between the three terms is important in certain contexts however they are used by researchers and authors interchangeably. In the following dissertation, I too will use these three terms interchangeably. There are different types of mergers that exist to create value and are classified into three main categories: horizontal, vertical and conglomerate (Pike and Neale). Horizontal integration: this is when a company takes over the target firm from the same industry and at the same stage of the production process. Vertical integration: where the target is in the same industry as the acquirer however is operating at a different stage in the production process. This can be either close to the source of materials (backward integration) or close to the final customer (forward integration). Conglomerate integration: occurs when the target is in a business that is different to the acquirer. The reasons a firm may undergo a conglomerate merger is to reduce risk through diversification, opportunities for cost reduction and improving internal and external efficiencies. In order to understand whether mergers and acquisitions create or destroy shareholder value, it is important to appreciate and understand few critical aspects of the complex MA theory. The three areas in helping to answer this question with respects to the impact of shareholder value in my opinion are different modes of financing mergers and acquisitions, motives for MA activity and post-merger performance. Various researchers in the finance field have conducted a great amount of research on the above mentioned areas and this dissertation will help put into perspective mergers and acquisitions impact on shareholder value currently in the UK. CHAPTER 2: BACKGROUND OF STUDY Mergers and acquisitions are undertaken as a means of corporate growth and expansion but are also an alternative to growth through internal or organic capital investment. The immediate objective of an acquisition is self-evidently growth and expansion of the acquirers assets, sales and market share (Sudarsanam, 1995). Another objective of acquisitions would be to increase the growth of shareholders wealth aimed at creating a strong competitive advantage for the acquirer. In modern finance theory, shareholder wealth maximization is a strong rational for financing and investment decisions made by management. This leads to the question of wealth gain effects of mergers and acquisitions, specifically among large UK companies. The following chapter introduces various literature regarding wealth gain effects of mergers and acquisitions and highlights the various aspects of mergers and acquisitions which may have an effect on the shareholder value within large UK corporations. 2.1 Modes of Acquisition Financing There are various modes of financing a takeover which includes: cash (preferred method), issuing of ordinary shares and fixed interest securities (loan stock, convertibles, and preference shares). The way in which a merger and acquisition is financed has different benefits to the target shareholders and bidder shareholders. In addition, cash takeovers may be sufficiently different from non-cash acquisitions and failure to distinguish between them may lead to inappropriate generalizations (Carleton et al, 1983). As per Sudarsanam (1995), there are various ways a firm can bid an acquisition, which is shown in Table 3.0. Table 3.0 Bid Financing Bidder Offers Target shareholders receive Cash Cash in exchange for their shares Share Exchange A specified number of bidder s shares for each target share Cash underwritten share offer (vendor placing) Bidders shares, then sell them to a merchant bank for cash Loan stock A loan stock/debenture in exchange for their shares Convertible loan or preferred shares Loan stock or preferred shares convertible into ordinary shares at a predetermined conversion rate over a specified period Deferred payment Part of consideration after a specified period, subject to performance criteria Source: Sudarsanam (1995, p.177) In addition, a bidder making cash offer can finance it from one or more of the following sources (Sudarsanam, 1995): Internal operating cash flow A pre-bid rights issue A cash underwritten offer, e.g. vendor placing or vendor rights A pre-bid loan stock issue Bank Credit A cash offer has two advantages from the point of view to both the target and acquiring shareholders which includes (Pike Neale, 1999): The amount is certain; there is no exposure to the risk of adverse movement in share price during the course of the bid. The targeted shareholder is more easily able to adjust his or her portfolio than if he or she receives shares, which involve dealing costs when sold. Because no new shares are issued, there is no dilution of earnings or change in the balance of control of the bidder. In terms of shares being used as a medium of exchange again there are some advantages to both target as well as acquiring shareholders (Arnold, 2002) which are: For target shareholders use of shares helps avoid capital gains tax. Target shareholders maintain an interest in the combine entity thus helping preserve as well as increase shareholders value. Acquiring shareholders gain from the fact that there is no immediate cash outflow. Nickolaos Travlos (1987) study titled Corporate Takeover Bids, Method of Payment, and Bidding Firms Stock Returns was to examine the role of the method of payment in determining common stock returns of bidding firms at the announcement of takeover bids. The analysis in the study was to show the valuation effects on two common methods of payment which are common stock exchanges and cash offers. The results showed that bidding firms had normal returns