Merger & Acquition Terms

7/31/2019 Merger & Acquition Terms

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Suicide pill:-

A hostile takeover prevention tactic that could destroy the target company. Taking on a largeamount of debt to prevent the takeover might cause bankruptcy.

An antitakeover measure stipulating that shareholders on the receiving end of a hostile takeover

may buy shares in their own company at a price below fair market value. Once the acquisition iscomplete, the provision allows these same shareholders to buy more shares in the new companyfor below market value. This forces shareholders in the acquiring company to suffer adevaluation and dilution of their own shares. This is done to discourage hostile takeovers amongthe shareholders of the acquiring companies. In essence, a suicide pill is identical to a poison pillexcept for degree; the term suicide pill indicates that the target company may intentionally gobankrupt, rather than simply weaken itself.

A poison pill provision so devastating to the target of a takeover attempt that the target companymay have to be liquidated to satisfy its creditors. For example, the company's directors mayinstitute a suicide pill giving stockholders the right to exchange their stock for debt if a raider

acquires more than a specified percentage of the company's outstanding shares. The tremendousincrease in debt will effectively doom the target company if the takeover attempt is successful.

Leveraged buyout (LBO) :-

A transaction used to take a public corporation private that is financed through debt such as bankloans and bonds. Because of the large amount of debt relative to equity in the new corporation,the bonds are typically rated below investment-grade, properly referred to as high-yield bonds orjunk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e.,purchase of the bonds or participation in the bank loan) or the purchase of equity through anLBO fund that specializes in such investments.

The acquisition of a publicly-traded company, often by a group of private investors, that isfinanced with debt. Often, the acquirer in a LBO issues junk bonds in order to raise the capitalnecessary for the acquisition. A leveraged buyout allows a company to be taken over with littlecapital, but it can be a high risk endeavor.

The use of a target company's asset value to finance most or all of the debt incurred in acquiringthe company. This strategy enables a takeover using little capital; however, it can result inconsiderably more risk to owners and creditors. See also hostile leveraged buyout, reverseleveraged buyout.

Case Study Leveraged buyouts (LBOs) became popular in the 1980s when firms such as BeatriceCompanies, Swift, ARA Services, Levi Strauss, Jack Eckerd, and Denny's were acquired andthen were taken private. With an LBO, a firm's management often borrows funds using the firm'sassets as collateral. The borrowed money is used to purchase all the firm's outstanding stock. Asa result, a small group of individuals is able to take control of the firm without using any or muchof the group members' own money. Following the buyout the new owners frequently attempt tocut costs and sell assets in order to make the increased debt more manageable. Because the groupinitiating the LBO must pay a premium for the stock over the market price, an LBO nearlyalways benefits the stockholders of the firm to be acquired. However, investors holding bonds of


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the acquired company are likely to see their relative position deteriorate because of the increaseddebt taken on by the company. For example, the leveraged buyout of R. H. Macy & Co.produced a $16 jump in the price of its common stock at the same time the price of its debtsecurities fell. Most bondholders have no recourse to the increased risks they face because of thegreater resultant debt.

Divestiture :-

A complete asset or investment disposal such as outright sale or liquidation.The removal of assets from a person or firm's balance sheet through sale, exchange, closure,bankruptcy, or some other means. Divestiture may occur when a person or company has acquiredmore than he/she/it can properly administer. This sort of divestiture may occur slowly; forexample, a corporation may slowly sell subsidiaries to concentrate exclusively on its corecompetence. On the other hand, divestiture may occur because a person or company has becomecash poor and needs to build liquidity very quickly.The sale, liquidation, or spinoff of a division or subsidiary. For example, a firm may decide todivest itself of a division in order to concentrate its managerial efforts on more promising

segments of its business.

Business alliance:-

A business alliance is an agreement between businesses, usually motivated by cost reduction andimproved service for the customer. Alliances are often bounded by a single agreement withequitable risk and opportunity share for all parties involved and are typically managed by anintegrated project team. An example of this is code sharing in airline alliances.

There are five basic categories or types of alliances:

Sales allianceSolution-specific allianceGeographic-specific allianceInvestment allianceJoint venture allianceIn many cases, alliances between companies can involve two or more categories or types ofalliances. A sales alliance occurs when two companies agree to go to market together to sellcomplementary products and services. A solution-specific alliance occurs when two companiesagree to jointly develop and sell a specific marketplace solution. A geographic-specific allianceis developed when two companies agree to jointly market or co-brand their products and servicesin a specific geographic region. An investment alliance occurs when two companies agree tojoint their funds for mutual investment. A joint venture is an alliance that occurs when two ormore companies agree to undertake economic activity together.

