Costco Wholesale in 2012 Essay Example for Free

Costco Wholesale in 2012 Essay Costco is one of United States’ largest retailers, serving over 3600 variants of convenience products at excellent quality with competent prices. Founded in 1983, Costco quickly expanded in its operations to over 598 stores worldwide. One of the unique selling propositions of Costco is the fact that they offer very low prices as compared to their competitors without requiring to compromise quality. This paper will analyze Costco’s key success factors in terms of its strategic management. Business Model Costco’s business model is simple and straightforward; they offer high quality products at affordable rates. The centerpiece of Costco’s model entails high sales volume and rapid inventory turnover. Costco enjoys high inventory turnover which means that they don’t need to stock a particular good for long period of time. Also, before they need to pay the suppliers, they are able to sell it. Which means, they are able to pay suppliers with the cash derived from sales, leading to low working capital. This shows significance in financial health and good financial management. This kind of business model is appealing for several reasons; low prices can generate high number of customers, indicates healthy operations, encourage rapid turnover, decrease warehouse costs and many more. However, in order to keep up with this business model, Costco needs to continually maintain overhead costs, which will be discussed further into the paper. Strategy Costco’s low pricing strategy highly depends upon several factors. In terms of pricing, they offer bargain products at low prices. Their earnings highly come from membership fees, over which members can join in an annual subscription and enjoy promotional rates as members. Even though Costco enjoys less profit margins, they have high number of annual members and earn their profit by membership revenues. In terms of product, their Kirkland Signature is also of good quality as a representation of their brand. They are also ready to experience loss of sales by customers who do not want to purchase in larger quantities. Treasure-hunt merchandising is also a smart  method to continually renew their product lines to encourage members to purchase the item right away in fear of not having them available at the next visit. Jim Sinegal and Core Values as CEO Jim Sinegal shows good examples of leadership as a CEO. He conducts an open-door policy which makes him accessible to staff, thereby increasing employee motivation. Jim also conducts regular store visits as opposed to working at a desk, which shows his willingness to step down to the field to help improve the store. The business environment is made to be causal and unpretentious, so employees feel sense of belonging and are often committed to the organization, in benefit of themselves and the company. Low employee turnover shows the compatibility of the employees and the company, which means that the corporate culture can be maintained or enhanced. Financial Perspective We have come to understand that Costco achieves much of their revenue from membership renewals. Observing the financial data, we see that Costco’s membership fees if four times over from 2000 up to 2011. This signifies their proficiency in making member packages attractive. Their actions in prioritizing members have been successful as we see that members are continually signing up. Therefore, membership is encouraged to be sustained. However, we see that sales also increase significantly over the years, almost 3 times over. Therefore, we can conclude that despite having less marketing activities, Costco is able to attract customers by emphasizing on price efficiency. Their working capital ration (current assets minus current liabilities) is kept at a low level due to high inventory turnover. Competitive Advantage over Competitors A key competitive advantage owned by Costco over its competitors is, without a doubt, their low prices. Although they do not invest much in store layout, store ambiance, labor and marketing, they have low overhead costs which contributes to being able to keep prices low. Also, they offer a wide array of product categories from food products to gasoline, although within a product category, they offer less brands than usual retailers (Llopis, 2011). Strategic Weaknesses in Comparison to Competitors The fact that Costco carries only 3600 selections of merchandises could potentially be a major flaw in their strategy. Generally, other stores carry over 10.000 selections. Customers may initially feel the thrill of shopping at cheap prices at Costco but could eventually dislike the lack of choices in terms of brands and may choose to shop at stores with larger varieties. Secondly, Costco spend less for advertisements and rely on word-of-mouth and certain campaigns. However, their competitors, Sam’s Club and BJ’s Wholesale Club spend much more on advertisements. Presently, Costco’s financial conditions show steady results in sales but the power of marketing is such that customers may choose to shop elsewhere for various reasons. It is also important to note that customers’ switching costs (from Costco to another) is relatively low. Compensations Policies Costco offers attractive compensations as compared to their competitors. The employee benefits covers all aspects such as fixed wages, health benefits, medicinal discounts, eligibility for company profits, counseling services and many more. At a quick glance, we notice that Costco spends much on compensation, despite the comparatively lower amount of labor, due to the vast varieties of compensations. In my opinion, it shows good corporate culture to take care of employees. In most companies, CEOs are the first ones to be rewarded with sky-high numbers. It is different in the case with Costco, where CEOs are paid enough without failing to reward employees appropriately. Conclusions and Recommendations Although from a management and operation point of view, Costco is doing everything to a tee, there are several recommendations provided to further improve its performance: Increase product lines to above 3600 in order to compete in terms of product choice with their competitors, especially after understanding that customers’ switching costs are low. Costco already has a big advantage in terms of prices and can do wonders when they also hold product advantage. Prepare some funds for marketing. Branding and brand awareness are two of the most important factors for warehouses to remain sustainable in the market to be seen as reliant. With more marketing, Costco can retain top-of-mind positioning as the â€Å"place to shop† in customers’ mindsets. Maintain membership fees at a fair rate. Currently, Costco’s membership fees are higher compared to their competitors. They can maintain their fees at this level only if they can provide more attractive member benefits to their customers compared to their competitors. Reference: Llopis, G. (2011, January 31). The Costco Factor: To Win The Business Game, You Need to Change How You Think. Retrieved February 20, 2015, from Forbes: http://www.forbes.com/sites/glennllopis/2011/01/31/the-costco-factor-to-win-the-business-game-you-need-to-change-how-you-think/

Theories of Merger and Takeover Waves

Theories of Merger and Takeover Waves Merger Wave The American economy experienced two great takeover waves in the postwar period, first in the 1960s and the second in the 1980s. Both waves had a deep affect on the structure of corporate America. The main trend in the 60s was diversification and conglomeration. In contrast the 1980s takeover reversed the previous process and brought US corporations back to specialization. In this respects, the last thirty years were a roundtrip for corporate America. This paper is an overview of the salient features of the two takeover waves. 1.1 The 1960s Conglomerate Merger Wave The merger wave of the 1960s was the major since the turn of the century (Stigler, 1968). A typical characteristic of the 1960s transaction was a friendly acquisition, frequently for stock, of a smaller private or public firm which was outside the acquiring firms main line of business. During this period unrelated diversification was widespread among the large companies. Rumelt (1974) has reported that the fraction of single business companies in the Fortune 500 decreased from 22.8% in 1959 to 14.8% in 1969. Further, the portion of conglomerates with no dominant businesses increased to 18.7% from 7.3%. There was also a considerable move to diversification among companies that retained their core business. The driving force behind the 1960s wave was high valuations of company stocks and large corporate cash flows. However the management was unwilling to pay out the high cash flows as dividends, and on the other hand able to issue equity at attractive terms therefore, turned their atte ntion to acquisitions (Donaldsoni. 1984).Dividends were considered as a complete waste, and acquisitions as a very attractive way to conserve corporate wealth. There are two sets of arguments used to explain why companies diversify. The first set argues that firms diversify to increase shareholder wealth. A number of authors have discussed different aspects of diversification that can potentially raise shareholder wealth. Williamson (1970), suggest that firms diversify to beat imperfections in external capital markets. Through diversification, managers create internal capital markets, which are less prone to asymmetric information problems. Lewellen (1971), argues that conglomerates can carry on higher levels of debt since corporate diversification reduces earnings variability. if conglomerate firms are more valuable than companies operating in a single industry If the tax shields of debt increase. Shleifer and Vishny (1992), state that conglomerates may have a higher debt capacity since they can sell assets in those industries that suffer the least from liquidity problems in bad states of the world. Finally, Teece (1980) argues that divers ification leads to economics of scale. The second set of arguments states diversification as a product of the agency problems between shareholder and managers. Amihud and Lev (1981) argue that managers follow a diversification strategy to protect the value of their human capital. However, Jensen (1986) suggests that companies diversify to increase the private benefits of managers. Similarly, Shleifer and Vishny (1989) suggest that managers diversify because they are better at managing assets in other industries. Thus, diversifying will make skills more indispensable to the firm. 1.2 The 1980s Merger Wave Form a longer historical perspective, Golbe and White (1988) presented time series evidence of U.S. takeover activity from the late 1800s to the mid-1980s. Their findings have suggested that takeover activity above 2 to 3 percent of GDP is unusual. However, the greatest level of merger activity occurred around 1980s, at roughly 10 percent of GNP. By this measure, takeover activity in the 1980s is historically high. The size of the average target in the 1980s had increased extremely from the modest level of the 60s. By 1989 28%, of Fortune 500 companies were acquired and many transactions, particularly the large ones, were hostile. Further the medium of exchange in takeovers was cash rather than stock, they were characterized by heavy use of leverage. Firms were purchased by other firms by leveraged takeovers by borrowing rather than by issuing new stock or using solely cash on hand. Other firms restructured themselves, borrowing to repurchase their own shares. The 80s was also characterized by latest forms of control changes, which included bustup takeovers. Bustup takeovers involved the sell off of a substantial fraction of the targets assets to other firms. (Bhagat, Shleifer, and Vishny, 1990; Kaplan, 1997). 2 Merger Motives The following sections will explain the motive behind the two merger waves. 2.1 Managerial Motives Agency theory predicts that unless managers are strictly monitored by large block of shareholders they will certainly act out of self-interest. Amihud and Lev (1981) have provided proof that unless closely monitored by large block shareholders managers will attempt to reduce their employment risk through diversification. Lane et al.