in cash offers however experienced significant losses in pure stock exchange acquisitions. Other literature studied by Asquith and Mullins (1986), Kalay and Shimrat (1987), Masulis and Korwar (1986) and Mikkelson and Partch ( 1986) show that common stock issues have negative stock price when there are new common stock offerings. These results were supported by various other studies such as Henri Servaess (1991) study titled Tobins Q and gains from takeovers. Agrawal, Jaffe and Mandelkar (1992) found post-acquisition returns to be lower fo r share-financed acquisitions in comparison to cash-financed acquisitions. They further went on to prove that shareholders of acquiring firms suffered a statistically significant loss of about 10% over the five-year merger period. The bidding firms method of payment provides valuable insight to the market. If the bidding firms managers possess information about the intrinsic value of their firm, independent of the acquisition, which is not fully reflected in the pre-acquisition stock price, they will finance the acquisition in the most profitable way for the existing stockholders (Travlos, 1987). Myers and Majluf (1984) model states that management will prefer cash offerings if they believe their firm is under-valued however a common stock exchange offer will be preferred if they believe their firm is over-valued. In addition, market participants will strongly favor a cash offer as good news while the opposite holds true for a common stock exchange about the bidding firms true value. If such information is important in the market, then the bidding firms stock price change at the proposals announcement will reflect both the gain from the takeover (weighted by the probability that the takeover bid will go throug h) and the information effects (Nickolaos, 1987). Jensen and Ruback (1983) state that most tender offers are financed by cash however merger proposals are financed by the exchange of common stock therefore the information argument states that larger target residuals occur in tender offers rather than in mergers. In their study conducted, they determined that for mergers, the weighted abnormal target firm return is 16.3% over the month before announcement however for tender offers; the weighted target return is 30.9% over the two-month period surrounding the announcement dates. Cash is by far the most widely used form of payment in mergers and acquisitions. There are many reasons as to why there is an increased use of cash in financing mergers. One possible explanation for the increasing use of cash depends on market imperfections and/or agency considerations (Carleton et al, 1983). Another reason for why bidding firms use cash in financing mergers is the increase in the number of hostile mergers. Cash not only signals a high value for the target, but also preempts other firms from bidding (Martin, 1996). These findings were also found in the literature of Eckbo, Giammarino and Heinkel (1990) which include a role for mixed financings in which higher-valued bidders are more likely to use more cash to finance the acquisition. As can be seen from the literature above the mode of payment in an acquisition may be driven by various motives and can have various effects on the bidders and acquirers stock price. This can have a major impact on shareholder value during corporate acquisitions as well as value gain studies. A study by Loughran and Vijh (1997) formed an association between the mode of acquisition (merger and tender offer) and the method of payment (cash or stock). They studied this relationship in the context of wealth gains from acquisitions and concluded that the post-acquisition returns of acquirers are related to both the mode of acquisition as well as form of payment. This was also proved by various other researchers (mentioned above) thus making the method of payment during an acquisition all the more important. Reason being, post-acquisition returns are what tend to effect shareholder value the most therefore the knowledge and distinction of the various modes of financing an acquisition is ve ry relevant and essential. 2.2 Motives for Mergers Acquisitions A Dual Perspective Tender offers allow for an in-depth analysis of agency relationships since the best interests of the principal (target firm shareholders) and agent (target firm managers) are often in conflict. Managers of the target firm are often in conflict of interest between their fiduciary responsibilities to the shareholders and their own personal wealth. For this reason, tender offers allow for the analysis of agency conflicts between shareholders and management of the target firm. According to Sudarsanam (1995) there are two main perspectives for acquisition motives which are: Shareholder wealth maximization perspective Under the shareholder wealth maximization perspective, all firms decisions including acquisitions are made with the objective of maximizing the wealth of the shareholders of the firm. In mergers and acquisitions, management of the target firm will oppose bidding firms to takeover if they believe this action would not be in the best interest of its shareholders. Target managers that oppose a bid defend their reasoning by claiming that the bid price is not adequate enough. Managerial wealth perspective Under the managerial wealth perspective, target managers may face an uneasy choice between obligations to current shareholders and those who aspire to such a position (Walkling and Long, 1984). For many target managers, if they sense a possibility of a loss in compensation from the merger or acquisition, conflict of interest will then increase. If self interest is pursued by target managers, there