M&A Part I Flashcards
Exchange Offer
exchange one type of security for another e.g. exchanging common stock for preferred
Restructuring
Actions related to a firm’s investment and financial policy, assets may be sold or dividends paid
Acquisition
One company takes over controlling interest in another company, acquirers usually pay more than market price for an acquisition
Golden Parachute
Separation agreement that provides payment to a corporate exec in the event they loose their job
Greenmail
Repurchase by a corporation of the stockholdings of a raider through an above market offer. Raider stops takeover efforts.
In Play
High chance a corporation will be taken over by one entity or another
LBO
Leveraged buyout
takeover of a company using borrowed funds, target company’s assets serve as security for acquirer.
Acquired company’s CFs are used to repay
Merger
Combination of 2 or more companies through different means (e.g. pooling of interests) and is classified by economic functions (vertical, horizontal, etc).
Pac-Man Defense
Target defends itself from acquisition, by making a counter-tender offer for the aggressor
Poison Pill
Right issued to targets stockholders of target, that are contingent on acquirer taking a certain % of company’s stock. Rights make a takeover more expensive for a target.
Raider
group / individual that acquires a block of stock in a target company with an eye to making a tender offer
Risk Arbritrage
Speculation by individuals / firms on whether or not mergers / transactions will take place
Scorched Earth Policy
Target makes it self unattractive to acquirer e.g. sells off more attractive parts of their business
Shark Repellent
A measure undertaken by a corporation to discourage unwanted takeover attempts. Also called a porcupine provisions
Shark Repellent Examples
Fair price provision
Golden parachute
Defensive merger
Staggered BOD
Supermajority Provision
Takeover
change in the controlling interest of a corporation, a friendly or unfriendly acquisition
hostile takeovers come via public tenders
Tender Offer
An offer to buy all or part of a firm over a stated period usually for the purpose of takeover
2 Tier Tender Offer
An offer to buy part of a targets firm stock at a stated price in cash and buy the balance in a less attractive way such as securities
White Knight
An outside company the target solicits to avoid the original acquirer
