I always used to hate scenarios that required me to take over AI companies. They never really seemed to be worth what my company had to pay for them. After I took them over I had the hassle of sorting out all the stupid stuff they had done. This was always expensive and a PITA, and the whole process was very boring for me and very expensive for my company.
Thanks to low_grade pointing me at his Chile scenario (which is well worth a look) I had to do quite a bit of thinking. I came up with an approach to mergers that I hadn't seen mentioned before, and it's so good that I feel stupid for not thinking of it earlier. It's not really aimed at AI companies that are already going down the tubes. It works best on AI companies which are strong, and which you really want, but due to their strength have a merger price that makes them difficult to acquire.
At first I thought it was an unscrupulous robber baron tactic, but really it isn't. To my mind, a robber baron tactic is one that deliberately destroys a company for the purpose of gaining PNW. This tactic is more or less the opposite of that. The target company's basic earning capacity isn't damaged, so it's still profitable and worth taking over. Not only does this tactic not trash the target company, but it will make you take some penalty on PNW. Its advantage is that you can use it to leverage a quite substantial boost to your CBV, if that is your aim.
For instance, when testing this tactic recently I took over a profitable company that had a CBV of roughly $70 million and a merger price to match. I got it for $50 million, so my company got a nice CBV boost of $20 million out of the deal, and there were no further costs incurred by my company after the merger. This is not an exceptional result. It's fairly common for your company to get a CBV boost of between 50% and 100% of the merger price.
This means that the bigger the target company is, the bigger the CBV increase your company gets out of the deal.
In essence it's really simple: since the target company is going to be part of your company, you start treating it as part of your company roughly 6 to 12 months before you take it over. What you basically do is sort out the AI's mistakes before you merge the target company, instead of sorting it all out after the merge. This means the AI company pays for fixing its own mistakes and your company doesn't have to. The cost of this restructuring causes a temporary hit to the target company's share price, so your company can take over the target company at a much cheaper price as long as you time it right.
There are some things you need to set up first.
1/ You need a majority of your company's stock, and you need a majority of the target company's stock. Without both of these, it wont work. You will have to resign chairmanship of your company, take over chairmanship of the target company, then resume chairmanship of your original company. This makes majority stock holding (>50%) essential.
2/ You need to be able to absorb some loss of PNW, and some loss of purchasing power. If PNW is critical, you probably should not try this. Ditto if you might be in danger of a margin call at any stage. How much this tactic will affect your purchasing power will depend on how heavily you bought on margin (if at all). You should assume the target company's stock price will drop by at least 50%. Since you will be holding at least half of that company's stock, you can assume your loss of PNW will be at least half of the current value of your holdings in that company. IOW, if you have $10 million worth of stock in the target company, you will probably lose $5 million of PNW and should know how to work out the likely effects on purchasing power.
3/ Your company should have, or be able to generate, sufficient funds to complete the merger (at the reduced price) within 12 months. This is because the stuff you are going to do will only reduce the target company's merger price temporarily. Since the target company's earning capacity wont be damaged, and in fact will probably be improved, the share price will bounce back if left for too long. The 12 month point is good to aim at, because that is when companies have to pay their biggest expenses, and also when the bookkeeping for that year is finalised. This will help you since it will further reduce the target company's merger price. I've found that a 12 month target is usually perfect, but sometimes I can get it all done in less time than that.
Once you have all those ducks in a row you can start getting your hands dirty with the fun stuff.
4/ Pause the game. You really, really need to do this. Never give an AI board the opportunity to run your original company while you are busy elsewhere, because they will make a pig's breakfast of it. Having the game paused means that your original company will stay exactly the same, apart from one small detail (when you resume the chair of your original company, all trains will be set to normal priority).
5/ Resign the chair of your company and take the chair of the target company.
6/ Check the train roster. There will usually be far too many of them, and most of them will be clapped out. Immediately sell anything older than 2 years. Don't worry if they are currently hauling a good load. It doesn't matter. Just sell them anyway. If there happen to be some good ones that are only 1 or 2 years old, you might want to keep those. If the good ones are stuck in one of those famous "massive cluster of stalled trains at a maintenance shed halfway up a 20% grade on really stupid line of track" things that AI's often do, just sell them anyway.
7/ Check the industry list for that company. If there are any which are making a loss, or only making marginal profits, sell them off. The definition of "marginal profits" is up to you, depending on the circumstances.
8/ There will probably be a fair amount of badly laid track. Bulldoze the lot of it, and lay the track you want it to have. It's best to do this without taking out any bonds, if possible, but if it needs one bond and the credit rating is good then go ahead. It doesn't matter that much in the scheme of things.
9/ There's another (optional) dodge you can add here. If you are the sort of person who always uses maintenance spurs (like me) obviously you will be building those and bulldozing any existing sheds and towers. However, even if you use inline sheds and towers like the AI does, you may still want to bulldoze all existing water/sand towers. The reason you might want to do this is that towers are cheap to replace later anyway, but the lack of them will make any AI trains run slower during the year while you are waiting to complete the merger. This will further cut AI profit for that year, helping to reduce the merger price.
9/ If there is any company cash left over, set it up with a basic roster of new trains. Depending on the size of the network, it might only need to be three or four. If there's no company cash left for this, take out a bond. You might as well, since the AI will do it anyway as soon as you leave. The AI will always want some trains running, so will buy them if you don't.
10/ If the company had large cash reserves, or if the sale of unprofitable industries generated a lot of cash, you may have a substantial amount left after sorting out the roster and the track. The best use for this is to improve your original company in some way, since that all gets credited to your original company's CBV. This can be done by double tracking some part of your system or building extra hotels (which you'll soon own) or whatever. Since the target company is going to be part of your company soon anyway, it's all good. The lack of cash reserve wont hurt the target company's earning capacity or profitability. Just try to leave it with some cash (a few hundred or so) since if you leave it totally skint the AI's first action will probably be to take out a bond.
That's about it. After doing this, just resume the chair of your original company and watch the target company's share price drop. When it reaches what you think is the right level, go ahead with the merger.
PS: There's one additional bonus I've found with this method. For some reason, when doing it this way all the ex-AI trains seem to get added to the end of your roster in a neat little group. There may be one or two of them mixed in with yours, or one or two of yours mixed in with them, but in general the new ones will be nicely grouped right where you want them. This makes sorting them out a lot easier.
