【正文】 As to achieve greater operating efficiency. Commercial banks that have moved beyond their historical role of accepting deposits and g ranting loans are merging with securities firms and insurance panies thanks to the Financial Services Modernization Act of 1999, which repealed legislation dating back to the Great Citicorp–Travelers merger a year earlier anticipated this change, and it is probable that their representatives were lobbying for the new legislation. The final chapter has yet t o be written: this trend toward huge financial services panies may yet be stymied by new regulation passed in 2010 in response to excessive risk taking.The telemunications industry offers a striking illustration. Historical。As to make rapid adjustments to changes in their external environments. Although change can e from many different sources, this theory considers only changes in the regulatory environment and technological innovation—two factors that, over the past 20 years, have been major forces in creating new opportunities for growth, and threatening, or making obsolete, firms’ primary lines of business.Regulatory ChangeThose industries that have been subject to significant deregulation in recent years—financial services, health care, utilities, media, telemunications, defense—have been at the center of Mamp。J was seeking an entry point for its medical devices business in the fastgrowing market for implantable devices, in which it did not then participate. A firm may attempt to achieve higher growth rates by developing or acquiring new products with which it is relatively unfamiliar and then selling them in familiar and less risky current markets. Retailer JCPenney’s acquisition of the Eckerd Drugstore chain or Jamp。 Gamble, the consumer products giant, uses its highly regarded consumer marketing skills to sell a full range of personal care as well as pharmaceutical products. Honda knows how to enhance internal bustion engines, so in addition to cars, the firm develops motorcycles, lawn mowers, and snow blowers. Sequent Technology lets customers run applications on UNIX and NT operating systems on a single puter system. Citigroup uses the same puter center to process loan applications, deposits, trust services, and mutual fund accounts for its bank’s customers. Each is an example of economies of scope, where a firm is applying a specific set of skills or assets to produce or sell multiple products, thus generating more revenue.Financial Synergy (Lowering the Cost of Capital)Financial synergy refers to the impact of mergers and acquisitions on the cost of capital of the acquiring firm or newly formed firm resulting from a merger or acquisition. The cost of capital is the minimum return required by investors and lenders to induce them to buy a firm’s stock or to lend to the firm.In theory, the cost of capital could be reduced if the merged firms have cash flows that do not move up and down in tandem (., socalled coinsurance), realize financial economies of scale from lower securities issuance and transactions costs, or result in a better matching of investment opportunities with internally generated funds. Combining a firm that has excess cash flows with one whose internally generated cash flow is insufficient to fund its investment opportunities may also result in a lower cost of borrowing. A firm in a mature industry experiencing slowing growth may produce cash flows well in excess of available investment opportunities. Another firm in a highgrowth industry may not have enough cash to realize its investment opportunities. Reflecting their different growth rates and risk levels, the firm in the mature industry may have a lower cost of capital than the one in the highgrowth industry, and bining the two firms could lower the average cost of capital of the bined firms.DiversificationBuying firms outside a pany’s current primary lines of business is called diversification, and is typically justified in one of two ways. Diversification may create financial synergy that reduces the cost of capital, or it may allow a firm to shift its core product lines or markets into ones that have higher growth prospects, even ones that are unrelated to the firm’s current products or markets. The extent to which diversification is unrelated to an acquirer’s current lines of business can have significant implications for how effective management is in operating the bined firms.A firm facing slower growth in its current markets may be able to accelerate growth through related diversification by selling its current products in new markets that are somewhat unfamiliar and, therefore, mor risky. Such was the case when pharmaceutical giant Johnson amp。 obligations such as interest expense, lease payments, and longterm union, customer, and vendor contracts。they are all included in a glossary at the end of the book.Mergers and Acquisitions as Change AgentsBusinesses e and go in a continuing churn, perhaps best illustrated by the everchanging position of the socalled Fortune 500—the 500 largest . corporations. Only 70 of the firms on the original 1955 list of 500 are on today’s list, and some 2,000 firms have appeared on the list at one time or another. Most have dropped off the list either through merger, acquisition, bankruptcy, downsizing, or some other form of corporate restructuring. Consider a few examples: Chrysler, Bethlehem Steel, Scott Paper, Zenith, Rubbermaid, Warner Lambert. The popular media tends to use the term corporate restructuring to describe actions taken to expand or contract a firm’s basic operations or fundamentally change its asset or financial structure.SynergySynergy is the rather simplistic notion that two (or more) businesses in bination will create greater shareholder value than if they are operated separately. It may be measured as the incremental cash flow that can be realized through bination in excess of what would be realized were the firms to remain se