is a possibility that a bad acquisition may occur and/or a loss of shareholder wealth. According to Sudarsanam (1995), managers may undertake acquisitions for the following reasons: To pursue growth in size of their firm, since their salary, prerequisites, status and power are a function of firm size. (Empire-building syndrome) In order to deploy their currently underused managerial skills. (self-fulfillment motive) To diversify risk and minimize costs of financial distress and bankruptcy. (job security motive) To avoid being taken over. (job security motive) The managerial wealth perspective motive is one of survival. Not only do managers tend to seek motivation from sustained growth but also seek job security. Managers unlike shareholders cannot diversify to spread their risks since they are tied to one company. If that company is acquired, managers have a high probability of losing their jobs. A study conducted by Firth (1991) tests to see if executive reward increases when an acquisition takes place. In a sample of 254 UK takeover offers during 1974-1980 found that the acquisition process leads to an increase in managerial remuneration, and that this is predicated on the increased size of the acquirer and concludes that the evidence is consistent with takeovers being motivated by managers wanting to maximize their own welfare'(Firth, 1991). Agency conflicts arise whenever differing incentives cause managers to take actions that benefit themselves but harm shareholders. In the context of acquisitions, agency conflicts may lead to a reduction in shareholder wealth if managers pursue expansion for nonprofit-maximizing reasons. According to past literature, large target shareholder wealth gains are experienced during the announcement of a takeover and large shareholder wealth losses occur when a takeover bid fails (Jensen and Ruback, 1983). This implies that target management interests are not always achieved by accepting bid offers. In addition, target managers may lose compensation and other perks if they are replaced after a successful bid offer. These findings are also confirmed by Walkling and Long (1984) and Martin and McConnell (1991), all of whom reported above-average managerial turnover after a successful takeover bid. The study findings show that in addition to lost compensation, managerial turnover may also be a ssociated with loss of status. Martin and McConnell (1991) further go on to say that the mergers and acquisitions market plays an important role in controlling the non-value maximizing behavior of managers of large corporations. As shown from the literature above, the shareholder wealth perspective and managerial wealth perspective may conflict with one another. With respects to mergers and acquisitions, the managerial motives and a mangers reaction to a takeover bid may have an impact on the shareholder wealth maximization criterion. The extent to which it would impact shareholder value will be decided by the amount of control managers have within the organization. 2.3 Post Merger Performance Debate (Targets and Bidders) There has been considerable interest in the post merger performance on shareholders returns in the target and bidder firms. Typical findings by researchers show three patterns: (1) target shareholders earn significantly positive abnormal returns from all acquisitions, (2) acquiring shareholders earn little or no abnormal returns from tender offers and (3) acquiring shareholders earn negative abnormal returns from mergers. Overall, the results of post merger performance have been mixed. According to Langetieg (1978) and Asquith (1983), their research concluded that acquired firms experience significantly negative abnormal returns over one to three years after the merger. In the research study conducted by Agrawal, Jaffe and Mandelker (1992) titled The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly found that stockholders of acquiring firms experience a statistically significant wealth loss of approximately 10% over five years after the merger completion date. Research conducted by Franks, Harris and Titman (1991) found that no significant underperformance of stockholders returns exist over a three year period after the acquisition. Franks et al concluded that the previous findings of poor performance post-acquisition were likely to be due to benchmark errors rather than inconsistencies with the Efficient Market Theory (EMH) or mis-pricing at the time of the takeover. Similar results that underperformance of stockholders returns do not exist over a three year period after acquisition is also concluded by Bradley and Jarrell (1988). A few studies have analyzed value gains during merger and acquisitions with respect to various classes of merging firms security holders. A study was carried out by Dennis and McConnell (1986) namely, Corporate Mergers and Security Returns and their results indicated mergers on average to be value creating activities for the acquired and the acquiring company individually. They found by other previous studies that on average common stockholders of acquiring firms earn positive returns but are usually not statistically significant. Their results also indicated that convertible preferred stockholders (of acquiring firm) received positive and statistically significant returns post-merger; however, non-convertible preferred stockholders received positive but not statistically significant returns post-merger. The combination of the above mentioned results lead to an overall increase in the value of the firm therefore presenting us with the reason as to why corporations go ahead with merge rs which do not earn statistically significant returns to