(1998) in this study have reexamined Amihud and Lev findings about agency theory Using a sample of 309 US firms that diversified between 1962 1970, from the Federal Trade Commission (FTC) Statistical Report on Mergers and Acquisitions (1976). This study falls in the third broad category[1] of agency studies. However this analysis only examines the strategic behaviors of managers when they are not under siege and are also not in a situation, in which their interests are clearly in conflict with those of shareholders. Specifically, firms without large block shareholders are expected to engage in more unrelated acquisitions and show higher levels of diversif ication than firms with large block shareholders (Jensen and Meckling (1976)) Using Multiple Regression, the study found no evidence for the standard agency theory predictions that management controlled firms are linked with strategically lower levels of diversification and lower levels of returns than are firms with large block shareholders. It was found that Ownership structure and diversification are largely independent constructs. Thus, managers may be are worthy of more trust and autonomy than what the agency theorists have prearranged for them. Rather than seeking to restrict managerial discretion through extreme oversight, a more balanced approach by principals is needed. Some safeguards are essential as conflicts of interests between managers and shareholders do arise in certain situations, therefore, the assumption that such conflicts dominate the day-to-day management is not realistic. Matsusaka,(1993) takes a deep look at the astonishingly high pre-merger profit rates of target companies during the conglomerate merger wave. The main goal of the study is to assess how important was managerial discipline as a takeover motive. The analysis uses an extensive data set of 806 manufacturing sector acquisitions that took place in 1968, 1971 and 1974. The sample was collected from New York Stock Exchange listing statements. Sample of 609 observations was taken from 1968, 117 from 1971, and 129 from 1974. The results did not differ in any vital way by year, so observations from the three periods were pooled. Because antitrust enforcement was strict in the late 1960s and early 1970s, it was safely assumed that the sample mergers were not motivated to increase market power Ravenscraft and Scherer (1987). This allowed the investigation to focus on a narrow set of merger motives. Profitability[2] throughout the study was measured as a rate of return on assets. The theory identified two basic characteristics of mergers motivated to discipline target management. First it wsa observed that the target was underperforming its industry and the only reason to discipline the managers was that they were not maximizing profit. It could be because of incompetence that they were pursuing their own objectives. The second, the target company had publicly traded stock and the only posibility to discipline management was by electing an appropriate board of directors. In this situation a takeover was necessary to effect a change as the diffused stock ownership resulted in free-rider problems. Owners can remove bad managers of privately owned firms, as they are closely held. The problem occurs in large publicly traded firms with diffuse ownership. The statistical results revealed that both public and private targets had extremely high profit rates prior to acquisition compared to their size classes and industries. Therefore, takeovers were not motivated to discipline target managers during the conglomerate merger wave. The second finding of the study is that public targets were not as particularly profitable as private targets. It was also found that the largest public targets had the lowest profit rates. A credible interpretation of the evidence is that managerial discipline may have been significant for just a small set of acquisitions that involved large publicly-traded targets. Matsusaka (1993) leaves the bigger question unexplained. Why buyers time and again sought high profit targets during the merger wave. There is a simple clarification, that high quality assets are generally favored to low quality assets, as high quality assets are more expensive. In addition to explaining why firms seek high-profit targets, an asset complementarity theory implies that firms tend to divest their low-profit divisions Palmer and Barber (2001) have determined the factors that led large firms to participate in the1960s wave. The theoretical approach, of the study conceptualizes corporate elites (managers and directors) as actors. However it is assumed that these actors have interests which have arisen from positions held in organizational and institutional environments, and from multidimensional social class structure. Often Acquisitions are deviant and innovative ways by which corporate these elites can increase their status and wealth. Corporate elite diversify to the extent that their place in the class structure provides them with the capacity and interest to augment their wealth and status in this way. The authors have examined how the firms top directors and managers class position influenced its tendency to employ diversification in the 1 960s. More specifically the following arguments on social status[3] have been tested empirically. Firstly, Firms run by top managers who attended an exclusi ve secondary school or whose family was listed in a metropolitan social register were less likely than other firms to complete diversifying acquisitions in the 1960s. Secondly, Firms run by top managers who were Jewish were more likely than other firms to complete diversifying acquisitions in the 1 960s. Thirdly, Firms run by top managers situated in the South or west were more likely than other firms to complete diversifying acquisitions in the 1960s. The study selected a sample of the largest 461 publicly traded U.S. industrial corporations from the Federal Trade Commissions Statistical Report on Mergers and Acquisitions (1976), between January 1, 1963, and December 31, 1968. This particular time period was chosen because as the merger wave took off at the end of 1962 and crested in 1968. The results of the study were found through count and binary regression models. The findings of the study are consistent with that of Zeitlin (1974). According to him top managers capacities and interests are shaped by their social class position. Corporate elite members differ in their social class position. It is this variation that influences the behavior of the firms they command. The results indicate that social club memberships and upper-class background influenced a firms propensity to complete diversifying acquisitions in the 1960s. Network embeddedness and status influenced acquisition likelihood in opposite directions. Corporations that were run by chief executives who were central in social networks but marginal with respect to status were more likely than other firms to complete diversifying acquisitions in the 1960s. Therefore, individuals with high status had small interest in adopting innovation. Corporate elites can inhibit the spread of an innovation when it threatens their interests. As observed by Hayes and Taussig (1967), One must never under estimate the moral suasion that the business and financial communities can bring to bear on those who engage in practices of which they disapprove. In this respect, the analysis provides additional evidence that intraclass conflict shaped corporate behavior during the 1960s merger wave. It seemed that in the 1960s, it was not concentrated ownership but, ownership in the hands of capitalist families that reduced a firms tendency to complete diversifying acquisitions. Further, as predicted by agency theory , concentrated ownership would lower acquisition rates most when in the hands of the CEO or other top managers, as opposed to outsiders, However it was found the reverse to be the case. Overall, there was very little support for any of the agency theory in the 1960s merger wave. Further, the results provided no support for several of the class-theory hypotheses. Firms headquartered in the South or West run or by Jewish CEOs did not have a greater propensity to complete diversifying acquisitions during the 1960s. The process of diversification of American firms reached its height during the merger wave of the late 1960s. Matsusaka(1993)evaluated the 1960s merger wave. In an attempt to do so the author has proposed a number of explanations that drove managers to diversify during the conglomerate merger wave. There are reasons to suspect that managers may have pursued a diversification strategy even when it impaired the shareholder. They may have entered new lines of business to protect their organization-specific human capital or establish themselves. On the other hand, they may have been pursuing size as an end and because of strict antitrust opposition to horizontal and vertical mergers they had to expand by buying into unrelated industries. The study has evaluated whether manager were diversifying for their own advantage or in the interest of shareholders returns .To do so the author inspected the effect of diversification on the value of his firms equity. Thus, if the value of a firm declined upon announcement of an acquisition, then its management was not acting to maximize shareholder wealth. One explanation for conglomeration stated in the study, stems from Managerial-Discipline theory. Firstly, Firms were taken over to discipline or replace their bad managers ie â€Å"Managerial-Discipline. Secondly, Managerial Synergy theory states that the bidder management wanted to work with target management, not replace it. In this case the acquirer management believed that the target management would complement to their skills. Therefore firm that had Managerial-discipline problem were likely to have had low profits, and on the other hand managerial-synergy targets were likely to have had high profits. Another explanation is that buyers were motivated by earnings-per- share (EPS) manipulation. This explanation states that conglomerates have a high price-earnings ratio (P/E). [4] Therefore the bidder management was bootstrapping, by buying firms with low P/Es. Construction of the dataset began with a list of mergers from the sample of 1968, 1971 and 1974 .The sample was identified from the takeovers from New York Stock Exchange listing statements and the results were presented through regression. The announcement-period return to the bidders shareholders was measured through dollar return, [5] .Regression of the dollar-return measure found that the return to a diversification acquisition was significantly positive. On average their shareholders enjoyed an $11.0 million value increase in value when bidders made a diversification acquisition,. This rejects the hypothesis that diversification hurt shareholders and is thus inconsistent with the idea that diversification was driven by managerial objectives. On the other hand, bidders who made related acquisitions cost their shareholders $6.4 million on average. Thus, the hypothesis that the markets reaction was the same to related acquisitions and diversification is rejected, suggesting that there was a market premium to diversification. Using descriptive statistical summaries it was found that both diversifying and horizontal buyers preferred to buy firms that were profitable. For both type of acquisitions the average operating profit was more than 5% in excess of the targets industry average. Therefore fame of high-profit targets argues against the importance of a managerial-discipline motive for both types of acquisition and in favor of a managerial-synergy motive. This is because Managerial-discipline takeovers should have been directed at low-profit firms, whose profitability needed improved. The motive was Managerial-synergy as the targets were takeovers were high- profit firms, this is because synergy-motivated managers were looking for good partners Matsusaka(1993). Another factor linked to the managerial theories is whether or not the targets management was retained.Top management is said to have been retained if it meet the following criteria. Firstly It was reported in the Wall Street Journal that the acquired firms management would continue to operate under the new management. Secondly, it was indicated in the buyers listing statement that the targets management would be retained. Lastly, when the merger took place at least one of the top three executives of the target firm was still managing the firm three years later from when the merger took place. According to the above mentioned definitions, 61.8% of the managers in the sample were retained and only 3.5% of the acquisitions fell in the Replaced category. The main finding is that buyers earned significantly positive announcement-period returns during the conglomerate merger wave when they made diversifying acquisitions. The hypothesis that conglomerates were driven by empire building or some other managerial objective can be rejected because such explanations imply value decreases to unrelated acquisitions. Another explanation of the conglomerate merger wave is that mergers were driven by an accounting trick rather than expected efficiencies. Therefore, investors watched EPS; when the EPS went up they bid up