Sibling Incest

J Fam Viol (2009) 24:531–537 DOI 10. 1007/s10896-009-9251-6 ORIGINAL ARTICLE Sibling Incest: A Model for Group Practice with Adult Female Victims of Brother–Sister Incest Kacie M. Thompson Published online: 5 June 2009 # Springer Science + Business Media, LLC 2009 Abstract Working with groups of people who have been sexually abused introduces mutual experiential themes into the process that can be beneficial and meaningful. This paper discusses brother–sister incestuous sexual abuse with implications for group work. Literature and research is reviewed concerning sexual abuse, incest, family relationships, and theories that aid in explaining incest. Themes covered include: effects of incest, coping methods, blaming, and family of the victim. Common themes are explored and implications for group work are suggested on the basis of length, detail, structure, content, and pre-group contact. Keywords Sibling incest . Group practice . Group therapy Sibling incest is widely believed by researchers and clinicians to the most common type of incest (Carlson et al. 006). Historically, the issue of father–daughter incest has been most often referred to when speaking of incest as a form of sexual abuse; and the concept of sibling incest has been ignored. Despite the high occurrence of sibling incest and its negative effects, attention to this issue by the family, researchers, and professionals has been lacking (Bass et al. 2006). In fact, violence between siblings is much more prevalent than child abus e by parents (Kiselica and MorrillRichards 2007). The purpose of this discussion is to highlight the experience of victims of sibling incest by shedding light on their feelings, thoughts, and mental and emotional issues that are a result of incestuous abuse. Based on the understanding of the sibling relationship and aspects of sibling incest, a model for group therapy is introduced K. M. Thompson (*) University of Montana, Missoula, MT, USA e-mail: [email  protected] com for adult female victims of brother–sister incest. Aspects, such as sibling elationships, effects of brother sister incest, the family, blaming, coping, and theoretical frameworks, are discussed to inform group work with victims. The Sibling Relationship & Incest Siblings share a unique relationship bound by genetics, social class, history, and family connections. The sibling relationship often outlasts many other relationships (Bass et al. 2006). The sibling relationship is unique in longevity and can be one of the most influential relationships in oneâ₠¬â„¢s life. Because of this, the impact siblings have on one another should not be underestimated (Kiselica and Morrill-Richards 2007). This unique relationship that siblings share is sometimes the reason why incidences of sibling incest are regarded as â€Å"sexual curiosity†. This view of sexual curiosity is often accepted by family members and the details of that curiosity are not fully understood (McVeigh 2003). Sibling incest is defined as sexual behavior between siblings that is not age appropriate, not transitory, and not motivated by developmentally appropriate curiosity. Sexual abuse between siblings is not limited to intercourse. It has been shown that unwanted sexual advances, sexual leers, and forcing a sibling to view pornographic material can have as much of a psychological impact on the victim as actual intercourse (Kiselica and Morrill-Richards 2007). There are many forms of sexual abuse, but the negative effect incest poses on the victim and the family cannot be ignored. The sibling relationship and the causes of sibling incest have been addressed in several ways. Some authors such as McVeigh (2003), note the importance of the power dynamic between the brother and sister, as that dynamic is caused by age difference and gender expectations. Haskins (2003) 532 J Fam Viol (2009) 24:531–537 states that incest with a younger sibling by an older sibling is motivated largely by urges to satisfy underlying emotional needs for nurture and comfort rather than a need for sexual gratification. The offender’s behavior has sometimes become an outlet to express his unconscious needs. To fully understand the victim and offender’s relationship, family contexts should be examined. Perhaps the victim feels and behaves in similar ways due to the dysfunction in the family environment and the possible need for comfort and acceptance, which will be discussed in relation to family details. Common Experiences: The Effects of Sibling Incest Reactions to incestuous sexual abuse vary from person to person, depending on the severity, duration, and family reaction to the abuse. Victims of sexual abuse experience long-term difficulties including psychological, sexual, and relationship problems (Brand and Alexander 2003). Victims of incest have many feelings, emotions, and issues to deal with in order to cope with the abuse they experienced. Victims of sibling incest exhibit a wide variety of psychological problems. Sexual sibling abuse creates fear, anger, shame, humiliation, and guilt (Kiselica and MorrillRichards 2007). Along with those feelings, victims can also have severe depression and feelings of helplessness (Martens 2007). Sometimes these feelings can lead to suicidal thoughts, and sexual promiscuity; two aspects that are very common in sexually abused women (Rudd and Herzberger 1999). In order to understand the many effects of abuse and the long-term consequences, aspects, such as blaming, coping, and forgiveness, will be addressed under the framework of issues to be addressed during group work with victims of sibling incest. Family of the Victim Family systems theory has been utilized by clinicians to aid in the understanding of sibling abuse. Family systems theory supports the understanding of the sibling relationship within the familial realm by viewing the sibling relationship as just one piece in the family puzzle. The family environment is an interactive, interdependent network in which the behavior of each individual or subsystem modifies the behavior of other individuals or subsystems. This environment is quite intimate, and if the network begins to break down, it often fosters violence. Through this, the family systems outlook shows that sibling abuse and incest cannot be considered an isolated problem but should be seen as a manifestation of family dysfunction (Haskins 2003). The importance of the family should always be examined in cases of sibling incest. Bass et al. (2006) note that each member of the family will hold a unique perspective and position on the issue of incest and sexual abuse; which in turn models how the woman involved in that abuse will react or respond to the abuse and the treatment that may follow. Sibling incest occurs in families with some common characteristics (Phillips-Green 2002). Abusive and incestuous families have high levels of personal, social, and economic stress; substance abuse; and exaggeration of patriarchal norms; and parenting skills are consumed with high levels of frustration, with punitive or harsh childrearing styles (Haskins 2003). Systems theory aids in the understanding that what one person does effects another, which effects another. The family dynamics that housed the sibling abuse can have negative effects on the victim in how she views herself and how she will parent her children based on how she was raised. Whatever the case, sibling incest is painful and damaging, whether the families are relationally connected or distant (Bass et al. 2006). Not only does the family play an important