Mergers & Acquisitions

Question 1

Why merge, acquire or acquire control?

Answer 1

1. Economies of scale
2. Economies of scope
3. Tax considerations
4. The target is poorly managed

Question 2

What are the forms of combination?

Answer 2

1. Statutory merger (DGCL 251)
2. Asset Acquisition (DGCL 271)
3. Share acquisition (tender offer)
4. Cash/Freeze-out Merger (DGCL 251/253)

Question 3

What is the burden of proof blueprint in freeze-out mergers (Weinberger)?

Answer 3

1. plaintiff allege unfairness
2. Defendant prove fair process and price
3. Informed vote of the majority of the minority shareholder shifts the burden back to the plaintiff, but the defendant must prove that vote was informed.

Question 4

When will the BJR apply to a controller buyout (Kahn)?

Answer 4

1. Deal is conditioned on approval of a special committee and a majority of minority shareholders;
2. SC is independent;
3. SC is empowered to seek advisors;
4. SC is informed (care);
5. minority vote is informed; and
6. there is no coercion of the minority.

Question 5

What is the Unocal standard (enhanced BJR)?

Answer 5

1. Were there reasonable grounds for believing that a a danger to corporate policy and effectiveness exists?
2. Were the defensive measures reasonable in relation to the threat posed?

Question 6

How do we assess “danger” to corporate policy and effectiveness?

Answer 6

1. Price
2. Coercion
3. Nature and timing
4. Quality of securities
5. Risk of non-consummation
6. Impact on other constituencies

Question 7

How do we assess the reasonablness of defensive measures?

Answer 7

Proportionality

1. Coercion: even up the front and back ends
2. Price: get a higher bid or pay alue to shareholders

Question 8

What are Revlon duties?

Answer 8

To maximize shareholder benefit (value) from the sale of the corporation/control.

Question 9

When are Revlon duties triggered (QVC/Time)?

Answer 9

1. A cash sale
2. sale/change of control
3. Bidding process for company
4. Target abandons its long-term strategy