common stockholders of the acquiring firms. Research results by Asquith and Kim (1982) also confirm what other investigators found for mergers: abnormal returns to the common stocks of acquired firms are positive and statistically significant; abnormal returns to the common stock of acquiring firms are not significantly different from zero. In the study Do Long-term Shareholders Benefit Corporate Acquisitions? by Loughran and Vijh (1997), found that post acquisition returns of acquirers stock are related to both the form of payment as well as the mode of acquisition. They concluded in the overall sample of 947 cases, acquirers that make merger bids earn, on average, 15.9 percent less than matching firms whereas acquirers that make tender offers earn 43.0 percent more than matching firms during a five-year period after acquisition. In addition, stock acquirers earned 24.2 percent less however cash acquirers earn 18.5 percent more with respects to matching firms. Furthermore, conclusions show that during a five year period following the acquisition, on average, firms t Effect of MA Strategy on Shareholder Value Effect of MA Strategy on Shareholder Value The aim of this project is to examine whether the decision of large UK companies looking to pursue a merger/acquisition strategy will affect shareholder value. The data analyzed in this study will determine if there is a positive or negative correlation in shareholder wealth when a merger/acquisition occurs. The research for this project will be conducted through the analysis of 40 different large UK companies that were merged or acquired by other UK based firms prior to 2002. The data will be obtained from the Bloomberg website. Further research and analysis on the topic will include information obtained from books, journals and reliable internet sources. To test the value of shareholder wealth when a merger/acquisition is pursued, different models will be used which includes Capital Asset Pricing Model, Efficient Capital Markets, Equilibrium Models, and Market Model (Event Studies and Abnormal Returns Methodology). The hypothesis that will be tested in this study is: H0 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will increase. H1 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will remain unchanged or will decrease. The first chapter will give a brief overview of mergers and acquisitions and introduce the reader to recent merger trends in the UK and different types of takeovers. The second chapter will be an in-depth analysis of past research studies which includes: examining different ways a company pays for a bid in a merger, exploring shareholder and managerial wealth perspectives, and analyzing long term post-merger performance of target and bidder firms. Chapter three presents the research methodology used in wealth gain studies and also states the methodology adopted for this dissertation. Chapter four analyzes and discusses the findings in context to wealth gain effects of mergers and acquisitions among the large UK companies chosen for this study. Chapter five concludes this research and highlights possible areas that may require further investigation. EXECUTIVE SUMMARY Mergers and acquisitions have become important events in todays rapidly changing business environment and have been the subject of many research studies. Reasons as to why companies may pursue a merger or acquisition strategy could be to reduce costs to achieve economies of scale or to reduce competition due to increased market power. Mergers and acquisitions have also been known to facilitate entry into new markets or industries and increase the level of effectiveness in a company by eliminating inefficient management. Mergers and acquisitions worldwide have tended to follow a pattern of waves, with there being periods of frantic takeover activity followed by relatively calmer periods. The main objective of financial theory is to maximize shareholder wealth therefore all decisions are taken with the aim of maximizing shareholder value. The purpose of this research is to re-examine the shareholder wealth gain criterion with regards to mergers and acquisitions within the United Kingdom. The objective of this study is to find out if shareholders of large UK companies benefit from the acquisition decisions made by the managers. Past research studies on post-acquisition performance of acquiring and target firms have mixed results. To determine if there is an increase or decrease in shareholder value from corporate takeovers, the Market Model and Event Study Methodology will be used in this study. The hypothesis developed in this study aims to support the argument that mergers and acquisitions are profitable events and lead to an increase in shareholder value. This study however concluded that merger and acquisitions among the large UK organizations chosen did not lead to an increase of shareholder value for both target and bidder firms. These results might not be entirely accurate due to various reasons such as size effects and the firms chosen in this study are from different industries. Other factors such as acquisition financing and acquisition motives also may have an effect on shareholder value however the testing of these factors is outside the scope of the following study. CHAPTER 1: OVERVIEW OF MERGERS AND ACQUISTIONS The following chapter briefly examines the benefits that a merger is expected to generate for both the target firm and the acquiring firm. The historical pattern of takeover activity in the UK from 1964-1992 is discussed to show merger and acquisition (MA) trends and recent MA activity abroad and within the UK will also be highlighted among large UK companies in 2008. In addition, the definition of mergers and acquisitions is provided and the second part of chapter one introduces the reader to different types of mergers used to create value for an organization. 