role in examining the bigger picture of the victim’s life, but it also provides insight into the individual and her treatment process. With brother–sister incest, the victim and the perpetrator are both in the family unit, and that unit can be strongly effected by disclosure of abuse. Disclosure can create emotional distress which may lead to the breakdown of the family, disclosure can also cause blaming to occur. It has been shown that blaming is often a large factor in the disclosure process. The parents and teachers often blame the victim for the abuse instead of providing support (McVeigh 2003). The victim has already endured the abuse, the shroud of secrecy, and in the moment she thinks she will begin to overcome this abuse she is often ridiculed and blamed for causing the abuse that was inflicted upon her. Cyr et al. (2002) hypothesize through their research that when blaming from the parents occurs, the mother is placed in a loyalty bind, having to choose between her daughter and her son. Depending on the type of relationship the mother has with each child, the blaming could be greatly influenced. The issue of blaming can be reciprocal, as the victim may then blame herself and her mother. Blaming Just as the victim is often blamed for the abuse she endured, blaming can occur by the use of self-blame or by motherblaming. Blaming the self for events that happened are not only damaging but are often associated with feelings of guilt relative to the abuse (Morrow and Sorell 1989). Women that have experienced brother–sister incest may also feel unsafe, and when she believes that she is the one J Fam Viol (2009) 24:531–537 533 to be held responsible for the wrongdoing, she will turn any feelings of rage and hostility away from the perpetrator or her family and place them on herself (Schlesinger 2006). Self-blame and mother-blaming are common ways to deal with feelings of guilt and anger. Mother blaming is supported by the notion that the mother is in some way responsible for the acts of the victim’s brother. Victims of incest often internalize anger, directing hatred and aggression against themselves. When these feelings become too intense, the victim copes with this by focusing her anger on her mother, which allows the victim to externalize her feelings (Jacobs 1990). Looking at family dynamics as well as the specific relationship the victim has with her mother can be useful in understanding coping methods through blaming. processing for the resolution of the trauma, as well as increase the likelihood for poor day to day adult functioning (Brand and Alexander 2003). With a deeper understanding of coping methods, there may be an enhanced opportunity for educating the individual who exhibits those behaviors, as well as other group members. Group Therapy The use of group therapy can be very effective with a variety of populations, especially those that have experienced incest. Group therapy can provide a unique opportunity for self and interpersonal learning because it allows for members to address effects of interpersonal victimization by identifying with other members who have had similar experiences (Wanlass et al. 2006). Although little is known regarding best practice measures to treat victims of sibling incest, options for treatment have been discussed based on the fact that each victim of sexual abuse will be different in the treatment process (Martens 2007). There are several characteristics of sexual abuse that can affect not only the victim, but the treatment process as well. Aspects such as duration of the abuse and the use of force should be examined. As mentioned earlier, the family dynamic should be looked at as well though the lens of how the victim’s disclosure of abuse was received. The victim will be coping with not only the abuse, but the impacts disclosure may have had on the family and the victim as well. Rudd and Herzberger (1999) note four common characteristics among victims coming to receive treatment: enforced secrecy, interpersonal power differentials, influences on sexual development, and individual aftereffects. These researchers state that abused women often felt that by tolerating the abuse and keeping it a secret was a way to hold the family together. This aspect of secrecy in the incestuous relationship is also connected to power dynamics within the relationship. These characteristics as well as sexual development and individual aftereffects can be examined including other issues discussed earlier. Focusing on building strength and resilience in group therapy has been noted by Wanlass et al. (2006) and Anderson (2006). Both authors contend that working through the abuse during the group process can be seen as â€Å"surviving† the abuse, which is an example of resiliency. The group therapy process can be structured and focused to maximize skills associated with resiliency, leading to improved treatment outcomes (Wanlass et al. 2006). Anderson (2006) discusses a change in perspective of how the victim views herself; from the victim to the survivor; which can aid in the process of forgiveness. The topic of forgiveness may be valuable to group members, depending on where each member is in her process of Coping When considering group therapy with women who have experienced sibling sexual abuse, coping mechanisms should be examined to understand what issues and problems the individuals may have due to their coping skills. The way each individual copes with the abuse can be connected to any diagnosis that they may have been given as a result of the abuse. For example, many victims of trauma, especially sexual related trauma display characteristics of Post Traumatic Stress Syndrome (Banyard and Williams 1996). In these situations, group members may need to be taught coping strategies to manage traumarelated anxiety (Foa et al. 1999). Paying close attention to the possibility of or presence of a disorder will be very helpful in group work. Coping has been examined in many ways to aid in the process of understanding how individuals respond to trauma and stress. Brand and Alexander (2003) state there are two types of coping strategies: emotionfocused coping, and problem-focused active coping. Becoming more aware of both of these style of coping will greatly influence effectiveness of group work. Emotion focused coping is rooted in the individual trying to regulate their emotions in dealing with the abuse, and problem-focused active coping is when individuals engage in behaviors in an attempt to manage the problem situation. An example of problem-focused coping is when an individual tries to manage her stress from the abuse through an eating disorder behavior. While the group facilitator learns more about the group members, behavior such as these may arise in discussion. Other coping methods that have been identified include the coping strategy of avoidance. Previous studies have stated that avoidance may be an initial way to cope with the stress of sexual abuse, but in the long term sense the avoidance strategy may increase future symptoms and cognitive 534 J Fam Viol (2009) 24:531–537 understanding the abuse she experienced. Working on forgiveness with group members may aid in the reduction of feelings that cause depression, fear, and anxiety by channeling those feelings and discussing options for positive coping though forgiveness and resiliency. Theoretical Frameworks Guiding Practice Research and information discussed thus far has roots in theory. These theories could lead to a deeper understanding and an enhanced framework for