Definition of 'Sell-Off':-

The rapid selling of securities, such as stocks, bonds and commodities. The increase in supplyleads to a decline in the value of the security.

A sell-off may occur for many reasons. For example, if a company issues a disappointingearnings report, it can spark a sell-off of that company's stock. Sell-offs also can occur more


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broadly. For example, when oil prices surge, this often sparks a sell-off in the broad market (say,the S&P 500) due to increased fear about the energy costs companies will face.

Spin-off:-

A company can create an independent company from an existing part of the company by selling

or distributing new shares in the so-called spin-off.A situation in which a company offers stock in one of its wholly-owned subsidiaries ordependent divisions such that subsidiary or division becomes an independent company. Theparent company may or may not maintain a portion of ownership in the newly spun-offcompany. A company may conduct a spin-off for any number of reasons. For example, it maywish to divest itself of one industry so it can expand into another. It may also simply wish toprofit from the sale of the subsidiary. A spin off should not be confused with a split off.Spin-off. In a spin-off, a company sets up one of its existing subsidiaries or divisions as aseparate company.Shareholders of the parent company receive stock in the new company basedon an evaluation established for the new entity. In addition, they continue to hold stock in theparent company.

The motives for spin-offs vary. A company may want to refocus its core businesses, sheddingthose that it sees as unrelated. Or it may want to set up a company to capitalize on investorinterest.In other cases, a corporation may face regulatory hurdles in expanding its business andspin off a unit to be in compliance. Sometimes, a group of employees will assume control of thenew entity through a buyout, an employee stock ownership plan (ESOP), or as the result ofnegotiation.

Definition of 'De-Merger':-

A business strategy in which a single business is broken into components, either to operate ontheir own, to be sold or to be dissolved. A de-merger allows a large company, such as aconglomerate, to split off its various brands to invite or prevent an acquisition, to raise capital byselling off components that are no longer part of the business's core product line, or to createseparate legal entities to handle different operations.

Investopedia explains 'De-Merger'For example, in 2001, British Telecom conducted a de-merger of its mobile phone operations,BT Wireless, in an attempt to boost the performance of its stock. British Telecom took this actionbecause it was struggling under high debt levels from the wireless venture. Another examplewould be a utility that separates its business into two components: one to manage the utility'sinfrastructure assets and another to manage the delivery of energy to consumers.

Post-merger manoeuvres - dos and don'ts

August 20, 2001 Singapore Business Times By Till Vestring and Mike BookerPrintE-mailShareMerging companies in Singapore must bring the battlefield into focus.Over the next few months, as a number of the recently announced mergers in Singapore close,the new management teams will need to make a staggering number of decisions: Should we keepboth brands, give up one brand, or create a new brand? Whose IT system should we adopt? Howmany branches can we close and what is the best way to reconfigure the new branch network?


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Who should we select from the two merging companies as department heads? How many peoplewill become redundant? Which pension scheme is better?RELATED ARTICLESThe digital challenge to retail banksCONSULTING SERVICE

Mergers & AcquisitionsThe ability of the merging management teams to make the right decisions and the speed withwhich they can execute those decisions will determine whether their mergers will createshareholder value or whether they will, as the majority of M&A deals do, ultimately destroyshareholder value.Few companies in Singapore have experience in this game. Furthermore, several of the deals infront of shareholders now have been put together at very short notice, with little or no time spenton pre-planning the integration.Military manoeuvres best illustrate the amount of planning required to integrate two largecompanies successfully. The quality of upfront planning, the officers' skills, the training of thefield troops and the arsenal of available tools and processes all impact the outcome of such