the price of the stock. According to this argument, Conglomerates, tended to buy companies with lower P/E ratios than their own in order to increase their EPS and boost their stock prices. There was no evidence that firms earned positive returns which inflated EPS in this way. The study indicated that early conglomerators earned significantly positive returns simply because they were first. They may have gained some rents to organizational innovation. Possibly the men who built the first conglomerates had a unique talent for diversification, which the market rewarded. Hubbard, Palia (1999), have examined the likelihood that internal capital markets were formed to alleviate the information costs associated with the less well-developed external capital markets of the time; that is, whether they were expected to create value by the external capital markets in the 1960s.In this paper, the authors have inspected a form of cross-subsidization that occurs when a financially unconstrained bidding firm takes over a financially constrained target firm and as a result forms an internal capital market.The study examined whether the external capital markets expected that the formation of internal capital markets in the 1960s were value-maximizing for the bidding firm. However, existing research has argued that internal capital markets can be value-enhancing. As argued by Geneen(1997), the financing and budgeting expertise that a firm possesses is not necessarily related to its degree of diversification. Accordingly, the internal capital market hypothesis for all acquisitions is tested. The study also tests the bootstrapping explanation for conglomeration in the 1960s, which takes place when firms with a high price-earnings ratio (P/E) took over low P/E target firms and fooled the stock market with an increased combined earnings-per-share. In the 1960s, external capital markets were less developed in terms of company-specific information production than in later years. The authors have classified company-specific information into two general categories. Firstly, production information; and secondly, financing and budgeting expertise. However, in this study information-intensive activities were introduced. This was because; it assists the manager to internally allocate capital across divisions of a diversified firm. It was suggested that diversified firms were perceived by the external capital markets to have an informational advantage, because external capital markets were less well developed at that time. Comparing it to the current decade, there was less access by the public to computers, data- bases, analyst reports, and other sources of company-specific information. Not only this there was less large institutional money managers and the market for risky debt was illiquid. The authors selected a sample of 392 acquisitions that occurred during the period from 1961 through 1970. Diversifying acquisitions were defined as those in which the bidder and target do not share any two- digit SIC code Matsusaka(1993), and related acquisitions as those in which they do share a two-digit SIC code. Further the Wall Street Journal was used for announcement date as the event date. Four measures of abnormal returns to the conglomerate bidding firm were calculated. These measures are as follows. Firstly, the usual percentage returns or the cumulative abnormal returns from five days before to five days after the event date. Secondly the percentage returns until date of last revision or the cumulative abnormal returns from five days before to five days after the date of the last revision (Lang et al. (1991)). Thirdly, the dollar returns or the percentage return times the market value of the bidder six days before the announcement (Malatesta(1983); Matsusaka(1993)). Lastly , the investment return defined as the change in the value of the bidder divided by the purchase price (Morck et al. (1990)). Tobins r ratio[6] is used as a proxy for a firms capital market opportunities. The evidence from these measures is mixed. Positive abnormal returns for all four measures were shown for related acquisitions. On the other hand, two of the four measures had shown statically significant positive abnormal returns for diversifying acquisitions in. Not only that diversifying acquisitions do not significantly earn less than related acquisitions in two of the four measures. Thus, evidence suggests, the capital markets believed acquisitions to be generally good for bidder shareholders during the 1960s. More significantly, it was found that when financially unconstrained buyers acquired constrained target firms, highest bidder returns were earned. Further, bidders generally retain target management, signifying that management may have provided company- specific operational information and the bidder on his part also provided capital budgeting expertise. Therefore, external capital markets expected information benefits from the formation of the internal capital markets. The study found no evidence in support of the bootstrapping hypothesis, as the coefficient on the dummy variable[7] was not statistically different from zero. This result is consistent with Matsusaka, (1993), who also finds no evidence for bootstrapping.Therefore, firms merged to form their own internal capital markets as there was a deficiency of well-developed external capital markets in the 1960s. Some firms apparently had an information advantage over the external capital markets and were expected to produce value in an internal capital market. In the 1960s diversified acquisitions were rewarded by financial markets, the informational advantage that acquiring firms appeared to possess was likely to be in the capital budgeting, allocation process and operational aspects of each division. Bidder firms generally retained the target management as it would facilitate them running the operational part of each target firm. The Motives discussed in the above mentioned articles are appealing; however evidence from the stock market suggests that shareholders preferred their firms to diversify. Using a data set from the 60s and early 70s, Matsusaka (1993) reported that, when the company announced an unrelated acquisition, the stock price of the bidder increased on average of $8 million. However, on the announcement of a related acquisition, the bidding firms stock price fell by $4 million. The difference between the two returns is quite significant. Thus it appears that investors fully believed that unrelated acquisitions benefited their firms relative to the alternatives. Thus the managers just did what the stock market told them to do that is to diversify. Evidence from 1980s stock market suggested that shareholders, again, liked what was happening. Shleifer, and Vishny (1992) found that in the 1980s, stock prices of the bidding firms rose when they bought other firms in the same industry, and fell with unrelated diversification. It is clear that the market disapproved unrelated diversification. Therefore it does not astonish that, in light of such market reception, managers stopped diversifying and did what the stock market directed them to do. 2.2 Legal Motives Matsusaka (1996) investigated whether the antitrust enforcement of the 1960s led firms to take on the diversification goal, by preventing them from expanding within their own core industries. If correct, diversification should have occurred more less frequently when small firms merged than when large firms merged since small mergers were less likely to have attracted antitrust attention. Further the author examined the diversification patterns in the United Kingdom, Canada, Germany, and France in the late 1960s and early 1970s, where none of these countries had legal restrictions on horizontal growth similar to those in the Unites States. The US Clayton Antitrust Act was the antitrust legislation in the postwar period (1950 Celler-Kefauver amendment to Section 7). The act, prohibited mergers that would substantially lessen competition, or tend to create a monopoly. This new law was used by the antitrust authorities and the courts to limit the number of mergers between vertically related and firms in the same lines of business. The strictness of the antitrust environment in 1968 is illustrated by the observation that in the earlier 12 years, all antitrust cases that reached the Supreme Court had been resolved in support of the government. The study indicates the following two implications. Firstly, large horizontal mergers were more liable to have been challenged on antitrust grounds than small horizontal mergers. Secondly mergers between unrelated firms were unlikely to have been blocked, regardless of size. Firms diversified in 1960s, since antitrust authorities prevented them from expanding in their home industries. Later when antitrust policy became less rigid in the 1980s, firms expanded horizontally, leading them to refocus on their core business. Stigler (1966) was perhaps the first to present evidence on the antitrust hypothesis, concluding that, the 1950 Merger Act has had a strongly adverse effect on horizontal mergers by large companies. The author selected a sample of 549 mergers (that took place in 1968) from the New York Stock Exchange. Results of the study were reported through Logit regressions .It was found that bidders were as likely to have entered new industries when they made small acquisitions as when they made large acquisitions, and small buyers were as likely to have diversified as large buyers. Further the total number of diversification acquisitions concerning small companies was high.Though, according to the antitrust hypothesis; diversification should have been widespread primarily in large mergers where same industry acquisitions were prohibited by tough antitrust enforcement. Secondly assembled international evidence indicated that diversification took place in many industrialized nations in the 1960s and 1970s, although restrictions against horizontal combinations were unique to the United States. Yet, most other industrialized Western nations[8] experienced diversification merger waves and general movements toward diversification in their largest companies (Chandler (1991)).Thus most of the evidence, is not consistent with the antitrust hypothesis, signifying that other explanations for corporate diversification should be emphasized not the anti trust hypothesis. Scholes and Wolfson (1990) state, that the changes in U.S. tax laws[9] in the 1980s had obvious affect on the desirability of mergers and acquisitions. However such transactions were not only motivated by tax factors but also non tax factors[10]. Tax laws can have number of affects on mergers and acquisitions , which can include the following capital losses, presence of tax-attribute carry forwards such as net operating losses , investment tax credits, and foreign tax credits, among others, that might be cashed in more quickly and more fully by way of a merger; the desire to step up the tax basis of assets for depreciation purposes to their fair market value; the desire to sell assets to permit a change in the depreciation schedule to one that is more highly accelerated. The authors in this study have examined the effect of changes in tax laws passed in 1980s on merger and acquisition activity in the United States. The authors selected the annual values of mergers and acquisitions from 1968 through 1987 in nominal dollars. The data source for nominal values was W. T. Grimm and Company for 1968-85 and Mergers Acquisitions (1987-88, rev. quarterly) for 1986 and 1987. Using time series analysis it was found that the dollar volume of merger activity between 1980-1981 increased from $44.35 billion to $82.62 billion (86%) in nominal terms. The percentage increase was approximately twice as large as the next largest percentage increase in annual merger and acquisition activity over the 1970-86 periods. There was spectacular increase in merger activity that began with the passage of the Economic Recovery Tax Act of 1981, however this was not the only merger wave that occurred in that time frame. Unusual merger activity was also witnessed in the 1960s. The termination of 1960s wave was accompanied by quite a few regulatory events that depressed such transactions. Firstly, the Williams Amendments had en larged the cost and difficulty of effecting tender offers. Secondly the issuance of Accounting Principles Board Opinions 16 and 17, forced many acquiring firms to boost depreciation expense, goodwill amortization and cost of goods sold. Thirdly the Tax Reform Act of 1969, made transferability of tax attributes (net-operating-loss carry forwards) more restrained. Therefore there was a sudden decline in merger activity from the peak in 1968. Relative to the tax benefits when the non tax benefits of the transaction were small, current management were the most efficient purchasers, as they had an advantage along the hidden information dimension. Therefore 1981 act had increased the incidence of cases in which non tax benefits were less than the common tax benefits of mergers and acquisitions. As a result, there was an increase in the number of transactions involving management buyouts. The annual dollar value of unit management buyouts between 1978-80 increased by a factor of 3, and by a factor in excess of 20 for the period 1981-86. The antitrust proposition mentioned above is appealing as one of the most important reason for diversification, during the 60s and 70s, which simply disallowed mergers of firms in the same industry, regardless of the effects of these mergers o Theories of Merger and Takeover Waves Theories of Merger and Takeover Waves Merger Wave The American economy experienced two great takeover waves in the postwar period, first in the 1960s and the second in the 1980s. Both waves had a deep affect on the structure of corporate America. The main trend in the 60s was diversification and conglomeration. In contrast the 1980s takeover reversed the previous process and brought US corporations back to specialization. In this respects, the last thirty years were a roundtrip for corporate America. This paper is an overview of the salient features of the two takeover waves. 