the discussion of incest as well as aid professionals in group work. Attachment theory, symbolic interaction theory, family systems theory, and feminist theory outline the theoretical framework that guides practice with female victims of incest. As mentioned earlier, much of the discussion of incest has its foundation in family systems theory and the significance of relationships family members have ith one another. Alexander and Anderson (1994) note that the family context associated with the abuse often explains more of the long-term effects than the abuse itself. Attachment theory lends itself to this notion by stating that the parent–child relationship is just as important to the child as eating and sleeping. Based on the child’s â€Å"internal working model† of relationships modeled by the parent–child relationship, that model governs how interpersonal relationships are viewed and experienced (Alexander and Anderson 1994). The goal of incorporating an attachment perspective is one of helping the client increase flexibility of though and views in interpersonal relationships beyond the parent– child relationship. This could be especially useful if there have been negative interactions as well as if blaming is occurring. Symbolic interaction theory aids in the exploration of incest by looking at aspects, such as frequency of abuse, degree of self-blame, and family disruption, in relation to how the victim will manifest her self-concept (Morrow and Sorell 1989). Through this theory, how the individual who experienced the abuse views herself is viewed as a social product constructed and developed by the social interactions around that individual. Once again, family relates to this theory and explanation of factors surrounding incest and sexual abuse, but it also reaches beyond to include other important social interactions, such as friends, classmates, etc. Understanding the social constructs present in the victim’s life can create a better understanding of what needs to be dealt with and recognized for effective group therapy to occur. The feminist framework of incest and the victim is centralized around gender and oppression, and the roles that males and females play in society. As discussed earlier, Anderson (2006) speaks of the importance of changing the viewpoint of â€Å"surviving† abuse to overcoming and resisting the abuse through resiliency. This idea of becoming resilient by resisting oppression is focused in categories found to represent resiliency in the face of oppression: being powerless, being silenced, and being isolated. Not only do all three of these aspects describe how an incest victim feels, but Anderson (2006) also argues that they correlate with oppressive resiliency. Introducing this idea of not being an incest ‘survivor’, but being a resilient person with qualities to be proud of, seems much more empowering, and is a great representation of an example of how feminist theory can be applied to group work with victims of incest. Moving past sentiments of oppressed within one’s feelings as well as within society due to one’s gender can be helpful for the victim, especially within a group setting. People can often find strength in numbers, and if other members are making the same conclusions about their lives and their experiences, positive progression can occur. Kreidler and England (1990) make an important point: â€Å"Because incest isolates victims and encourages feelings of guilt, incrimination, and shame, group experiences allow survivors to build self esteem and develop relationships in a protected environment†. Through this, the group process fosters autonomy and a sense of control in its members. Group Model Group therapy for adult female victims of sibling abuse can be approached in many ways. Group facilitators must be able to assist their clients in making sense of their trauma and work through negative emotions, as well as to teach group members healthy and adaptive coping strategies (Wanlass et al. 2006). The basics of group work will be rooted in helping group members work through their experiences while processing their emotions. Through this, connections will often be made with other members based on the shared experience of brother–sister incest. Focus should not only be on the present, but the victim should be able to make connections to the abuse and how her life has been affected. Victims of sibling incest have lifelong problems in many areas including marriage, work, and parenting (Phillips-Green 2002). Once group members begin to make those connections, the possibility for positive change may increase. Northen and Kurland (2001) emphasize the importance of thorough and thoughtful planning to the success of group work (p. 109). In order to address the topics and concerns discussed throughout this paper, the intake process should be thorough in detail and always take into account the elements of the brother–sister incest, finding out if force was used, how long the incest occurred, etc. The facilitator in charge of creating the group should be involved in the intake of members, as well as choosing the time and place J Fam Viol (2009) 24:531–537 535 where the group will meet. The length of the group sessions should be considered. Group therapy can be short term or long term, depending on the desired goals of the facilitator and the needs of group members. Sparks and Goldberg (1994) propose a short term group that is centered within re-educating victims about the dynamics of incest. Victims are often unaware of the widespread incidence of sibling incest experiences, and may feel much less alone in their feelings and issues as a result of the abuse. These authors note the sense of empowerment that women feel by telling their story to others who share similar experiences, as vocalizing the abuse sets it â€Å"free† and places it in the open, as well as helps the woman to continually break feelings of secrecy. There can be advantages and disadvantages to short-term and long-term group models. Short-term groups are more effective for creating connections between victims around a shared experience, but due to the severity and seriousness of sibling incest, the author proposes a long-term group specifically for women who have experienced brother– sister incest. Long-term groups offer more of an opportunity to address issues such as sexuality, sexual dysfunction, and other issues such as secrecy, isolation, and suicidal thoughts that victims often carry with them throughout their lives. This long-term group is a 12-week format, with meetings once per week at two hours per session. Depending on the size of the group and the characteristics of members, private individual sessions outside group meetings may also be arranged. Size can vary, but should be limited to 10 women. Northen and Kurland (2001) make the point that the smaller the group, the more demand on members to be fully involved in the group, and then there is more demand for intimacy of relationships (p. 136). Sparks and Goldberg (1994) mention the importance of realizing that many survivors will be suspicious of anyone in the counselor/professional role because they many have felt they experienced further violation and betrayal from any previous treatment. To begin to look at this, it may be helpful to ask women during intake if they have gone to any treatment previously, as well as how they felt about it. The facilitator should be aware of this prior to the first meeting. The facilitator also needs to make group members aware of the time commitment during the intake