Ch 3 Deck 5 Flashcards
compares the earnings per share of the buyer before the acquisition with the earnings per share after the acquisition
accretion/dilution analysis
sometimes a dilutive deal may still be attractive because it shows
increased value in the future
occurs when two companies combined is more profitable than the sum of the two separately
synergy
Under Hart Scott Rodino Antitrust Improvements (HSR) act most merger transactions must file
a notification and report to the FTC and the Anti Trust Division of DOJ
Purpose of notifying FTC and DOJ Under Hart Scott Rodino Antitrust Improvements (HSR) act is
to provide them with information about large mergers and tender offers before they occur.
Under Hart Scott Rodino Antitrust Improvements (HSR) Act The notification is typically filed
after the definitive merger agreement is signed
Under Hart Scott Rodino Antitrust Improvements (HSR) Act after filing the waiting period for mergers is
30 days
Under Hart Scott Rodino Antitrust Improvements (HSR) Act after filing the waiting period for tender offers is
15 days
Under Hart Scott Rodino Antitrust Improvements (HSR) Act during the waiting period either the FTC or the Department of Justice will
either the FTC or the Department of Justice will assess whether the transaction violates U.S. antitrust laws
Under Hart Scott Rodino Antitrust Improvements (HSR) Act during the waiting period either the FTC or the Department of Justice can choose to
require further information or extend the waiting period.
Under Hart Scott Rodino Antitrust Improvements (HSR) Act during the waiting period filers can
request early termination of the waiting period which is sometimes granted
Under Hart Scott Rodino Antitrust Improvements (HSR) Act in order for the deal to close
the waiting period must end and both FTC and DOJ must determine there are no antitrust concerns
Under Hart Scott Rodino Antitrust Improvements (HSR) Act filing is required if the three tests are met of:
commerce test
size of transaction test
size of person test
HSR Commerce test is met if
the “acquired person” or “acquiring person” is engaged in commerce (almost always met)
HSR Size of transaction test is related to
value of what is being acquired
HSR Size of transaction test limit as of 2010: No filing is required if the transaction is valued under
$63.4M
HSR Size of transaction test limit as of 2010: filing is required if the transaction is valued over
$253.7M
HSR Size of transaction test limit as of 2010: if the transaction is valued between $63.4M and $253.7M then
the size of person test is used
HSR Size of transaction test limits as of 2009 were
Under $62.5M and over $260.7M
HSR size of person test requires you to
determine the net sales and total assets for the entities involved in the acquisition
In an acquisition, lists the duties and obligations of each party with respect to the proposed transaction
Letter of intent
a beginning step in a proposed business combination transaction is the
letter of intent
in an acquisition, a letter of intent would not force
public disclosure by either the target or acquiring company
letter of intent would typically obligate each party to maintain
confidentiality about the proposed business transaction while each party is fulfilling its respective duties and obligations.
A business combination letter of intent includes this information
The price
the form of consideration
structure of the deal (merger or acquisition)
A business combination letter of intent does NOT include
a binding obligation
A business combination letter of intent includes these provisions
I. confidentiality
II. walk-away fees
III. access to the selling entity’s books and records
IV. no-shop agreement
