Megers And Acquisitions Part 2 Flashcards
What are the different ways of financing mergers and acquisitions?
Cash for shares
Shares for shares
What are the 7 characteristics of cash for shares?
Easy to understand
Shares cannot fall in value
Acquiring shareholders maintain their control
Simple and precise
Allows recipients to spread their investments
May trigger capital gains tax liability for the selling shareholders
Nah lead to excessive gearing if the bidder borrows
What are the only circumstances the shares can fall in value? But what will happen if they do?
Inflation but that would need to be compensated for
Why do acquires maintain control?
What does being simple and precise help?
What is gearing?
Because they don’t have to offer shares
Greater chance of success
Ratio of debt to equity
Shares for shares
What are the 3 characteristics?
Capital gains postponed
Maintain interest in combined company
No immediate outflow of cash
Soft defences
What can they attack? What can they improve? What can they also attack? Who can they get involved? What can they encourage?
The logic of the bid The image of the firm The value record of the bidder Office for fair trading or competition commission Stakeholders to lobby
What are the 6 hard defended?
PAC man defence Golden parachutes Poison pills Management buyout Share repurchase White knight
Management buyout
What happens?
Management buy out majority of shares
Share repurchase
Who purchases shares?
What is it the opposition to?
What does it do to the shares?
Directors on behalf of the company
Dilution
Increases price
White knight
What does this entail?
Finding a bidder who will act more favourable to the target firm
Poison pills
What does the firm undertake?
What can this be to the firm?
Transactions that aren’t beneficial to the business
Detrimental
PAC man defence
What is the company now?
The bidder
Golden parachutes
What do directors do?
What does it do to the firm?
Make transactions in their favour
Less attractive
