Acquisitions and divestitures

The development of new products for new markets (e.g., electronic chemicals for a fine-chemical company thus far dealing only with life sciences) is the task of corporate development. The latter is a staff function reporting to the CEO. It deals with activities outside the authority of the operating divisions. Apart from new products for new markets, it also looks after joint ventures, mergers and acquisitions, and divestitures. 

American Home Products Evolving through Acquisitions and Divestitures... 

See Chapter 15, Acquisitions and Divestitures, for a discussion of successor transfer of... 

To examine these issues systematically, we analyzed data on acquisitions and divestitures in the chemical sector in last ten years or so. The data we obtained cover deals in the industry (defined as SIC 28) with value exceeding 1 million dollars that were announced in the U.S. 1984-1992, and in Europe 1987-1992. Table 8 displays the overall trends in the number of acquisitions in the three regions. While differences in coverage period do not allow us to draw firm conclusions about when restructuring starts in the different regions, the trends are consistent with the idea that restructuring began earlier in the U.S. Further, European and Japanese firms are more likely to be involved in cross-border deals than are U.S. firms. 

A Due-Diligence study of the prospective acquisition and divestitures shall be conducted to determine strengths and weaknesses of the business, and the impact on safety and environmental requirements. 

We also test a more general specification with acquisitions and divestitures included separately. Finally, we test a specification with the aggregate number of transactions to proxy for the level of restructuring activity. The results of these specifications are consistent with our preferred specification. 

To the best of our knowledge, our study is the first to explore firm-level data for an analysis of the effects of restructuring on R D using data on both acquisitions and divestitures, and a panel composed of a large number of chemical companies from many countries. 

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