M&A Legal Context

M&A Legal Context - M&A Legal Context: Hostile...

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Introduction 1. Until the 1980s, hostile takeovers were rare. 2. Then hostile bids were initially met with little or no resistance. 3. Then target companies became more sophisticated about defenses. 4. Types of takeovers: a. Friendly negotiated transactions. Negotiated with board of the target company. b. Hostile deal. Made directly to the target stockholders, bypassing the board of directors. 5. Types of control transactions: a. Acquisition of stock. b. Acquisition of assets. c. Board control via proxy contest. 6. Tender offers are regulated via the Williams Act. Takeover Tactics of Bidders 1. Multiple points of pressure: a. Tender offer for the shares, made directly to stockholders. b. Proxy contest to oust the incumbent board of directors. c. Lawsuit filed to invalidate poison pill. d. Ex. IBM hostile bid for Lotus. 2. Poison pill. a. Stockholder rights plan. b. Invented by Martin Lipton. c. Takeover defense legal device. d. Specifics: i. Trigger percentage typically 10-15%. ii. Gives rights to non-tendering stockholder to buy newly issued stock at half price. iii. Makes acquisitions too expensive to culminate. iv. Adoption was judged to be legal by the Delaware courts. e. Issue: Does it protect management at the expense of stockholders? f. Event Study: Do companies with poison pills get higher takeover offers than those without? i. Yes. ii. Why? Empowers boards to negotiate on behalf of stockholders. iii.
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M&A Legal Context - M&A Legal Context: Hostile...

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