1.1 The 1960s Conglomerate Merger Wave The merger wave of the 1960s was the major since the turn of the century (Stigler, 1968). A typical characteristic of the 1960s transaction was a friendly acquisition, frequently for stock, of a smaller private or public firm which was outside the acquiring firms main line of business. During this period unrelated diversification was widespread among the large companies. Rumelt (1974) has reported that the fraction of single business companies in the Fortune 500 decreased from 22.8% in 1959 to 14.8% in 1969. Further, the portion of conglomerates with no dominant businesses increased to 18.7% from 7.3%. There was also a considerable move to diversification among companies that retained their core business. The driving force behind the 1960s wave was high valuations of company stocks and large corporate cash flows. However the management was unwilling to pay out the high cash flows as dividends, and on the other hand able to issue equity at attractive terms therefore, turned their atte ntion to acquisitions (Donaldsoni. 1984).Dividends were considered as a complete waste, and acquisitions as a very attractive way to conserve corporate wealth. There are two sets of arguments used to explain why companies diversify. The first set argues that firms diversify to increase shareholder wealth. A number of authors have discussed different aspects of diversification that can potentially raise shareholder wealth. Williamson (1970), suggest that firms diversify to beat imperfections in external capital markets. Through diversification, managers create internal capital markets, which are less prone to asymmetric information problems. Lewellen (1971), argues that conglomerates can carry on higher levels of debt since corporate diversification reduces earnings variability. if conglomerate firms are more valuable than companies operating in a single industry If the tax shields of debt increase. Shleifer and Vishny (1992), state that conglomerates may have a higher debt capacity since they can sell assets in those industries that suffer the least from liquidity problems in bad states of the world. Finally, Teece (1980) argues that divers ification leads to economics of scale. The second set of arguments states diversification as a product of the agency problems between shareholder and managers. Amihud and Lev (1981) argue that managers follow a diversification strategy to protect the value of their human capital. However, Jensen (1986) suggests that companies diversify to increase the private benefits of managers. Similarly, Shleifer and Vishny (1989) suggest that managers diversify because they are better at managing assets in other industries. Thus, diversifying will make skills more indispensable to the firm. 1.2 The 1980s Merger Wave Form a longer historical perspective, Golbe and White (1988) presented time series evidence of U.S. takeover activity from the late 1800s to the mid-1980s. Their findings have suggested that takeover activity above 2 to 3 percent of GDP is unusual. However, the greatest level of merger activity occurred around 1980s, at roughly 10 percent of GNP. By this measure, takeover activity in the 1980s is historically high. The size of the average target in the 1980s had increased extremely from the modest level of the 60s. By 1989 28%, of Fortune 500 companies were acquired and many transactions, particularly the large ones, were hostile. Further the medium of exchange in takeovers was cash rather than stock, they were characterized by heavy use of leverage. Firms were purchased by other firms by leveraged takeovers by borrowing rather than by issuing new stock or using solely cash on hand. Other firms restructured themselves, borrowing to repurchase their own shares. The 80s was also characterized by latest forms of control changes, which included bustup takeovers. Bustup takeovers involved the sell off of a substantial fraction of the targets assets to other firms. (Bhagat, Shleifer, and Vishny, 1990; Kaplan, 1997). 2 Merger Motives The following sections will explain the motive behind the two merger waves. 2.1 Managerial Motives Agency theory predicts that unless managers are strictly monitored by large block of shareholders they will certainly act out of self-interest. Amihud and Lev (1981) have provided proof that unless closely monitored by large block shareholders managers will attempt to reduce their employment risk through diversification. Lane et al.(1998) in this study have reexamined Amihud and Lev findings about agency theory Using a sample of 309 US firms that diversified between 1962 1970, from the Federal Trade Commission (FTC) Statistical Report on Mergers and Acquisitions (1976). This study falls in the third broad category[1] of agency studies. However this analysis only examines the strategic behaviors of managers when they are not under siege and are also not in a situation, in which their interests are clearly in conflict with those of shareholders. Specifically, firms without large block shareholders are expected to engage in more unrelated acquisitions and show higher levels of diversif ication than firms with large block shareholders (Jensen and Meckling (1976)) Using Multiple Regression, the study found no evidence for the standard agency theory predictions that management controlled firms are linked with strategically lower levels of diversification and lower levels of returns than are firms with large block shareholders. It was found that Ownership structure and diversification are largely independent constructs. Thus, managers may be are worthy of more trust and autonomy than what the agency theorists have prearranged for them. Rather than seeking to restrict managerial discretion through extreme oversight, a more balanced approach by principals is needed. Some safeguards are essential as conflicts of interests between managers and shareholders do arise in certain situations, therefore, the assumption that such conflicts dominate the day-to-day management is not realistic. Matsusaka,(1993) takes a deep look at the astonishingly high pre-merger profit rates of target companies during the conglomerate merger wave. The main goal of the study is to assess how important was managerial discipline as a takeover motive. The analysis uses an extensive data set of 806 manufacturing sector acquisitions that took place in 1968, 1971 and 1974. The sample was collected from New York Stock Exchange listing statements. Sample of 609 observations was taken from 1968, 117 from 1971, and 129 from 1974. The results did not differ in any vital way by year, so observations from the three periods were pooled. Because antitrust enforcement was strict in the late 1960s and early 1970s, it was safely assumed that the sample mergers were not motivated to increase market power Ravenscraft and Scherer (1987). This allowed the investigation to focus on a narrow set of merger motives. Profitability[2] throughout the study was measured as a rate of return on assets. The theory identified two basic characteristics of mergers motivated to discipline target management. First it wsa observed that the target was underperforming its industry and the only reason to discipline the managers was that they were not maximizing profit. It could be because of incompetence that they were pursuing their own objectives. The second, the target company had publicly traded stock and the only posibility to discipline management was by electing an appropriate board of directors. In this situation a takeover was necessary to effect a change as the diffused stock ownership resulted in free-rider problems. Owners can remove bad managers of privately owned firms, as they are closely held. The problem occurs in large publicly traded firms with diffuse ownership. The statistical results revealed that both public and private targets had extremely high profit rates prior to acquisition compared to their size classes and industries. Therefore, takeovers were not motivated to discipline target managers during the conglomerate merger wave. The second finding of the study is that public targets were not as particularly profitable as private targets. It was also found that the largest public targets had the lowest profit rates. A credible interpretation of the evidence is that managerial discipline may have been significant for just a small set of acquisitions that involved large publicly-traded targets. Matsusaka (1993) leaves the bigger question unexplained. Why buyers time and again sought high profit targets during the merger wave. There is a simple clarification, that high quality assets are generally favored to low quality assets, as high quality assets are more expensive. In addition to explaining why firms seek high-profit targets, an asset complementarity theory implies that firms tend to divest their low-profit divisions Palmer and Barber (2001) have determined the factors that led large firms to participate in the1960s wave. The theoretical approach, of the study conceptualizes corporate elites (managers and directors) as actors. However it is assumed that these actors have interests which have arisen from positions held in organizational and institutional environments, and from multidimensional social class structure. Often Acquisitions are deviant and innovative ways by which corporate these elites can increase their status and wealth. Corporate elite diversify to the extent that their place in the class structure provides them with the capacity and interest to augment their wealth and status in this way. The authors have examined how the firms top directors and managers class position influenced its tendency to employ diversification in the 1 960s. More specifically the following arguments on social status[3] have been tested empirically. Firstly, Firms run by top managers who attended an exclusi ve secondary school or whose family was listed in a metropolitan social register were less likely than other firms to complete diversifying acquisitions in the 1960s. Secondly, Firms run by top managers who were Jewish were more likely than other firms to complete diversifying acquisitions in the 1 960s. Thirdly, Firms run by top managers situated in the South or west were more likely than other firms to complete diversifying acquisitions in the 1960s. The study selected a sample of the largest 461 publicly traded U.S. industrial corporations from the Federal Trade Commissions Statistical Report on Mergers and Acquisitions (1976), between January 1, 1963, and December 31, 1968. This particular time period was chosen because as the merger wave took off at the end of 1962 and crested in 1968. The results of the study were found through count and binary regression models. The findings of the study are consistent with that of Zeitlin (1974). According to him top managers capacities and interests are shaped by their social class position. Corporate elite members differ in their social class position. It is this variation that influences the behavior of the firms they command. The results indicate that social club memberships and upper-class background influenced a firms propensity to complete diversifying acquisitions in the 1960s. Network embeddedness and status influenced acquisition likelihood in opposite directions. Corporations that were run by chief executives who were central in social networks but marginal with respect to status were more likely than other firms to complete diversifying acquisitions in the 