Corning Wins Cash Gold

Corning recently won the Gold Award in liquidity management from Treasury & Risk. In 2015, the company announced its Capital Allocation Framework, designed to reduce its $5.5 billion in cash by one-half. The company generates one-third of its revenue in Asia, which is where much of the cash was tied up. Thanks to the formation of the Shanghai Free Trade Zone, Corning was able to pool its cash, allowing for more flexibility in cash management. Better cash management practices have allowed Corning to reduce its cash balance to about $1.2 billion as of June 2019.

M&A Checklist

In the textbook, we discuss how to value an acquisition. But what are the some considerations in the valuation of the target? The recent acquisition of Wells Fargo's retirement and trust business by Principal can give you some insight. For example, Principal had to consider whether recent problems at Wells Fargo had extended into the retirement area. Additionally, future revenues from the acquisition depend on how many of the current customers stay when the acquisition is complete. In this case, a payment will be made in two years contingent on the percentage of current customers of Wells Fargo remain at that time.

Finally, an important consideration is the cultural fit between the two companies. The value of the synergies, as well as the continuation of the current cash flows of the target company into the future, often depend on culture. If employees of the target company are thrust into a new culture, it may lead to an exodus of employees, resulting in a decrease in ongoing cash flows as well as reducing expected synergies. A culture clash was allegedly a major cause of why the AOL-Time Warner merger flopped so badly.