M&A Flashcards
Along with generic terms such as acquirer, purchaser, or buyer, companies making an acquisition can also be referred to as…
1) parent
2) Issuer
3) Bidder
4) Offeror
When is parent typically used in M&A?
When a company forms a subsidiary
When is offeror typically used in M&A?
when acquisition is made using tender offers
What is a direct merger?
When the target company merges directly with and into the acquiring company.
What is a triangular merger?
When the target merges with a subsidiary, resulting in the subsidiary company as the surviving legal entity.
What is a reverse triangular merger?
When the target merges with a subsidiary of the acquirer, dissolves the subsidiary, leaving only the acquirer and the target.
What is an asset sale?
The acquiring company buys certain assets and the liabilities that go with them. This is opposed to a merger in which all assets and liabilities move as a bundle w/ no picking and choosing.
What is a tender offer?
An offer to buy a company is made directly to the stockholders. If the buyer gets most of the target shares they gain control and can elect a new board.
What is the right to an appraisal under DGCL?
Shareholders of either company can cash out before the merger occurs for FMV
What makes a deal hostile?
They aren’t are negotiated with the target board
What makes a deal friendly?
When they are negotiated with the target board
What are some anti-takeover devices?
1) A staggered board
2) the poison pill
3) share repurchases
4) Lock-ups
5) anti-takeover statutes
How do staggered boards prevent hostile takeovers?
The board is broken into classes which are elected at different times.
1) insurgent has to win 2 elections
2) harder to get the needed # of directors
How does a share repurchase prevent a hostile takeover?
A smaller # of issued shares increases the value of outstanding shares (more expensive; fewer shares available to buy)
What is a lock-up?
selling off most valuable assets so the company is not as attractive and value can’t be acquired.