1960s. Therefore, individuals with high status had small interest in adopting innovation. Corporate elites can inhibit the spread of an innovation when it threatens their interests. As observed by Hayes and Taussig (1967), One must never under estimate the moral suasion that the business and financial communities can bring to bear on those who engage in practices of which they disapprove. In this respect, the analysis provides additional evidence that intraclass conflict shaped corporate behavior during the 1960s merger wave. It seemed that in the 1960s, it was not concentrated ownership but, ownership in the hands of capitalist families that reduced a firms tendency to complete diversifying acquisitions. Further, as predicted by agency theory , concentrated ownership would lower acquisition rates most when in the hands of the CEO or other top managers, as opposed to outsiders, However it was found the reverse to be the case. Overall, there was very little support for any of the agency theory in the 1960s merger wave. Further, the results provided no support for several of the class-theory hypotheses. Firms headquartered in the South or West run or by Jewish CEOs did not have a greater propensity to complete diversifying acquisitions during the 1960s. The process of diversification of American firms reached its height during the merger wave of the late 1960s. Matsusaka(1993)evaluated the 1960s merger wave. In an attempt to do so the author has proposed a number of explanations that drove managers to diversify during the conglomerate merger wave. There are reasons to suspect that managers may have pursued a diversification strategy even when it impaired the shareholder. They may have entered new lines of business to protect their organization-specific human capital or establish themselves. On the other hand, they may have been pursuing size as an end and because of strict antitrust opposition to horizontal and vertical mergers they had to expand by buying into unrelated industries. The study has evaluated whether manager were diversifying for their own advantage or in the interest of shareholders returns .To do so the author inspected the effect of diversification on the value of his firms equity. Thus, if the value of a firm declined upon announcement of an acquisition, then its management was not acting to maximize shareholder wealth. One explanation for conglomeration stated in the study, stems from Managerial-Discipline theory. Firstly, Firms were taken over to discipline or replace their bad managers ie â€Å"Managerial-Discipline. Secondly, Managerial Synergy theory states that the bidder management wanted to work with target management, not replace it. In this case the acquirer management believed that the target management would complement to their skills. Therefore firm that had Managerial-discipline problem were likely to have had low profits, and on the other hand managerial-synergy targets were likely to have had high profits. Another explanation is that buyers were motivated by earnings-per- share (EPS) manipulation. This explanation states that conglomerates have a high price-earnings ratio (P/E). [4] Therefore the bidder management was bootstrapping, by buying firms with low P/Es. Construction of the dataset began with a list of mergers from the sample of 1968, 1971 and 1974 .The sample was identified from the takeovers from New York Stock Exchange listing statements and the results were presented through regression. The announcement-period return to the bidders shareholders was measured through dollar return, [5] .Regression of the dollar-return measure found that the return to a diversification acquisition was significantly positive. On average their shareholders enjoyed an $11.0 million value increase in value when bidders made a diversification acquisition,. This rejects the hypothesis that diversification hurt shareholders and is thus inconsistent with the idea that diversification was driven by managerial objectives. On the other hand, bidders who made related acquisitions cost their shareholders $6.4 million on average. Thus, the hypothesis that the markets reaction was the same to related acquisitions and diversification is rejected, suggesting that there was a market premium to diversification. Using descriptive statistical summaries it was found that both diversifying and horizontal buyers preferred to buy firms that were profitable. For both type of acquisitions the average operating profit was more than 5% in excess of the targets industry average. Therefore fame of high-profit targets argues against the importance of a managerial-discipline motive for both types of acquisition and in favor of a managerial-synergy motive. This is because Managerial-discipline takeovers should have been directed at low-profit firms, whose profitability needed improved. The motive was Managerial-synergy as the targets were takeovers were high- profit firms, this is because synergy-motivated managers were looking for good partners Matsusaka(1993). Another factor linked to the managerial theories is whether or not the targets management was retained.Top management is said to have been retained if it meet the following criteria. Firstly It was reported in the Wall Street Journal that the acquired firms management would continue to operate under the new management. Secondly, it was indicated in the buyers listing statement that the targets management would be retained. Lastly, when the merger took place at least one of the top three executives of the target firm was still managing the firm three years later from when the merger took place. According to the above mentioned definitions, 61.8% of the managers in the sample were retained and only 3.5% of the acquisitions fell in the Replaced category. The main finding is that buyers earned significantly positive announcement-period returns during the conglomerate merger wave when they made diversifying acquisitions. The hypothesis that conglomerates were driven by empire building or some other managerial objective can be rejected because such explanations imply value decreases to unrelated acquisitions. Another explanation of the conglomerate merger wave is that mergers were driven by an accounting trick rather than expected efficiencies. Therefore, investors watched EPS; when the EPS went up they bid up the price of the stock. According to this argument, Conglomerates, tended to buy companies with lower P/E ratios than their own in order to increase their EPS and boost their stock prices. There was no evidence that firms earned positive returns which inflated EPS in this way. The study indicated that early conglomerators earned significantly positive returns simply because they were first. They may have gained some rents to organizational innovation. Possibly the men who built the first conglomerates had a unique talent for diversification, which the market rewarded. Hubbard, Palia (1999), have examined the likelihood that internal capital markets were formed to alleviate the information costs associated with the less well-developed external capital markets of the time; that is, whether they were expected to create value by the external capital markets in the 1960s.In this paper, the authors have inspected a form of cross-subsidization that occurs when a financially unconstrained bidding firm takes over a financially constrained target firm and as a result forms an internal capital market.The study examined whether the external capital markets expected that the formation of internal capital markets in the 1960s were value-maximizing for the bidding firm. However, existing research has argued that internal capital markets can be value-enhancing. As argued by Geneen(1997), the financing and budgeting expertise that a firm possesses is not necessarily related to its degree of diversification. Accordingly, the internal capital market hypothesis for all acquisitions is tested. The study also tests the bootstrapping explanation for conglomeration in the 1960s, which takes place when firms with a high price-earnings ratio (P/E) took over low P/E target firms and fooled the stock market with an increased combined earnings-per-share. In the 1960s, external capital markets were less developed in terms of company-specific information production than in later years. The authors have classified company-specific information into two general categories. Firstly, production information; and secondly, financing and budgeting expertise. However, in this study information-intensive activities were introduced. This was because; it assists the manager to internally allocate capital across divisions of a diversified firm. It was suggested that diversified firms were perceived by the external capital markets to have an informational advantage, because external capital markets were less well developed at that time. Comparing it to the current decade, there was less access by the public to computers, data- bases, analyst reports, and other sources of company-specific information. Not only this there was less large institutional money managers and the market for risky debt was illiquid. The authors selected a sample of 392 acquisitions that occurred during the period from 1961 through 1970. Diversifying acquisitions were defined as those in which the bidder and target do not share any two- digit SIC code Matsusaka(1993), and related acquisitions as those in which they do share a two-digit SIC code. Further the Wall Street Journal was used for announcement date as the event date. Four measures of abnormal returns to the conglomerate bidding firm were calculated. These measures are as follows. Firstly, the usual percentage returns or the cumulative abnormal returns from five days before to five days after the event date. Secondly the percentage returns until date of last revision or the cumulative abnormal returns from five days before to five days after the date of the last revision (Lang et al. (1991)). Thirdly, the dollar returns or the percentage return times the market value of the bidder six days before the announcement (Malatesta(1983); Matsusaka(1993)). Lastly , the investment return defined as the change in the value of the bidder divided by the purchase price (Morck et al. (1990)). Tobins r ratio[6] is used as a proxy for a firms capital market opportunities. The evidence from these measures is mixed. Positive abnormal returns for all four measures were shown for related acquisitions. On the other hand, two of the four measures had shown statically significant positive abnormal returns for diversifying acquisitions in. Not only that diversifying acquisitions do not significantly earn less than related acquisitions in two of the four measures. Thus, evidence suggests, the capital markets believed acquisitions to be generally good for bidder shareholders during the 1960s. More significantly, it was found that when financially unconstrained buyers acquired constrained target firms, highest bidder returns were earned. Further, bidders generally retain target management, signifying that management may have provided company- specific operational information and the bidder on his part also provided capital budgeting expertise. Therefore, external capital markets expected information benefits from the formation of the internal capital markets. The study found no evidence in support of the bootstrapping hypothesis, as the coefficient on the dummy variable[7] was not statistically different from zero. This result is consistent with Matsusaka, (1993), who also finds no evidence for bootstrapping.Therefore, firms merged to form their own internal capital markets as there was a deficiency of well-developed external capital markets in the 1960s. Some firms apparently had an information advantage over the external capital markets and were expected to produce value in an internal capital market. In the 1960s diversified acquisitions were rewarded by financial markets, the informational advantage that acquiring firms appeared to possess was likely to be in the capital budgeting, allocation process and operational aspects of each division. Bidder firms generally retained the target management as it would facilitate them running the operational part of each target firm. The Motives discussed in the above mentioned articles are appealing; however evidence from the stock market suggests that shareholders preferred their firms to diversify. Using a data set from the 60s and early 70s, Matsusaka (1993) reported that, when the company announced an unrelated acquisition, the stock price of the bidder increased on average of $8 million. However, on the announcement of a related acquisition, the bidding firms stock price fell by $4 million. The difference between the two returns is quite significant. Thus it appears that investors fully believed that unrelated acquisitions benefited