15.3: Friendly Vs. Hostile takeovers Flashcards
What is a friendly acquisition?
The acquisition of a target company that is willing to be taken over.
What is an offering memorandum?
A document describing a target company’s important features to potential buyers.
What is a data room?
A place where a target company keeps confidential information about itself for serious potential buyers to consult.
What is a confidentiality agreement?
A document signed by a potential buyer to guarantee the buyer will keep confidential any information about a target company that is available in the data room and will not use the data to harm the target company.
What is due diligence?
The process of evaluating a target company by a potential buyer.
What is a letter of intent?
A letter signed by an acquiring company that sets out the terms of agreement of its acquisition, including legal terms.
What is a no-shop clause?
A clause in a letter of intent stating that the target agrees not to find another buyer, demonstrating its commitment to close the transaction.
What is a break fee?
A fee paid to an acquirer or target should the other party terminate the acquisition, often 2.5 percent of the value of the transaction.
What is an asset purchase?
A purchase of the firm’s assets rather than the firm itself.
What is a hostile takeover?
A takeover in which the target has no desire to be acquired, actively rebuffs the acquirer, and refuses to provide any confidential information.
What is a tender offer?
A public offer in which the acquiring firm offers to purchase shares of the target firm from its existing shareholders.
Who are arbs (short for arbitrageurs)?
Specialists who predict what will happen in takeovers and buy and sell shares in target companies, with the possibility of earning a premium.
What is a defensive tactic?
A strategy used by a target company to stave off a takeover or to try to get the best deal for its shareholders.
What is a shareholder rights plan or poison pill?
A plan by a target company that allows its shareholders to buy 50 percent more shares at a discounted price in the event of a takeover, which makes the target company less attractive.
What is selling the crown jewels?
The sale of a target company’s key assets, which the acquiring company is most interested in, to make the target company less attractive for takeover.