1.1 Benefits to Mergers and Acquisitions Activity The main objective for an acquiring firm is to grow and expand its assets, sales and market shares. Other specific reasons for entering into a merger bid are reflected in the benefits that are expected to be generated which include: Exploiting scale economies Obtain synergy Enter into new markets To restore growth impetus To acquire market power To reduce dependence on existing or perhaps risky activities With the above mentioned benefits to MA activity, it should also be noted that takeovers most likely to succeed are those approached with a strategic focus, incorporating a detailed analysis of the objectives of the takeover, the possible alternatives and how the acquired company can be integrated in the new parent (Pike and Neale). 1.2 Trends in UK Merger Activity There has been an increasing trend of MA activity in the UK over the past few decades, with there being periods of high takeover activity followed by relatively slower periods as can be seen by the graph below. Figure 1.0 History of UK MA Activity Source: National Statistics, 2002 The highest peaks in takeovers are during the period 1984-1989. During this time, the average size of an acquisition had grown significantly from 9.64 million to 20.38 million. As per Sudarsanam (1995) the main reason for this was because the stock market in the UK, along with the harmony with the rest of the world stock markets experienced a strong bull phase which culminated in the October 1987 crash. Furthermore, the 1980s also experienced divestments on a large scale which meant companies would sell off divisions or subsidiaries to other firms of the divested parts in a management buyout. This increase in acquisitions and divestments had shown significant amount of corporate restructuring in the UK and thus led to new organizational innovations such as management buyouts and management buyins, as well as by financial innovations like high-leverage buyouts and mezzanine finance (Sudarsanam, 1995).As can be seen from the graph above, the UK MA market has experienced a relatively le aner period, which has continued till date. The main reasons that can be attributed to this are the various world catastrophes and the overall global economic slowdown. As per the office of National Statistics, the largest significant transaction recorded during the first quarter of 2008 was the acquisition by Imperial Tobacco Group Plc of Altadis S.A. for a press reported value of 9.3 billion. Another significant transaction was the acquisition by Carillion Plc of Alfred McAlpine Plc for a reported value of approximately 0.5 billion. For quarter one in 2008, the number of transactions reported for acquisitions in the UK by UK companies has been the lowest reported since quarter one 2003. Other recent major UK mergers acquisitions (2008) are as follows: Table 1.0 Recent Acquisitions in the UK by UK Companies Company Value in million Carillion Plc acquiring Alfred McAlpine Plc 554 Willmott Dixon Ltd acquiring Inspace Plc 133 easyJet Plc acquiring GB Airways Ltd 104 iimia MitonOptimal Plc acquiring Midas Capital Partners Ltd 100 Source: National Statistics, 2008 Table 2.0 Recent Acquisitions abroad by UK Companies Company Value in million Imperial Tobacco Group Plc acquiring Altadis S.A. 9339 Reckitt Benckiser Group Plc acquiring Adams Respiratory Therapeutics 1100 Scottish and Southern Energy Plc acquiring Airtricity Holdings Ltd 808 SABMiller Plc acquiring Koninklijke Grolsch N.V 606 Ineos Group Ltd acquiring Kerling AS 429 429 Standard Chartered Plc acquiring American Express Bank Ltd 413 Kesa Electricals Plc disposing of BUT SAS 389 Source: National Statistics, 2008 1.3 Definitions and Different Types of Mergers and Acquisitions Although the terms merger, acquisition and takeover are used interchangeably, technical differences do exist. A merger is when corporations come together to combine and share their resources to achieve a common set of objectives (Sudarsanam, 1995). The shareholders of the two combined corporations will continue to be joint owners. An acquisition is when one firm purchases the assets or shares of another firm however the shareholders of the acquired firm continue being owners of that firm. A takeover is the acquisition by one company of the share capital of another in exchange for cash, ordinary shares, loan stock or a combination of these (Pike and Neale). This distinction between the three terms is important in certain contexts however they are used by researchers and authors interchangeably. In the following dissertation, I too will use these three terms interchangeably. There are different types of mergers that exist to create value and are classified into three main categories: horizontal, vertical and conglomerate (Pike and Neale). Horizontal integration: this is when a company takes over the target firm from the same industry and at the same stage of the production process. Vertical integration: where the target is in the same industry as the acquirer however is operating at a different stage in the production process. This can be either close to the source of materials (backward integration) or close to the final customer (forward integration). Conglomerate integration: occurs when the target is in a business that is different to the acquirer. The reasons a firm may undergo a conglomerate merger is to reduce risk through diversification, opportunities for cost reduction and improving internal and external efficiencies. In