their firms relative to the alternatives. Thus the managers just did what the stock market told them to do that is to diversify. Evidence from 1980s stock market suggested that shareholders, again, liked what was happening. Shleifer, and Vishny (1992) found that in the 1980s, stock prices of the bidding firms rose when they bought other firms in the same industry, and fell with unrelated diversification. It is clear that the market disapproved unrelated diversification. Therefore it does not astonish that, in light of such market reception, managers stopped diversifying and did what the stock market directed them to do. 2.2 Legal Motives Matsusaka (1996) investigated whether the antitrust enforcement of the 1960s led firms to take on the diversification goal, by preventing them from expanding within their own core industries. If correct, diversification should have occurred more less frequently when small firms merged than when large firms merged since small mergers were less likely to have attracted antitrust attention. Further the author examined the diversification patterns in the United Kingdom, Canada, Germany, and France in the late 1960s and early 1970s, where none of these countries had legal restrictions on horizontal growth similar to those in the Unites States. The US Clayton Antitrust Act was the antitrust legislation in the postwar period (1950 Celler-Kefauver amendment to Section 7). The act, prohibited mergers that would substantially lessen competition, or tend to create a monopoly. This new law was used by the antitrust authorities and the courts to limit the number of mergers between vertically related and firms in the same lines of business. The strictness of the antitrust environment in 1968 is illustrated by the observation that in the earlier 12 years, all antitrust cases that reached the Supreme Court had been resolved in support of the government. The study indicates the following two implications. Firstly, large horizontal mergers were more liable to have been challenged on antitrust grounds than small horizontal mergers. Secondly mergers between unrelated firms were unlikely to have been blocked, regardless of size. Firms diversified in 1960s, since antitrust authorities prevented them from expanding in their home industries. Later when antitrust policy became less rigid in the 1980s, firms expanded horizontally, leading them to refocus on their core business. Stigler (1966) was perhaps the first to present evidence on the antitrust hypothesis, concluding that, the 1950 Merger Act has had a strongly adverse effect on horizontal mergers by large companies. The author selected a sample of 549 mergers (that took place in 1968) from the New York Stock Exchange. Results of the study were reported through Logit regressions .It was found that bidders were as likely to have entered new industries when they made small acquisitions as when they made large acquisitions, and small buyers were as likely to have diversified as large buyers. Further the total number of diversification acquisitions concerning small companies was high.Though, according to the antitrust hypothesis; diversification should have been widespread primarily in large mergers where same industry acquisitions were prohibited by tough antitrust enforcement. Secondly assembled international evidence indicated that diversification took place in many industrialized nations in the 1960s and 1970s, although restrictions against horizontal combinations were unique to the United States. Yet, most other industrialized Western nations[8] experienced diversification merger waves and general movements toward diversification in their largest companies (Chandler (1991)).Thus most of the evidence, is not consistent with the antitrust hypothesis, signifying that other explanations for corporate diversification should be emphasized not the anti trust hypothesis. Scholes and Wolfson (1990) state, that the changes in U.S. tax laws[9] in the 1980s had obvious affect on the desirability of mergers and acquisitions. However such transactions were not only motivated by tax factors but also non tax factors[10]. Tax laws can have number of affects on mergers and acquisitions , which can include the following capital losses, presence of tax-attribute carry forwards such as net operating losses , investment tax credits, and foreign tax credits, among others, that might be cashed in more quickly and more fully by way of a merger; the desire to step up the tax basis of assets for depreciation purposes to their fair market value; the desire to sell assets to permit a change in the depreciation schedule to one that is more highly accelerated. The authors in this study have examined the effect of changes in tax laws passed in 1980s on merger and acquisition activity in the United States. The authors selected the annual values of mergers and acquisitions from 1968 through 1987 in nominal dollars. The data source for nominal values was W. T. Grimm and Company for 1968-85 and Mergers Acquisitions (1987-88, rev. quarterly) for 1986 and 1987. Using time series analysis it was found that the dollar volume of merger activity between 1980-1981 increased from $44.35 billion to $82.62 billion (86%) in nominal terms. The percentage increase was approximately twice as large as the next largest percentage increase in annual merger and acquisition activity over the 1970-86 periods. There was spectacular increase in merger activity that began with the passage of the Economic Recovery Tax Act of 1981, however this was not the only merger wave that occurred in that time frame. Unusual merger activity was also witnessed in the 1960s. The termination of 1960s wave was accompanied by quite a few regulatory events that depressed such transactions. Firstly, the Williams Amendments had en larged the cost and difficulty of effecting tender offers. Secondly the issuance of Accounting Principles Board Opinions 16 and 17, forced many acquiring firms to boost depreciation expense, goodwill amortization and cost of goods sold. Thirdly the Tax Reform Act of 1969, made transferability of tax attributes (net-operating-loss carry forwards) more restrained. Therefore there was a sudden decline in merger activity from the peak in 1968. Relative to the tax benefits when the non tax benefits of the transaction were small, current management were the most efficient purchasers, as they had an advantage along the hidden information dimension. Therefore 1981 act had increased the incidence of cases in which non tax benefits were less than the common tax benefits of mergers and acquisitions. As a result, there was an increase in the number of transactions involving management buyouts. The annual dollar value of unit management buyouts between 1978-80 increased by a factor of 3, and by a factor in excess of 20 for the period 1981-86. The antitrust proposition mentioned above is appealing as one of the most important reason for diversification, during the 60s and 70s, which simply disallowed mergers of firms in the same industry, regardless of the effects of these mergers o

Charater of Sydney Carton in A Tale of Two Cities :: Tale Two Cities Essays

Charater of Sydney Carton in A Tale of Two Cities    Sydney Carton, one of the main characters of the book, A Tale of Two Cities, is a drunken lawyer who works with Stryver on the trial of Charles Darnay.he doesnt care about anything. At first this man seems as if he is a lazy, good for nothing, alcoholic. he tells Lucie Manette he doesn't believe that his life is worth anything and feels as if it is pointless to even live anymore. When you first meet him during the court scene it looks as if he just rolled out of bed and was dragged to the courtroom. This one man sat leaning back, with his torn gown half off him, his untidy wig put on just sat it had happened to light on his head after it's removal, his hands in his pockets, and his eyes on the ceiling as they had been all day. Something especially reckless in his demeanor not only gave him a disreputable look, but so diminished the strong resemblance he undoubtedly bore to the prisoner. However after he meets Lucie he falls madly in love for her. This marks a period of ch ange for Sydney Carton. But he then knows that Charles Darnay is going to be married to her. He sill believes that his life is worthless but it seems as if he's a bit more willing to work and to do things for other people.    Towards the middle of the book, A Tale of Two Cities, Carton professes his love for Lucie and he says For you, and for any dear to you, I would do anything. I would embrace any sacrifice for you and for those dear to you. And when you see your own bright beauty springing up anew at your feet, think now and then that there is a man who would give his life, to keep a life you love beside you. He means that he would do anything for her, because he loves her so very much. He tells Josh Barsad that he is going to marry miss Manette, but then he backs out of it.    At the very end of the novel you find out that Carton is about to go to the guillotine, but not for him.

Strategic Planning Essay -- Business Planning Essays

Strategic Planning 1.  Ã‚  Ã‚  Ã‚  Ã‚  Appraise the formal planning efforts at the Copley Company for the period 1981 to 1984. INTRODUCTION Copley Manufacturing Company was primarily a manufacturer of a wide line of cutting tools and related parts and supplies. Late in 1980, Mr. Sagan, director of corporate development and Mr. Albert, executive vice president agreed that regular formal planning should become part of management’s way of life at Copley. EXECUTIVE SUMMARY In 1981, Copley Manufacturing Company had begun formal corporatewide planning. The formalized planning was ingrained into life at Copley through a series of visits by corporate groups, planning review meetings, as well as planning response meetings. However in 1982, the planning system was modified where the planning committee separated the formal planning cycle into three phases – Strategy Development phase, Quantitative phase and Action phase. In 1983, the planning process was largely influenced and administered by Mr. Tyler, the executive vice president. For recent development in 1984, the actual responsibility for planning has been placed directly on the executive vice president, group vice presidents and also division managers. DISCUSSION OF SITUATION IN 1981 In February 1981, Mr. Albert formed a corporate planning committee as the first step to move toward a regular formal planning process. In the discussion held, the planning committee decided on the process of ingraining the formalized planning into the life at Copley. On 21st March 1981, Mr. Albert requested the division general managers to sketch out a plan for regular formal planning and schedule for starting such an effort. The main objective of that effort is to issue guidelines for the preparation of divisional â€Å"provisional plans† (Brethauer 1999). On 6th June 1981, the corporate groups, which always included Mr. Albert and Mr. Sagan, had visited to the divisions constantly as an initial concept of formal planning activities. In the introductory meetings, Mr. Albert explained the importance of the planning effort, and Mr. Sagan explained the details. On 1st October 1981, the divisions, as well as the corporate staff groups, were asked to produce and submit the five-year plans. In November and December 1981, planning review meetings were held to review the divisional plans. On 28th December 1981, th... ...981 and modified in later years, leading Copley to attain success.M  Ã‚  Ã‚  Ã‚  Ã‚  The top management had been continuously putting effort in making planning a way of life for Copley. Weaknesses  Ã‚  Ã‚  Ã‚  Ã‚  M  Ã‚  Ã‚  Ã‚  Ã‚  The 1982 changes in top management were temporarily disruptive to the planning effort.M  Ã‚  Ã‚  Ã‚  Ã‚  Considerable effort was required to assimilate the acquired company and work out the split-up of Cutting Tool Division.M  Ã‚  Ã‚  Ã‚  Ã‚  Division managers had been planning largely to satisfy the requirements but had failed to commit to the plans. Opportunities  Ã‚  Ã‚  Ã‚  Ã‚  M  Ã‚  Ã‚  Ã‚  Ã‚  The 10-year look indicated that Copley’s profit was sensitive to cyclical swings, and large cash flow could be expected.M  Ã‚  Ã‚  Ã‚  Ã‚  Copley was mainly concerned in achieving future outgrowth through acquisition and merger.M  Ã‚  Ã‚  Ã‚  Ã‚  Copley is expected to reach a minimum annual profit growth of 10 percent and a return on equity of 12.5 percent. Threats  Ã‚  Ã‚  Ã‚  Ã‚  M  Ã‚  Ã‚  Ã‚  Ã‚  The depressed market conditions might result in Copley’s extensive loss.M  Ã‚  Ã‚  Ã‚  Ã‚  It was fearful that Copley would revert to a short-term orientation if it continued along the present path.M  Ã‚  Ã‚  Ã‚  Ã‚  There is a great tendency in American business to over manage, over plan, over staff, and over organize.