process, making sure they know that missing sessions is not encouraged. A possible therapy method that can be incorporated in group work is the use of Cognitive Processing Therapy for Sexual Abuse (CPT-SA). This treatment is an adaptation by Chard et al. 1997) of Cognitive Processing Therapy for rape victims and is intended to extend treatments for childhood sexual abuse by addressing sexual abuse responses and aspects of the abuse (Chard 2005). This 17week therapy method combines the use of individual and group therapy to maximize positive results by utilizing the benefits of group work as well as giving group members individual attention throughout the group process. Alt hough this method is not discussed at length in this paper, it may be useful to examine facets of CPT-SA for possible incorporation in group work with incest victims. The goals, strategies, and topics included in treatment will vary from therapist to therapist; and the goals and topics included in therapy typically reflect the therapists’ own assumptions of the impact of child sexual abuse (Beutler et al. 1994). This author suggests topics that should be addressed in the group are: emotions and feelings, sexuality, family history, effects of disclosure, power/feeling of powerlessness, secrecy, relationship with the offender, relationship with family members, current coping skills, and options for positive change for the future. These can be modified week to week. There really is no way to run a group in a step-bystep manner, as the group process is unique in itself as it takes shape and changes course all on its own. Topics can be presented to the group if there seems to be a lack of conversation or comfort with one another, but once the group members get to know one another topics and discussions will take shape and find their way into discussions even if there isn’t a definite â€Å"plan† for the group that day. For the use of an example, a basic proposed model for group may include: Week 1: Learning about each other What brings you here? Tell us about yourself. How do you feel about being here? Activities may be used to â€Å"break the ice†, writing exercises, etc. Week 2 & 3: The Family and Disclosure What is your relationship with your family like? Discuss dynamics of the family. What happened when you told about your abuse? Blaming may be discussed here. Week 4 & 5: Relationship with your brother Relationship changes, start and end of abuse, where the perpetrator is, how that makes you feel. Week 6 & 7: Depression, guilt, anger, sexual promiscuity. What are you dealing with now? How has the abuse effected you long term? How have you changed? Week 8 & 9: Coping strategies, positive outlets, self esteem, strength, resilience Week 10, 11, & 12: Reflection and growth, closure and celebration The topics included in this example will likely blend and flow from week to week, and should not serve as a rigid foundation for group. Through these suggestions, the facilitator can help the abused woman feel that her sense of victimization is valid, she can help the victim remove 536 J Fam Viol (2009) 24:531–537 self blame, and identify change patterns of self-abuse and self-degradation to promote growth and a higher selfesteem (Kiselica and Morrill-Richards 2007). Given the unique relationship that siblings share, this relationship may become a backdrop to the group process, as well as the family relationships that connect within the sibling subgroup. It is likely that these relationships will go through an on-going assessment and re-definition as group members discover more about themselves in regard to their behaviors, feelings, and relationships with others. Although topics outlined in the example could be introduced to the group for discussion, most of these topics will likely come up due to the nature of the experience and the common aspects that are seen frequently in sibling abused women. The author suggests that the group should be allowed to take their session in the direction they want it to go. To exemplify the power of each group member’s story, it is proposed that letting the group decide what they would like to discuss proves most effective. Sparks and Goldberg (1994) state that the group becomes a forum for humor and creativity as members take advantage of the unique opportunity to express what can not be expressed until someone who can appreciate it is willing to hear it. This creativity of the members should not be underestimated, and every moment of that process should be an empowering reminder for the group members. Most of the literature argues that the group facilitator(s) should be female. The possibility for a co-facilitator should be considered, depending on the size of the group. If the group is small, only one facilitator is needed. The facilitator (s) should have some knowledge and/or experience in crisis and group work. Age should also be taken into consideration. Group members should be 18 years of age and older, as this group is restricted to adult female victims. Commonality and shared experience are extremely important to the success of this group process, and grouping members based on age range will be helpful for members to relate to each other on more levels than one. During the intake process, the facilitator should attempt to arrange the groups based on what they conclude to be the most effective combination of members based on what was discussed with members prior to the initial meeting. The option for diversity should not be ignored, but O’Hare and Taylor (1983) make the important point that the group composition should always be considered in relation to making sure one person in the group does not stand out; for example, one African American woman, one lesbian woman, etc. Once again, thoughtful design of the group cannot be ignored. Group closure may include a celebration of connections and alliances made within the group. The format of closure and celebration should largely be decided by group members. Conclusion Group work with victims of sibling incest can be complex and challenging. It is clear that many factors influence the victim’s life other than the actual abuse. Family dynamics and overall relationships at the time of the abuse and disclosure prove to be extremely important in determining the entire picture of the victim. Once the facilitator becomes more educated about the details of incest and what to expect from group members, she will be able to design the group in the most effective manner. With the help of shared experience and shared knowledge, group members will find connections with one another that will maximize their growth and value of the group therapy experience. References Alexander, P. C. , & Anderson, C. L. (1994). An attachment approach to psychotherapy with the incest survivor. 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Brother–sister incest— father–daughter incest: a comparison of characteristics and consequences. Child Abuse & Neglect, 23, 915–928. oi:10. 1016/S0145-2134(99)00058-7. Schlesinger, N. J. (2006). Treatment implications of a female incest survivor’s misplaced guilt. Psychoanalytic Social Work, 13, 53– 65. doi:10. 1300/J032v13n02_04. Sparks, A. , & Goldberg, J. (1994). A current perspective on short-term groups for incest survivors. Women & Therapy, 15, 135–147. doi:10. 1300/J015v15n02_11. Wanlass, J. , Moreno, K. , & Thomson, H. M. (2006). Group therapy for abused and neglected youth: therapeutic and child advocacy challenges. Journal for Specialists in Group Work, 31, 311–326. doi:10. 1080/01933920600918808.

