Corporate Takeover Market Flashcards
Name 5 general regulatory considerations?
Federal security laws Antitrust Environmental Racketeering Employee Benefits
Name 7 industry specific regulatory considerations?
Public utilities Insurance Banking Broadcasting Telecom Defense Transportation
Describe the 1933 Securities Act
Required investors to receive financial and other significant information concerning securities being offered for public sale
Prohibited deceit, misrepresentations, and other fraud in the sale of securities
Describe the Securities Act of 1934
Supervision of new security offerings
Ongoing reporting requirements
Conduct of security exchanges
Created the SEC
Describe the Sarbanes-Oxley Act
Corporate governance, disclosure, and conflicts of interest
Facilitate competitiveness in an industry
Antitrust
Name the two regulatory bodies that can get involved in an antitrust issue?
Enforced by Department of Justice and Federal Trade Commission
Name the important legislation for the Antitrust Laws
Important legislation: Sherman Act (1890), Clayton Act (1914), Hart-Scott-Rodino Act (1976)
Herfindahl-Hirschman Index (HHI)
sum of the squared market shares (%) of all companies within the industry
A commonly accepted measure of market concentration.
Industry HHI < 1000
Unconcentrated
1000 ≤ Industry HHI ≤ 1800
Moderate Concentration
1800 < Industry HHI
(HIGHLY) Concentrated
Describe the Gramm-Leach-Bliley Act of 1999
Overturned Glass-Steagall
Provide more stable and countercyclical business model for these banks
Allow U.S. banks to better compete with international counterparts (e.g., UBS, Credit Suisse, Deutsche Bank)
Led to formation of U.S.-based universal investment banks (e.g., JPM, Citigroup, and BoA)
Describe the Sarbanes Oxley Act
Corporate governance, disclosure, and conflicts of interest
Separated stock analysis from underwriting activities
Created Public Company Accounting Oversight Board
Name the five state level antitakeover statues
Control share statues Fair price statutes Business combination statutes Poison pill statutes Constituencies statutes
Control share statutes:
effectively forces a shareholder vote to proceed with a hostile bid
Fair price statutes:
requires bidders to pay all shareholders the same price for their shares, regardless of when they are tendered
Business combination statutes:
: imposes a waiting period for combining the assets of the bidder and target following a takeover
Poison pill statutes:
: dilutes the bidder’s ownership stake by allowing target firm shareholders to purchase more shares at a discount (when triggered)
Constituencies statutes:
allows management to take into consideration constituencies other than shareholders when evaluating a takeover proposal
What is corporate governance?
External/Internal mechanisms that impact the balance of power between insiders and outsiders
Name four internal mechanisms of corporate governance?
Board of directors
Financial reporting
Incentive systems
Antitakeover defenses
Name five external mechanisms of governance?
Regulators Laws Outside owners Managerial labor market Corporate control market
Define a friendly takeover tactic?
acquirer and target agree on key issues
Define an aggressive takeover tactic?
Four types?
target management resists acquirer
- success factors
- bear hugs
- proxy contest
- hostile tender offer