A Life Changing Experience Essay -- essays research papers

First day of the rest of my life, my stomach is in knots and I can’t seem to do anything with my hair. I have all my pens, papers, notebooks and other miscellaneous items stuffed into my brand new blue book bag. My mother is down stairs on the patio drinking her morning tea watching the world wake up. I gave my brand new shoes a quick shine, checked my hair about three more times each time finding something new wrong. Mother yells at me from down stairs.   Ã‚  Ã‚  Ã‚  Ã‚  Ã¢â‚¬Å" You’re going to miss the bus!† The bus! I can’t believe my ears. I can’t show up to high school on my first day by riding the bus. I was scared I needed my mother to drive me to school. Somehow knowing my mother was going to be there part of the way made it a little bit easier for me to go. I need her in a way to hold my hand as I embark on a new chapter in my life. Plus I was a little brat and felt too good for the public transportation system. My mother could sense that I felt uneasy and drove me. The drive to the newly built high school was just under fifteen minuets away. As we traveled my mother gave me some tips to make it through the day. She told me to introduce myself to my teachers on personal bases, to sit up front and to eat a good lunch. As we arrived at the entrance I felt my breakfast wanting to jump out of my stomach. I was shaking and on the verge of tears. Mother gave me a hug and a kiss on the forehead, told me everything was going to be just fine. I jumped out of the car and stood on the sidewal...

Barriers Of Implementing Technology In Education

Over the past fifty years or so, teachers and parents have read and heard forecasts of an impending educational revolution each time a new technological innovation arrived on the scene. Fifty years ago, radio broadcasting was suppose to revolutionize education. Soon thereafter, teaching machines were predicted to bring sweeping changes.Next, television was touted as the medium that would solve problems facing education. Now, the computer is being hailed as the next technological innovation to have a major impact on the educational process.Modern education, in fact, has sustained a long-term interest in the use of educational technology as a means to design more efficient learning opportunities for students. There are tools on how to use the new electronic technologies and this includes: skills software; computer graphics; word processors; telecommunications; simulations; multimedia/hypermedia; virtual reality and distributed learning.. In a field with such a wide range of powerful an d complex tools, experts cannot help but disagree about what teachers need to know and even where they should begin.Not long ago, many experts advised teachers who wanted to become capable computer users learn to write computer programs in languages such as FORTRAN and BASIC. To become computer literate, many assumed that teachers needed to know enough about the technical workings of computers to follow. Few people today believe that teachers need this much technical skill, but textbooks still provide wide varieties of information for beginning technology users. The following steps are needed to take by the beginning technology users: †¢ Develop a philosophy.Teachers must observe where current resources and types of applications fit in the history of the field. Then they must begin developing personal perspectives on the current and future role of technology in education and in their own classrooms. †¢ Purchase products. Teachers must become informed, knowledgeable consume rs of computer products and select wisely among available alternatives. †¢ Identify the problems. Teachers must be able to troubleshoot computer systems they use frequently in order to discriminate between problems they can correct and those that will require outside help.†¢ Speak the language. Sufficient understanding of the terms and concepts related to technology allows users to exchange information with other teachers and experts and to ask and answer questions to expand their knowledge. †¢ See where technology fits in education. In perhaps the most important- and the most difficult- challenge, teachers must identify specific school activities where technology can help to improve existing conditions or to create important educational opportunities that did not exist without it. As part of this process, teachers decide what they need to make these changes occur.This process of determining where and how technology fits is known among users of educational technology as integration. Successful integration requires a connection between how people learn and how teachers employ technology to assist and enhance this learning. DISCUSSION Computer networks offer a significant opportunity for improving the educational climate, especially in situation calling for teaching at a distance in settings which are either primarily educational or primarily business oriented. Computer-based education networks are characterized by a large-scale central computer connected by a communication link to remote terminals.Students work at the remote terminals either individually or in groups. The major advantage of computer-based systems to the student is the potential for individualizing instruction.. Student progress can be continuously evaluated and the student can be assigned to appropriate learning activities. Individualization of instruction is possible because of the one-to-one interaction between the educational system and the student. As far as the student is co ncerned, this is a confidential interaction between himself or herself and the system.The fact that the student is one of many persons using the system at the same time, and the fact that a record is often made of the students’ progress, do not seem to detract from the feeling of individuality and confidentiality on the part of the student. The significant problem for many students in using computer-based system, especially adults, is the typing ability required for the use of the system. The need for typing can be minimized by the use of programming techniques that limit the complexity of responses. System malfunctions are another disadvantage of computing networks and are very frustrating to the individual student.Malfunctions can occur either in the computing itself or in the communication links between the computer and the terminal. While the geographic and time-scheduling of computer-based systems can be an advantage, it can also be a limitation. The terminals themselves and communication links are expensive. At present they cannot be universally located throughout the world. The distribution of other educational materials, such as books, can be accomplished with considerably more ease. Information technology (IT) can be a very effective distance learning medium.The IT package consisted of word processing, spreadsheet and communications software (via Telecom Gold) and a personal computer. IT is an interesting teacher. It can make learning easier and more attractive; for example, a resource for learning about animals could include written information about their habitat, and pictures of it. There could be video clips showing the animal running, accompanied by animated diagrams of the operation of their skeletal structure and muscles. IT is also a patient and responsive teacher. Software does not tire of waiting for a response.Computer Aided Learning software can give pupils immediate feedback. Pupils are rewarded as they make incremental progress. T his can be particularly helpful where pupils have learning difficulties. Rewards can be structured so that pupils are motivated to learn. IT is pupil centered. Unlike traditional didactic teching, strategies for teaching IT will emphasize pupil centered, resource-based learning. This helps IT teachers with the particularly exaggerated problems they have in planning and controlling continuity, progression, differentiation, and breadth and depth of learning.After citing some of the benefits derived from using IT, what therefore, has inhibited a greater use of IT in management education? One reason may be a paucity of good quality educational material for use with computers. Another reason may be a lack of incentive or a resistance to change. Economic reason is also a possibility. Until very recently the use of IT as an instrument for individual learning has been prohibitively expensive. However, the reduced purchase price of the microcomputer has helped lower that barrier. Many teache rs are busy with their daily routines and can find any excuse when asked to add something new.â€Å"Why change what is working? † Many teachers find that it is easier to maintain the status quo: staying with what has been comfortable. Some teachers are afraid of taking any risk and exposing themselves as lacking skills, especially in front of their students. According to Rick Maurer, this fear of change can be categorized into three levels of resistance. Level One: â€Å"Resistance to any use of technology. † These teachers do not understand what the administration is trying to accomplish, or doubt if the school realizes how much technology will cost in time or money.They have their own ideas about what the school should do-they like the status quo, and believe the timing is wrong. Their main concern may just be fear of letting others know what they don't know. Level Two: â€Å"Deeper than the use of technology. † These teachers believe the administration has ma de promises before which they did not keep. They are afraid that technology use is really the start of something deeper and fear if they do not use technology, they will no longer be included as â€Å"in. † Actually, many of these teachers may be worn out by taking on so many changes all at once and may not be completely opposed to using technology.Level Three: â€Å"Deeply embedded resistance. † These teachers may have developed deeply entrenched distrust over many years. They fight anything the administration is supporting because values differ from what teachers want and what administration is proposing. Teachers need a great deal of motivation when it comes to implementing technology in the classroom (Gahala, 2001). There are many obstacles to overcome. Technology can be very intimidating for many teachers â€Å"because introducing technology almost always requires new learning† (Dyrli & Kinnaman, 1994).