Camelina: a Market Forecast and Strategy Report

Camelina: a Market Forecast and Strategy Report 40 graphs and charts Camelina: a Market Forecast and Strategy Report 40 graphs and charts Published March 2010 From Biomass Advisors, a Biofuels Digest company Camelina has been much in the news of late, as a biofuels feedstock of strong promise, because of its position as one of the few â€Å"sustainable, affordable, reliable, available† feedstocks suitable for aviation biofuels. In November, KLM Royal Dutch Airlines made the first biofuels test flight with passengers on board, powering one engine with a mixture containing biofuel made from Camelina. Great Plains – The Camelina Company provided some of the Camelina used to make the fuel for this flight. Earlier, camelina was one of the feedstocks powering the Japan Airlines biofuels test, while the U. S. military has performed ground engine tests on camelina-based jet fuel in preparation for FA-18 Hornet fighter jet flights planned for this spring. Biofuels Digest has covered the camelina story in 71 different stories since 2007. But what’s the bottom line, for the grower, processor, end user, investor or policymaker? Biomass Advisors — a Biofuels Digest company focused on in-depth research — will release its definitive report on camelina in March 2010, including 40 charts and graphs. It’s based on unparalleled access to and cooperation with key stakeholders, on trends in processing, yields, geographies, and the end user markets opening up for high-value animal feed, and liquid transportation fuels (including aviation biofuels). In the report you’ll find the timeliness and perspective expected of the Digest — but with far more depth than a daily newsletter can provide. To reserve a copy or for more information, use this link to email us with â€Å"reserve† or â€Å"more information† in the subject line. Or to order your copy for $495, click on the button below: Table of Contents 1. Overview 1. 1. What is Camelina? 1. 2. Camelina’s development 1. 3. Camelina for the grower: a wheat rotation crop 1. 4. Camelina for the processor: omega-3 rich meal, high-yielding oilseed 1. 5. Camelina for the end user: animal feed, renewable jet fuel, biodiesel 2. Camelina’s Geography 2. 1. Opportunities within the wheat belt 2. 2. Additional opportunities in grazing or idle lands 2. 3. Trial locations and yield patterns 3. Camelina’s Economics 3. 1. Camelina oil: uses and values 3. 2. Camelina meal: uses and values 3. 3. Camelina economics 3. 3. 1. Inputs: fertilizers, herbicies, pesticides, labor 3. 3. 2. Outputs: yields and values 3. 4. Comparison of Camelina to other rotation crops: geography, yields, economics 3. 5. Camelina’s lifecycle greenhouse gas emissions, and sustainability 3. 6. Camelina Subsidies, Incentives, Grants, Mandates and Approvals for Use 3. 6. 1. National 3. 6. 2. State 3. 6. 3. Local 4. The competition: Petroleum Oil Economics 4. 1. Oil market trends and forecasts 4. 2. Camelina end markets size and potential 5. Camelina Production Forecast 5. 1. Oil parity analysis 5. 2. Available land analysis 5. 2. 1. Wheat fields available for rotation 5. 2. 2. Idle land available for Camelina production 5. 3. Agriculture adoption patterns 5. 4. Existing, planned and potential refineries 5. 5. Camelina production forecast 5. 5. 1. Biodiesel 5. 5. 2. Biojet fuel 5. 5. 3. Biolubricants and biomaterials 5. 5. 4. Animal feed 5. 6. Theoretical maximums 5. 7. Potential impact of market distortions 5. 8. Sensitivity analysis 6. Business and Investment Opportunities 6. 1. Transport and logistics 6. 2. Pressing 6. 3. Refining and blending 6. 4. Site selection considerations 6. 4. 1. Current and planned refineries 6. 4. 2. End-market locations and off-take partners 7. Case Studies, Profiles 8. Additional Resources and Information ?

Ad Evaluation

The focal point of this paper is to write a 3 page essay evaluating one commercial advertisement from a popular magazine and analyze it with an evaluation of its effectiveness in light of its purpose, paying particular attention to how well its various components work together to persuade. Jean Kilbourne makes an excellent point in her portrayal of advertisement and its appearance of violence and sexually predatory nature. Blatantly sexist, implied violence and the essence of fear or dominance would be inherent in advertisement of all descriptions from lingerie, to jeans all the way to peanut butter. Jean Kilbourne’s essay shows us how much we ignore in the world of advertisement, which simply exemplifies that which we ignore in life as a whole. Her portrayal of the difference between perceptions of men and women in the various ads, including such concepts as intimacy, violence and innocence would be such as to either cause alarm or to cause us to seriously examine the route advertisement is taking in the role of human behaviors. Human behavior is altered by stimuli outside the mind, but absorbed by that same mind. It is this absorption that must be considered when understanding the human psyche. Sexual advertisement has a tendency to increase violence done by men continuously exposed to the ads and the industry continues to use these sexual images for attention magnets. The biggest problem with this now would be the fact that now teenagers and children have become a target audience, resulting in addiction toward images and brands. Jean Kilbourne’s essay is quite an informative piece. It proves that what we see and what we get are obviously gender separate, and also can be either intimidating, or thought provoking dependent upon that gender. Most, if not all, advertisement can be considered mildly offensive, no matter the implied innocence. For example, Calvin Klein’s underwear ads spark outrage to this day and yet, regardless that they are only there for a few moments or weeks even, it is enough for people to go out and buy his underwear line. This, without realizing our own actions, simply feeds the desire to continue the outrageous behaviors displayed within the advertisements. A second example, both on the feminine and masculine side of intimidation, Diet Coke advertisements of Cindy Crawford in a very short skirt drinking a Diet Coke and being ogled by men and boys of all ages and on the other side of the coin, the sweat-coated construction worker ogled by the women in their office building as he drinks the soft drink. In Jean Kilbourne’s essay she states that â€Å"First, the industry spreads the sexual images using the media regardless of appropriate types of media. She cites Paris Hilton as prime example just in the year 2005. There are no doubts that Jean Kilbourne’s criticism of our efforts to put a halt to violence and even the innuendo of violence in both feminist movements and equality based ones, would in fact be direct and to the point in her understanding of what is acceptable, and what should hardly be. The affect of these ads on the younger minds alters the landscape in such a way that we would see it in the actions of younger and younger children. For instance, the rape of a six year old girl by an eight year old on the same bus while on their way home from school as she was held down by four other boys. There are many images that continue to testify to the belief that violence against women is acceptable, that sex, in the case of the woman, cannot be proven as rape because she is a woman. There is an advertisement, in the March 9, 2006 Rolling Stone magazine on pages five and six of a man pulling a woman’s jeans off on a beach. A blatant testament of dominant sexuality, and then add to that the advertisement on page nine of four pairs of women’s legs, showing off the shoes, or showing off the smooth legs? This is no doubt a blatant approach toward masculine attention. Rolling Stone is a very obvious method of exploitation, both masculine and feminine. An advertisement further in this issue proves that with a woman whose clothing shows the curvature of her bust quite blatantly and then a large white feather pointing directly toward the cleavage. She stands there with her lashes lowered and a bottle of Skyy Vodka with a glass in her hands. Fashion and the industry that supports it would be a blatant exposition utilizing many sexual images with both teenagers and adults, usually exposing too much of the torso in their advertisement, their shows and so forth. This would constitute a blatant reinforcement of the vulnerability of women, and now, even more so, of children. Jean Kilbourne has a very good point in her critical assessment of the world of advertising and its affect on both the masculine and feminine gender. Her critical assessment should be considered a wake up call for all in that we ignore the warning signs and exploit the danger in place of fighting against it. Thus, in her essay, she proved her theory quite sufficiently in that the industry would continually uses sexual images specifically to capture the attention of people, and now, teenagers and children have become the target audience thus becoming addicted to both the images and the brand. If we do not fight as equals, then feminism has no true hold on culture in any way. This, in actuality, is of a far greater impact on the lives of men and women, as well as boys and girls. The fact that these ads continue would tell us that feminism is losing its hold on the minds of many. Ads have a tendency to mold a generation, and the portrayal of men and women in suggestive or violent poses manages a platform for strong debate. References: Kilbourne, Jean; Two Ways a Woman Can Get Hurt: Advertising and Violence; Rereading America Cultural Contexts for Critical Thinking and Writing 5th Edition; St. Martin’s Press 2001 Jan S. Wenner Editor and Publisher; Rolling Stone Magazine: 1290 Avenue of the Americas; New York, NY 10104-0298 USA