order to understand whether mergers and acquisitions create or destroy shareholder value, it is important to appreciate and understand few critical aspects of the complex MA theory. The three areas in helping to answer this question with respects to the impact of shareholder value in my opinion are different modes of financing mergers and acquisitions, motives for MA activity and post-merger performance. Various researchers in the finance field have conducted a great amount of research on the above mentioned areas and this dissertation will help put into perspective mergers and acquisitions impact on shareholder value currently in the UK. CHAPTER 2: BACKGROUND OF STUDY Mergers and acquisitions are undertaken as a means of corporate growth and expansion but are also an alternative to growth through internal or organic capital investment. The immediate objective of an acquisition is self-evidently growth and expansion of the acquirers assets, sales and market share (Sudarsanam, 1995). Another objective of acquisitions would be to increase the growth of shareholders wealth aimed at creating a strong competitive advantage for the acquirer. In modern finance theory, shareholder wealth maximization is a strong rational for financing and investment decisions made by management. This leads to the question of wealth gain effects of mergers and acquisitions, specifically among large UK companies. The following chapter introduces various literature regarding wealth gain effects of mergers and acquisitions and highlights the various aspects of mergers and acquisitions which may have an effect on the shareholder value within large UK corporations. 2.1 Modes of Acquisition Financing There are various modes of financing a takeover which includes: cash (preferred method), issuing of ordinary shares and fixed interest securities (loan stock, convertibles, and preference shares). The way in which a merger and acquisition is financed has different benefits to the target shareholders and bidder shareholders. In addition, cash takeovers may be sufficiently different from non-cash acquisitions and failure to distinguish between them may lead to inappropriate generalizations (Carleton et al, 1983). As per Sudarsanam (1995), there are various ways a firm can bid an acquisition, which is shown in Table 3.0. Table 3.0 Bid Financing Bidder Offers Target shareholders receive Cash Cash in exchange for their shares Share Exchange A specified number of bidder s shares for each target share Cash underwritten share offer (vendor placing) Bidders shares, then sell them to a merchant bank for cash Loan stock A loan stock/debenture in exchange for their shares Convertible loan or preferred shares Loan stock or preferred shares convertible into ordinary shares at a predetermined conversion rate over a specified period Deferred payment Part of consideration after a specified period, subject to performance criteria Source: Sudarsanam (1995, p.177) In addition, a bidder making cash offer can finance it from one or more of the following sources (Sudarsanam, 1995): Internal operating cash flow A pre-bid rights issue A cash underwritten offer, e.g. vendor placing or vendor rights A pre-bid loan stock issue Bank Credit A cash offer has two advantages from the point of view to both the target and acquiring shareholders which includes (Pike Neale, 1999): The amount is certain; there is no exposure to the risk of adverse movement in share price during the course of the bid. The targeted shareholder is more easily able to adjust his or her portfolio than if he or she receives shares, which involve dealing costs when sold. Because no new shares are issued, there is no dilution of earnings or change in the balance of control of the bidder. In terms of shares being used as a medium of exchange again there are some advantages to both target as well as acquiring shareholders (Arnold, 2002) which are: For target shareholders use of shares helps avoid capital gains tax. Target shareholders maintain an interest in the combine entity thus helping preserve as well as increase shareholders value. Acquiring shareholders gain from the fact that there is no immediate cash outflow. Nickolaos Travlos (1987) study titled Corporate Takeover Bids, Method of Payment, and Bidding Firms Stock Returns was to examine the role of the method of payment in determining common stock returns of bidding firms at the announcement of takeover bids. The analysis in the study was to show the valuation effects on two common methods of payment which are common stock exchanges and cash offers. The results showed that bidding firms had normal returns in cash offers however experienced significant losses in pure stock exchange acquisitions. Other literature studied by Asquith and Mullins (1986), Kalay and Shimrat (1987), Masulis and Korwar (1986) and Mikkelson and Partch ( 1986) show that common stock issues have negative stock price when there are new common stock offerings. These results were supported by various other studies such as Henri Servaess (1991) study titled Tobins Q and gains from takeovers. Agrawal, Jaffe and Mandelkar (1992) found post-acquisition returns to be lower fo r share-financed acquisitions in comparison to cash-financed acquisitions. They further went on to prove that shareholders of acquiring firms suffered a statistically significant loss of about 10% over the five-year merger period. The bidding firms method of payment provides valuable insight to the market. If the bidding firms managers possess information about the intrinsic value of their firm, independent of the acquisition, which is not fully reflected in the pre-acquisition stock price, they will finance the acquisition in