Anti-Takeover Defense (A,B,C)

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

Merger Agreement Provisions

Target may enter into agreement with friendly parties that provide them with certain benefits that give them incentive to participate Lockup option -Stock Lockup - under 20% they don't need shareholder approval -Asset Lockup - (Real Estate)

Historical Trend on Poison Pills

There is a downward trend

Do Target shareholders benefit from termination fee?

Yes! -Higher completion rates -Higher premium

The logic behind an anti-takeover defense (Guy -> girl example)

-Decrease the perception of intrinsic value of target to the attacker -Increase the price paid by the attacker

Impact on shareholder wealth

-Lower tobin's Q (Worse management ability) -Classified boards pay CEO more cash and stock options -Classified less likely to fire CEOs

Wealth effects of Poison Pills

-Markets react positively to adoption of poison pill if company's board has majority outside investors and negatively otherwise -Companies that adopt a plan are twice as likely to defeat an unsolicited offer -If a deal is accepted, premium is 5-10% higher. If deal is defeated, target stock price is down 14%

3 types of poison pills

1. First generation: preferred shares; adverse impact on balance sheet 2. Second generation: Flip-over rights; allow holders to buy stock in acquiring firm at a low price when the takeover is complete 3. Third Generation: Flip-in rights; allow holders to acquire stocks in the target firm (except the bidder)

Two Views on anti-takeover defense

1. Shareholder interest hypothesis 2. Management entrenchment hypothesis

Staggered Board

AKA Classified board In a staggered board, directors are grouped into several classes. Only a certain percentage will come up for election in a given year Benefits and costs of staggered board -board stability -Obstacle to takeover

Other changes to corporate charter

Antigreenmail provision change the state of incorporation -1209 North Orange, DE

Bidder Termination Fees

Bidder agrees to pay target a fee if the bidder dissolve he deal Reasons to withdraw? -Financing -Regulation Less common than target termination fee

Termination Fees

Break-up fee or topping fee Target termination fee - target agrees to pay the bidder if the target is taken over by another company (2-3% of purchase price) Motivation: -encourage bidder to participate in an expensive bidding war and compensate them for revealing information -discourage hostile bidder and protect sweetheart deal (White knights)

Historical Trend: Staggered Board losing appeal

Now majority of firms have non-classified boards Increasing pressure from active shareholders to dismantle staggered board

White Knight

Potential acquirer invited by the board to counter a hostile bidder What makes white knight favorable? -Higher offer price -More friendly deal terms

Anti-takeover defenses

Preventative measures (Prebid) -Staggered Boards -Poison Pills -Corporate Charter Amendments -Golden Parachutes Active Measures: -White Knight -Green mail -Crown Jewel

Other post-bid defense

Recapitalization Share Repurchase Corporate Restructuring Litigation

Poison Pills

Shareholder right Plan: grants holders of the company's shares the right to acquire additional shares at a deep discount to market is distributed to common shareholders as dividend (one right for each share of stock they own) The right is triggered if a shareholder accumulates an ownership position above a threshold DILUTE SHARES

How effective is a staggered Board?

companies with a staggered board are significantly more likely to defeat a bid


Set pelajaran terkait

Greek Mythology Test 4 Multiple Choice

View Set

Part 2 Boards Question journal/Crozer/Prism

View Set

Fundamentals EDAPT - Living Will

View Set

Principles of Management Chapter 1

View Set

Esame finale Questions and answer

View Set