Impotance of career planning Essay Example | Topics and Well Written Essays - 750 words

Impotance of career planning - Essay Example As a function of such differing aspects of personal well being and growth, this brief analysis will consider a few of the reasons why career planning is essential to maximizing success and satisfaction in life. In order to accomplish such an analysis and/or investigation, this author will integrate with career planning based upon the following determinants: the necessity of performing career planning in order to define and differentiate what actions must be accomplished in order to direct ones path towards the ultimate goal as well as the necessity of career planning in order to maximize satisfaction. Firstly, the reader can and should integrate with an understanding of the fact that it is necessary in order for the individual to make something of a road map of future actions that must be completed in order to realize the goals they have set for themselves. One can easily take a quick glance around their local academic institution and quickly realize that a very large majority of the students within the system have not a clue or the foggiest notion with regards to how they will accomplish the goals after university. As a function of this, creating a set of metrics and milestones that will help define and guide the shareholder in the correct direction is a requirement to proper career planning (Babik 7). This is not to say that career planning is something of a concrete science that cannot be bent or changed as time goes on. Rather, it is the understanding of this author that unexpected eventualities will shift the way in which the shareholder expects to accomplish the goals that he/she has set; however, having a plan and being able to change that plan is of vital importance due to the fact that without it there is little hope that much in the way of proactive planning or thinking will be accomplished. An aspect of career planning that is often ignored is the fact that proper career planning can easily help an individual to realizes a far greater degree of satis faction than they would had they not engaged in any level of planning (Chen & Fulmer 15). This strikes at the very root of what proper career planning can effect due to the fact that this is the connection between hopes, dreams and realities. Without a clear idea in mind of the aspects of one’s career that can bring the highest level of success and personal satisfaction, the individual oftentimes finds themselves in situations that hardly resemble what they had previously imagined (Magnuson & Starr 99). This is not to say that without proper career planning the individual will necessarily find themselves in a miserable career with little to no satisfaction in the work that they are performing; rather, it merely helps to underscore the fact that without career planning the likelihood that satisfaction will be evidenced in one’s work environment is necessarily reduced (Greenhaus 4). As a function of these determinants that have been listed in this brief analysis, the rea der can come to the understanding that proper career planning is an integral component of helping to maximize personal satisfaction and success. By creating a definitive road map for how key