the most profitable way for the existing stockholders (Travlos, 1987). Myers and Majluf (1984) model states that management will prefer cash offerings if they believe their firm is under-valued however a common stock exchange offer will be preferred if they believe their firm is over-valued. In addition, market participants will strongly favor a cash offer as good news while the opposite holds true for a common stock exchange about the bidding firms true value. If such information is important in the market, then the bidding firms stock price change at the proposals announcement will reflect both the gain from the takeover (weighted by the probability that the takeover bid will go throug h) and the information effects (Nickolaos, 1987). Jensen and Ruback (1983) state that most tender offers are financed by cash however merger proposals are financed by the exchange of common stock therefore the information argument states that larger target residuals occur in tender offers rather than in mergers. In their study conducted, they determined that for mergers, the weighted abnormal target firm return is 16.3% over the month before announcement however for tender offers; the weighted target return is 30.9% over the two-month period surrounding the announcement dates. Cash is by far the most widely used form of payment in mergers and acquisitions. There are many reasons as to why there is an increased use of cash in financing mergers. One possible explanation for the increasing use of cash depends on market imperfections and/or agency considerations (Carleton et al, 1983). Another reason for why bidding firms use cash in financing mergers is the increase in the number of hostile mergers. Cash not only signals a high value for the target, but also preempts other firms from bidding (Martin, 1996). These findings were also found in the literature of Eckbo, Giammarino and Heinkel (1990) which include a role for mixed financings in which higher-valued bidders are more likely to use more cash to finance the acquisition. As can be seen from the literature above the mode of payment in an acquisition may be driven by various motives and can have various effects on the bidders and acquirers stock price. This can have a major impact on shareholder value during corporate acquisitions as well as value gain studies. A study by Loughran and Vijh (1997) formed an association between the mode of acquisition (merger and tender offer) and the method of payment (cash or stock). They studied this relationship in the context of wealth gains from acquisitions and concluded that the post-acquisition returns of acquirers are related to both the mode of acquisition as well as form of payment. This was also proved by various other researchers (mentioned above) thus making the method of payment during an acquisition all the more important. Reason being, post-acquisition returns are what tend to effect shareholder value the most therefore the knowledge and distinction of the various modes of financing an acquisition is ve ry relevant and essential. 2.2 Motives for Mergers Acquisitions A Dual Perspective Tender offers allow for an in-depth analysis of agency relationships since the best interests of the principal (target firm shareholders) and agent (target firm managers) are often in conflict. Managers of the target firm are often in conflict of interest between their fiduciary responsibilities to the shareholders and their own personal wealth. For this reason, tender offers allow for the analysis of agency conflicts between shareholders and management of the target firm. According to Sudarsanam (1995) there are two main perspectives for acquisition motives which are: Shareholder wealth maximization perspective Under the shareholder wealth maximization perspective, all firms decisions including acquisitions are made with the objective of maximizing the wealth of the shareholders of the firm. In mergers and acquisitions, management of the target firm will oppose bidding firms to takeover if they believe this action would not be in the best interest of its shareholders. Target managers that oppose a bid defend their reasoning by claiming that the bid price is not adequate enough. Managerial wealth perspective Under the managerial wealth perspective, target managers may face an uneasy choice between obligations to current shareholders and those who aspire to such a position (Walkling and Long, 1984). For many target managers, if they sense a possibility of a loss in compensation from the merger or acquisition, conflict of interest will then increase. If self interest is pursued by target managers, there is a possibility that a bad acquisition may occur and/or a loss of shareholder wealth. According to Sudarsanam (1995), managers may undertake acquisitions for the following reasons: To pursue growth in size of their firm, since their salary, prerequisites, status and power are a function of firm size. (Empire-building syndrome) In order to deploy their currently underused managerial skills. (self-fulfillment motive) To diversify risk and minimize costs of financial distress and bankruptcy. (job security motive) To avoid being taken over. (job security motive) The managerial wealth perspective motive is one of survival. Not only do managers tend to seek motivation from sustained growth but also seek job security. Managers unlike shareholders cannot diversify to spread their risks since they are tied to one company. If that company is acquired, managers have a high probability of losing their jobs. A study conducted by Firth (1991) tests to see if executive reward increases when an acquisition takes place. In a sample of 254 UK takeover offers during 1974-1980 