â€Å"Teachers may lack the time and the motivation to learn technology skills . The integration of technology into the curriculum will not succeed without giving teachers ample time to practice, explore, conceptualize, and collaborate† (Gahala, 2001). This can be done by inviting them to join the school technology planning committee. â€Å"Solicit teachers' participation on the technology planning committee and explain why their participation is important† (Conner, 2002). Another barrier to consider is the cost of technology to be implemented.Computer-based systems are more expensive to set-up. Hardware and softwares must be purchased and staff must be re-trained or recruited. Some disturbance and expense can be expected due to the need for the installation of additional electrical power circuits and computer network cabling and redecoration in parts of the school. Besides the high initial cost, the primary problem with investing in technology is the changing pattern of technology usage along with revisions in the associa ted definition of â€Å"adequate resources†.Maintenance and security for existing resources also became important cost issues. In the 1980’s and 1990’s, new directions in technology use replaced the emphasis on microcomputers with the trend toward multimedia and integrated learning systems. Schools now face a dual challenge that seems likely to remain the only constant amid changing educational technology. Monetary costs associated with the implementation of computer-based technology system includes : 1) Capital cost of computer and network hardware and software; 2) Installation cost, including classroom and laboratory renovation.; 3) Hardware and software upgrades; 4) Support personnel for hardware and software installation, repair, and maintenance; 5) Support personnel and facilities for training and support of users (instructors and students). Obsolete computers are replaced with more powerful computers, which include more sophisticated peripherals and networ k connections. These computers, software, and the associated infrastructure require a greater level of training to use and maintain. Public school systems in the U. S. are currently spending $4,100,000,000 on hardware and software [8].A detailed study of K-12 education estimates that a reasonable target spending for technology should be approximately $300/student, compared to $70/student now being spent [9]. A 1996 forecast predicts spending on educational technology by K-12 and higher education to rise from $6Ãâ€"109 to $14Ãâ€"109 by the year 2000 [10]. As a specific example in higher education, Virginia Tech, which has 25,000 total students, is spending $10-million over four years in an Instructional Development Initiative for classroom and faculty infrastructure.Computer projection equipment is being installed in classrooms, and approximately 1500 faculty members are receiving information technology training and a computer. Once all faculty members complete the course, another 4-year cycle will begin. The dollar amount of this initiative does not include money spent by individual colleges, departments, and research groups for information technology for educational use. Oberlin quotes a total expenditure of $40-million on information technology for a Research-I university of 25,000 students [11].This figure translates to $1,600 per student per year, and does not include the money spent by individual students who can afford their own personal computers, peripherals, and software. Whether purchased with government support, tuition, student fees, or personal funds, the use of information technology is increasing the cost of education. Moreover, other problems may arise during the implementation of technology and these include the following: 1) Methods of working are distorted to fit the requirements of the software used.If the software is not sufficiently flexible so that it can be changed to support current or proposed methods of working then these may have to be adjusted to match the requirements of the software. 2) Bringing new IT-based systems into use can be time-consuming, as it is prudent to continue with both the old system and the new system until it is clear that the new system is working effectively. 3) Software may not do what is required of it. This may happen when the software does not work as it should or because new demands are made for additional facilities that the software is not designed to supply.CONCLUSION/RECOMMENDATION: Nowadays, technology is rapidly moving and we cannot help but to cope with the advancement. It is true that using technology in education is very expensive and time consuming but it was worth the cost. Unfortunately, lack of global long-range planning often amounts to wasted efforts and excessive costs. For an innovation to be successful, teachers need to learn new skills and they may need to unlearn beliefs about students or instruction that have dominated their professional careers (Darling, Ham mond & McLaughlin, 1996).Thus teacher professional development is at the heart of sustaining an innovation. Student support and enthusiasm for the local innovation also played an important role in motivating teachers to continue to carry out and improve the innovation. Teachers want to do what is best for students to enhance their learning. If they believe that students are benefiting from a particular innovation, they in turn will be willing to devote additional time and effort required to maximize the advantage brought on by the innovation.Likewise, educators must resolve many complex issues in order to apply technology solutions to educational problems. They must address many concerns before and during implementation to ensure that technology will have the desired effects on students and schools. These concerns range from funding to selection and placement of technology resources. The author believes that regardless of the downfall of technology, computer-based system of educatio n must go on to continuously improve learning. REFERENCES: 1. Conner, D. (2002, April 12). Technology planning: Closing the communications gap Education World.Retrieved March 19, 2004, from http://www. educationworld. com/a_tech/tech152. shtml 2. Crawford, R. (1997). Managing information technology. London: Roulledge. pp. 131-135. 3. Dyrli, O. E. , and Kinnaman, D. E. (1994, January). Gaining access to technology: First step in making a difference for your students. Technology and Learning, pp 16-50. 4. Crawford, R. (1997). Managing information technology. London: Roulledge. pp. 131-135. 5. Gahala, J. (2001, October). Critical issue: Promoting technology use in schools. Retrieved March 29, 2004, from http://www. ncrel.org/sdrs/areas/issues/methods/technlgy/te200. htm 6. Maurer, Rick. (1995) Beyond the Wall of Resistance: Unconventional Strategies that Build Support for Change. Bard & Stephen. 7. Norton, P. & Sprague,D. (2001). Technology for teaching. USA: Allyn & Bacon. pp. 23-30. 8. Data from a Quality Education Data (QED) report(1996), quoted in J. Chem. Ed. 73, A248. 9. Glennan, T. K. ; Melmed. (1996) A. Fostering the Use of Educational Technology: Elements of a National Strategy; RAND: Santa Monica, CA. http://www. rand. org/publications/MR/MR682/contents. html 10. CCA Consulting Inc.(1996) quoted from News, Resources, and Trends, June 28, 1996, SyllabusWeb, Syllabus Press: Sunnyvale, CA. http://www. syllabus. com/ntr06_28_96. html. 11. Oberlin, J. L. (1996) â€Å"The Financial Mythology of Information Technology: The New Economics,† CAUSE/EFFECT , 19(1) issue of Spring 1996, 21; http://cause-www. colorado. edu/information-resources/ir-library/abstracts/cem9616. html 12. Darling-Hamilton, L. & McLaughlin, M. W. (1996). Policies that support professional development in an era of reform. In M. W. McLaughlin & I. Oberman (eds. )Teacher learning: New policies,new practices. NewYork: Teachers College Press.

The Handmaids Tale Foreword

The Handmaids tale Foreword: In an age of consumerism and commercialization, the younger generations are demanding fast satisfaction and instant returns. They want see and own within a couple of taps on their screens which are specialized, personalized, made to meet their every demand. We are in an age where possessions define you. The commercial world loves us and consequently mass production and competition increases happily. Un-till we stop to ask, what costs do these freedoms come? Recently portrayed on the big screen The Handmaids Tale shouts out a universal and timeless message .As warning to us, Margaret Atwood presents the inconvenient truths about the ways in which we live our lives today. Dystopian totalitarian government, Gilead offers prime grounds for Atwood’s ironic and controversial comment . The novel paints a picture of a world undone by pollution, infertility, environmental degradation, declining birthrates and the dangers of nuclear power. It is a classic Re flection of the original production era, the 1980’s, in which the understanding of humanities environmental footprint went commercialGilead is set in a time where life had become so licentious that the morally aggrieved have overthrown, this in just over a decade. The similarities to reality in this novel lead the reader on a confronting journey, both of discovery and realization, positioning them to question society and all that is our normality. Living under the fundamentalist Gilead Ian regime, the commoner is stripped from all that they own and once lived for. It is a society in which freedom has been replaced by control.Due to a drastic decline in fertility rates, the few fertile woman left, are now treated as communal property and are selected for the role of womb, classified as ‘Handmaids’. Women find themselves no longer allowed to read, work, own property, or handle money. Consequently they are entrapped in a system, which defines them by their role: wom b, wife, prostitute, and servant. Various commanders move handmaids from house to house for fertilization and childbirth is miraculous. Reaping the benefits of this rarity are those in power .The rare commodity of a baby is distributed to the commander and his wife. Confronting and contrasting our ways of life today, Atwood evolves a threatening statement about the system. This ‘story’, discusses the social expectations that dominate our lives . In a fictional tale not dissimilar to history, it embodies the timeless tune of human nature. Painting a disturbingly graphic picture of the future and has her audience left appreciating all that we take for granted every day.Through the eyes of handmaid, Offred, we are transported into a totalitarian fundamentalist regime. Offred hangs on those who poison her existence. She has been stripped down to Breeding for breath. Passively resisting the regime Offred in her self is a comment on what it is that truly empowers us. Through off red’s circumstances Atwood has us asking the questions. What is the repercussion of our becoming so acquainted with freedom, that we stop fighting for it? What will the remedy be for when we finally are forced into facing the inconvenient truth?Through entertaining the ethical dilemmas of today, Atwood asks how we will work in solving the problems we are currently making for ourselves. All fundamental issues that the younger generations, the future leaders of our world need to be ware. A theocratic government, which demands false dichotomy, patriotism and ultimately Christian fundamentalism. The themes of this novel are Parallels with the monstrosities we are facing today, consequently presenting us with some disturbing realizations about reality.Presented in a fictional format this book is similar to the healthy version of a mud cake. Juicy, gooey, sweet and enticing, only unlike the pulp fiction today’s audiences crave, this piece of work leaves you thinking. The story hangs on the realities of our world. Yes the world is changing. Will there be anyone left soon from the liberation eras to endorse, and let us understand how to fight for our rights? Will the future of our world know how? I can only imagine these were Atwood’s questions when she set out in writing this prophetic piece. This is her legacy.This is how she answered the question. This is education, reaching out to the masses like someone able to speak a universal language . She has caused the problems in the hope that we will change. Such powerful words of warning becoming more relevant as time goes on, this novel will stand the tests of time and live throughout the 21st century. Atwood remarkably, is able to offer a confronting and ultimate insight into the society today, all this without one generically boring statistics. This is an Ultimately Disturbing dystopia that leaves its audiences captivated by the possibilities.