Effects of Globalisation on Bolivia in the last 5 years PowerPoint Presentation

Effects of Globalisation on Bolivia in the last 5 years - PowerPoint Presentation Example In the 2009 elections, he again came in to power by winning the election with a huge margin and now making attempts to change the system of his country. Figure 1: Map of Bolivia Source: Central Intelligence Agency. The World Fact Book, 2011 Bolivian Economy: Bolivia is among the poorest and the most undeveloped country in the Latin American region. There was a devastating economic crisis in Bolivia in the early 80s but then the economic reforms were made which improved the economy as well as reduced the poverty in the country. In the time period between 2003- 2005, there was political disturbance in the country along with racial clashes mainly on the issue of export of natural gas to northern hemisphere region. In 2005, newly elected government passed the hydrocarbon law according to which the royalties were raised significantly resulting in the withdrawal of all the local companies from the sector and foreign companies started to operate in the country. In 2008 due to higher rates o f oil and gas, the surplus was significantly higher but in the later years, the economy started to decline due to following factors; i. Global Recession. ii. Decreased prices of oil and gas worldwide. iii. Poor infrastructure of the country. iv. Economic sanctions imposed by USA on Bolivia. a. GDP: Figure 2: GDP from 2000-2009 Source: Index Mundi, 2008. b. Exports and Imports: The main exports of the country include natural gas which constitutes the main financial reserve of the country and apart from this; the other exports include soybeans, crude petroleum, zinc ore and tin. Major countries which are involved in importing these items from Bolivia are Brazil which constitutes the largest export partner of Bolivia followed by USA, Japan, Columbia, South Korea and Peru. Main imports of the country include petroleum products, paper and plastics, aircrafts and their parts, ready to serve foods, automobiles and insecticides. The main partners in imports are Brazil, Argentina, USA, Chile and Peru. Figure 3: Exports of Bolivia Source: www.amchambolivia.com Figure 4: Imports of Bolivia Source: Index Mundi, 2008. c. Investment Opportunities: Direct Foreign Investment (DFI) is the main contributor to the growth in the private investment sector in the country. It has grown from 169 million US$ to about 1,000 million US$ in just seven years from 1992 to 1999. It represents about 10% of the GDP. The rapid increase in DFI in these years was basically due to process of privatization which was completed in 1999 and afterwards the DFI started to fall. In addition to this, the economic conditions got better in the neighboring countries and as a result, the DFI fell further in the years after 1999. The government from 2005 is working to have good economic conditions which support the interests of foreign investors. As a result of this commitment, irrespective of the social and political unrest in the country, GDP has grown to about 4% in last seven quarters. The overall deficit had narrowed and there was a surplus of 4.2% in 2006, the main reason for this improvement is the government policy about the hydrocarbon sector increasing its exports. Other factors include better revenue system as well as reform in

Annotation Assignment Example | Topics and Well Written Essays - 500 words

Annotation - Assignment Example An interesting verbatim quote from the article is â€Å"these seemingly innate feelings may help explain how quickly and easy rituals serve that purpose† (Lau 1). The article is very short. Lau merely reflects on the article’s findings and hypothetical framework while failing to explore the ways the researchers came to these conclusions after the research. The article should have discussed the change in theory before the experiment and after making the new findings. Instead, Lau presented an extension of the study’s abstract section, which is very succinct. Despite the shortness, the article covered all crucial aspects of the study. Lau compares the findings of the first study with a previous one concerning the same matter (Lau 1). This comparison brings the article up-to-date and clear. I found the study more interesting than the article itself. The sample used, research design, purpose, and reasoning of the study was compelling. Lau further cites resemblances between customs across traditions like hitting wood and spitting that the study’s researcher noted before the actual study. The article may be used for a piece of writing as a basis for an abstract idea concerning superstition amongst human beings and its role or purpose evolutionarily, socially, or psychologically. This type of support arises from the author’s inclusion of the follow-ups made by the researchers. The author says the relationship between the beliefs surrounding suspicious and random activities such as knocking on wood and tossing tennis balls have â€Å"a common underlying mechanism† (Lau 1). This quote expresses the author’s interest in the topic but insufficient understanding of the study being outlined. the author could have added two more comparisons with recent systematic findings to be thorough about the thesis and hypothetical framework. Instead,

Discuss character development in Everyday Use Essay

Discuss character development in Everyday Use - Essay Example She even decides to change her name, though its history may be traced back to the Civil War â€Å"I couldnt bear it any longer, being named after the people who oppress me†. Instead, she chooses name Wangero, which her mother finds difficult to pronounce. What Dee desires is to become a new person. It becomes obvious that Dee’s mother and sister worship her. It is noticeable from the first lines. â€Å"Sometimes I dream a dream in which Dee and I are suddenly brought together on a TV program of this sort† acknowledges her mother. What she wants is to achieve her daughter’s approval. At the same time, Dee is unlikely to desire it. What she seeks seems to be attention and personal meaning. Even more, she seems to behave like a selfish, arrogant, and insensitive person. The story is told on behalf of Mama, that is why readers are not given an opportunity to trace the way Dee thinks. Instead, readers are offered to judge her by her actions, words, and relations to others. For example, these lines â€Å"At sixteen she had a style of her own: and knew what style was†. It says a lot about a girl who comes from a family which leads a labor-intensive life. â€Å"In real life I am a large, big-boned woman with rough, man-working hands† that is how Mama describes herself. At the very beginning readers understand that Dee is totally different. She wants to be a part of idealistic Africa. Consequently, she rejects actual experience and severe realities that Afro-Americans face. That is what unites her with Hakim-a-barber. This couple stands in stark contrast to Dee’s mother and sister. At the same time, readers may only guess what kind of relationships Dee has with this man. â€Å"They didnt tell me, and I didnt ask, whether Wangero (Dee) had really gone and married him† comments Mama. It is clear that Maggie and Mama cannot let themselves live in a world of illusions. At the same time, rustic realism of their world becomes a

Review on The Man with a movie camera 1928 b&w, silent Dziga Vertov Essay

Review on The Man with a movie camera 1928 b&w, silent Dziga Vertov (90min) - Essay Example Firstly, he reminds the audience, that this is an experiment in cinematic communication without the aid of inter-titles, sets actors and a scenario. Then he tells that this is an effort to create a truly international absolute language for cinema. His third claim is that this is an attempt to totally separate cinema from theatre and literature so that a pure cinematic language is born. Everything mundane and commonplace are attributed a meaning from the very beginning of the film. But enough space is given in the film for the viewer to indulge in this process of meaning creation on his/her own rather than agree to what the film maker suggests. The unfolding of the chairs in the theatre is recorded in a montage form as if that was the most important event of the day in that theatre. The long pause before the performance in which every artist holds his or her breath and is on the verge of starting to play is also made subject of another montage. This kind of detailing of the trivia progresses towards subtle and profound meaning creation as the film moves on. The camera eye is interspersed with the human eye in several frames. Images are repeated in different compositions to add a new element of detail. For example, there is a film poster of which we first see the pictures only. Later the name of the film also is displayed making us remember the image that we saw earlier in a new light. The film is divided into nine segments. Novel and even wild editing techniques are used throughout. Multiple exposures are used to emotionally link workers with the machines they use. Detailing with a passion to find correlations between human behaviour and actions of the machines has resulted in a number of powerful cuts like that from the close up of blinking of an eye to the movement of camera shutter blinds. Washing of human body is correlated with washing of walls of a building. Vertov also includes the process of film making into this creative interface of humans