found that the acquisition process leads to an increase in managerial remuneration, and that this is predicated on the increased size of the acquirer and concludes that the evidence is consistent with takeovers being motivated by managers wanting to maximize their own welfare'(Firth, 1991). Agency conflicts arise whenever differing incentives cause managers to take actions that benefit themselves but harm shareholders. In the context of acquisitions, agency conflicts may lead to a reduction in shareholder wealth if managers pursue expansion for nonprofit-maximizing reasons. According to past literature, large target shareholder wealth gains are experienced during the announcement of a takeover and large shareholder wealth losses occur when a takeover bid fails (Jensen and Ruback, 1983). This implies that target management interests are not always achieved by accepting bid offers. In addition, target managers may lose compensation and other perks if they are replaced after a successful bid offer. These findings are also confirmed by Walkling and Long (1984) and Martin and McConnell (1991), all of whom reported above-average managerial turnover after a successful takeover bid. The study findings show that in addition to lost compensation, managerial turnover may also be a ssociated with loss of status. Martin and McConnell (1991) further go on to say that the mergers and acquisitions market plays an important role in controlling the non-value maximizing behavior of managers of large corporations. As shown from the literature above, the shareholder wealth perspective and managerial wealth perspective may conflict with one another. With respects to mergers and acquisitions, the managerial motives and a mangers reaction to a takeover bid may have an impact on the shareholder wealth maximization criterion. The extent to which it would impact shareholder value will be decided by the amount of control managers have within the organization. 2.3 Post Merger Performance Debate (Targets and Bidders) There has been considerable interest in the post merger performance on shareholders returns in the target and bidder firms. Typical findings by researchers show three patterns: (1) target shareholders earn significantly positive abnormal returns from all acquisitions, (2) acquiring shareholders earn little or no abnormal returns from tender offers and (3) acquiring shareholders earn negative abnormal returns from mergers. Overall, the results of post merger performance have been mixed. According to Langetieg (1978) and Asquith (1983), their research concluded that acquired firms experience significantly negative abnormal returns over one to three years after the merger. In the research study conducted by Agrawal, Jaffe and Mandelker (1992) titled The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly found that stockholders of acquiring firms experience a statistically significant wealth loss of approximately 10% over five years after the merger completion date. Research conducted by Franks, Harris and Titman (1991) found that no significant underperformance of stockholders returns exist over a three year period after the acquisition. Franks et al concluded that the previous findings of poor performance post-acquisition were likely to be due to benchmark errors rather than inconsistencies with the Efficient Market Theory (EMH) or mis-pricing at the time of the takeover. Similar results that underperformance of stockholders returns do not exist over a three year period after acquisition is also concluded by Bradley and Jarrell (1988). A few studies have analyzed value gains during merger and acquisitions with respect to various classes of merging firms security holders. A study was carried out by Dennis and McConnell (1986) namely, Corporate Mergers and Security Returns and their results indicated mergers on average to be value creating activities for the acquired and the acquiring company individually. They found by other previous studies that on average common stockholders of acquiring firms earn positive returns but are usually not statistically significant. Their results also indicated that convertible preferred stockholders (of acquiring firm) received positive and statistically significant returns post-merger; however, non-convertible preferred stockholders received positive but not statistically significant returns post-merger. The combination of the above mentioned results lead to an overall increase in the value of the firm therefore presenting us with the reason as to why corporations go ahead with merge rs which do not earn statistically significant returns to common stockholders of the acquiring firms. Research results by Asquith and Kim (1982) also confirm what other investigators found for mergers: abnormal returns to the common stocks of acquired firms are positive and statistically significant; abnormal returns to the common stock of acquiring firms are not significantly different from zero. In the study Do Long-term Shareholders Benefit Corporate Acquisitions? by Loughran and Vijh (1997), found that post acquisition returns of acquirers stock are related to both the form of payment as well as the mode of acquisition. They concluded in the overall sample of 947 cases, acquirers that make merger bids earn, on average, 15.9 percent less than matching firms whereas acquirers that make tender offers earn 43.0 percent more than matching firms during a five-year period after acquisition. In addition, stock acquirers earned 24.2 percent less however cash acquirers earn 18.5 percent more with respects to matching firms. Furthermore, conclusions show that during a five year period following the acquisition, on average, firms t