The performance management (PM) approach and the High performance Work Assignment

The performance management (PM) approach and the High performance Work (HPW) approach - Assignment Example These activities are carried out by leaders and managers in organisations to help in improving the activities and the performance of the organisation. We think that performance management for employees in trying to set goals, monitor the employee’s achievement of the goals of the organisation, sharing the feedback of performance of employees with them and evaluating the performance with them. Organisational performance is composed of the output of an organisation while comparing it against the inputs that were deployed to the organisation to achieve those results. The output can be measured by the organisation in terms of profits and growth of the organisation. Performance can be measured by several dimensions; the financial performance or the shareholder returns the level of customer service in the organisation, the social responsibility of the organisation in the society and its clients and the stewardship of the employees. Organisations use statistical evidence to be able t o determine the progress to define the objectives in the organisation (Hoverstadt 2011, p67). Organizational performance is measured in terms indicators of efficiency, effectiveness, relevance to shareholders and the financial viability. These indicators are used by the human resources to evaluate the performance of the employees and the organization (Ed Barrows 2010, p98). Performance management is composed of two types of the management system. One of them is where an analyst views the performance of a firm as a whole, and will monitor the effectiveness of how managers and other executives achieve their set goals. On the other hand, performance management may be viewed as a system to monitor the performance of employees and how they help them in achieving their goals; hence ensuring that organizations perform much better. This type of management will differ from the objectives to how they will be applied. This will include; planning of the work to be done, the setting of the goals , and offering feedback to the employees about their performance (Hoverstadt 2011, p45). Employees work best when the work they are given is planned well, delegated well, and objectives of the work are clearly set. This will motivate employees to do their job and be able to achieve the goals without any problem. When the executives plan and set goals and objectives better in performance management, it creates a predictable system for better performance. By doing this, the employees assume their consequences of work performance and bear the responsibility too. Giving results back to the employees about their work is done on an annual review. This enables employees to change their past mistakes and ensure that they will perform better in the next year. Employees get to benefit from the consistent models of performance evaluation; this is because the employees will get enough time to address their issues. Performance management also provides employees with opportunities to grow themsel ves in their fields of interest. This means that employees will be given opportunities to perform their duties better and at the same time pair the unskilled employees with the more skilled employees. This model enables employees to perfect their skills and hence improve the performance of the organizations (Ed Barrows 2010,

Advantages and Disadvantages of Drugs Usage Essay Example for Free

Advantages and Disadvantages of Drugs Usage Essay : Advantages and Disadvantages of Drugs Usage Good morning to our teacher Pn. Devi and our friends. I am chien yen. I am Wan Yi. We are honoured to give a talk on advantages and disadvantages of drug usage. I probably don’t have to work very hard to get people to see that there really is no right time, place, or situation to try drugs, but I’m going to try anyway. There are several different reasons why teens might turn to drugs . One of them could be that they just want to be social and have fun. Usually, it is in a social setting that teens first try drugs. The â€Å"teen years† is when most adolescents do their experimenting with different things, and this could also be another reason why they might try drugs. They also might be mislead to think that addiction couldn’t happen to them, so â€Å"I can stop whenever I want† is often an excuse. Another reason could be that they want to seem mature, or cool. Many teens think that using drugs make them seem more grown-up and confident, but in fact, it shows just how immature they are. By giving into peer pressure and not being able to think for themselves, the only thing they prove is that they are naive. Everybody knows that parents are big influence in child’s life, but sometimes children might feel pressured or controlled by their parents and decide to rebel against them. Using drugs is a very common way of rebelling because the parents might not even know that it’s going on right under their noses. School, friends, relationships, and many other things could also be adding to the stress of teens today, and the pressure alone might drive them to drugs because they think it’s comforting. The truth is that it adds more stress to their lives in the long run. There are many dangers that come along with drug use. The greatest danger is death, but there are several other risks and consequences that should definitely be taken into consideration. Drugs can cause addiction, brain damage, liver failure, and many other serious health problems. The use of drugs can also impact the user’s family and friends. They can be dragged into the user’s problem and get addicted themselves. The user could also end up being abandoned by his or her family and friends because nobody really wants to be around drug users. There are so many benefits that come along with a drug free lifestyle. I think most people probably already know the major benefit†¦ life. I believe life is too short to waste time worrying about the consequences of doing drugs. Teenagers are stressed enough these days with work, school, family, and friends that we don’t need any additional reasons to be stressed or feel overwhelmed. Life is hard sometimes, but the misconception that drugs will make it better just makes it that much worse. Another benefit of drug free lifestyle is having a completely functional brain. School is hard for many teenagers, and they have to struggle to get by, so add drugs into the equation, and it makes school that much harder. Then what happens if the person decides that school is too hard? They give up, and live the rest of their life poor because they never finished high school and can’t get a decent job. There’s also the fact that there would be a lost less money spent on medical bills. Tobacco causes cancer, alcohol causes liver problem, inhalants cause brain damage, and all of the other drugs have their health issues also. If they were no drugs, there wouldn’t be as many health problems. If there weren’t as many health problems, there wouldn’t be as much money spent at the hospital. If there was less money spent at the hospital, the doctors might be mad, but the person’s life would be so much better overall! Seriously, not doing drugs can prevent a number of health problems. Overall, there is never a right time, place, or situation to use drugs. Also, almost all the reasons that teens might use drugs are just misconceptions. This doesn’t only go got teenagers. Many adults use drugs , and the same risks apply to adult drug users.

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