military manoeuvres.Before beginning to plan for integration, merging companies must bring the battlefield intofocus. What is the strategic rationale behind the deal? What are the likely sources of value - costreduction, cross-selling or new bundled service offerings? Is rapid integration the key to successor is it more important to get the strategy right first?The best integration approach depends on the strategic rationale of the deal. Many deals fail toadd shareholder value because the integration process is not tailored to delivering the strategicgoals of the deal.In a previous article, we outlined the six basic strategic rationales for mergers: active investing,scale, scope, adjacency expansion, refining business models and redefining industries. For eachtype of merger, the importance of speed, the balance between operational focus and strategy andthe emphasis on cost-cutting versus revenue enhancement vary dramatically.For example, executives who use mergers to take their businesses in a fundamentally newdirection ('reinventing the business' or 'redefining the industry') need to sacrifice speed and focuson strategy first. Integration comes later and cost reduction tends to be less important.Take the proposed merger between StarHub and SCV. Top managers' challenge will be todevelop a profitable business model for their new bundled services (broadband Internet, cableTV, fixed and wireless telephony) and to cross-sell to their respective customer bases. Gettingthis right will take strategic thinking, testing and careful preparation.Acquisitions or mergers that intend to expand into adjacent markets, address new customer orproduct segments ('adjacency' or 'scope' rationales) require a balanced approach between strategyand integration.With Raffles Holdings' recent acquisition of Swissotel, Raffles will need to develop a two-tieredbranding concept - super premium (Raffles) and business travel (Swissotel) - and to createsynergistic linkages between the two hotel brands. In the meantime, however, the combinedcompany may be able to reap more immediate benefits by standardising reservations, marketingsystems and operational procedures, and merging common support functions.Finally, successful scale-driven mergers and acquisitions require rapid integration and ruthlesselimination of overlap. The challenge often lies more in the sheer scale of the businessesinvolved and the high degree of overlap than in the strategy for the new entity.


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Many of the deals currently in discussion in Singapore are primarily aimed at increasing scale:Celestica/Omni, Keppel Fels/Keppel Hitachi Zosen, OCBC/Keppel Capital, SMRT/Tibs andUOB/OUB are the most recent examples.The experiences of the most successful global 'serial acquirers' point towards some perhapscounter-intuitive lessons for success. The next 12 months will show whether these lessons also

apply to current mergers in Singapore.- Maintain a high degree of focus on the base businesses of the two merging companies duringthe transition process instead of throwing a lot of resources at the integration. Most mergers andacquisitions fail because the core businesses of the two companies deteriorate before theintegration is even complete. All but a very small part of the merging organisations should befocused on meeting existing revenue and profit targets, not on participating in the integration.- Don't rush. Speed is only valuable once the leaders have paved a well-flagged race course.Otherwise, speed quickly unravels into chaos. Investing in comprehensive, detailed planningupfront always pays off in an ultimately faster and smoother integration.- Deliver bad news quickly. One of the biggest challenges in a merger is that individuals arepreoccupied with their own future. As veteran acquirer Dennis Kozlowski, CEO of Tyco

International, observes: 'People are normally productive for about 5.7 hours in an eight-hour day,but any time a change of control takes place, their productivity falls to less than an hour.'Eliminating uncertainty improves productivity, even if employees lose their job. Term contractsand performance-based incentives can keep employees who will ultimately leave the companyfocused on working productively.- Disregard the popular principle, 'for each job, we will select the best person from eithercompany'. This maxim only slows down and disrupts the integration process in scale-drivenmergers. Selecting the best teams from either organisation rather than the best individuals makesfor much more rapid and smooth integration, because it avoids mixed teams of people who havepreviously not worked together.- Don't let systems integration issues dictate the timetable for integration. Integrating systemsoften takes one to two years. Customers and competitors are unlikely to give a new entity thatmuch time. Many processes, facilities, teams and systems can and need to integrate much morequickly.- Integration should come before any fundamental efforts to improve efficiency and effectivenessof processes. Companies that have tried to reengineer themselves while they are merging oftenget bogged down and stall as employees from both sides wrestle with new processes. Muchbetter to integrate rapidly first, and review core processes later.Management teams involved in mergers and acquisitions in Singapore have their work cut outfor them. The best way to create shareholder value from these deals is to tailor the integrationprocess to the strategic rationale of the deal and to follow the best practices developed byfrequent acquirers.

Till Vestring is global head of Bain & Company's merger integration practice and a partner andvice-president in Singapore. Mike Booker is a manager with Bain & Company in Singapore andhas extensive M&A experience in South East Asia


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Keys to Successfully Completing an M&A Deal

An M&A deal is the biggest deal of your life, so completing a successful transaction is key.Knowing a few key M&A tipswhether you're merging or acquiringincreases your odds ofsuccessfully completing an M&A deal. Secrets to success include the following:

Retain capable and experienced M&A advisors. You can't complete this transaction alone, and abusiness owner who represents himself in a life-altering deal is asking for trouble. You need adispassionate advisor, someone who has been through the process before and can guide you to aclose. This advice is especially true if you're selling a business.

Don't allow yourself to get too high or too low during the process. M&A is a roller coaster ride,with ups and downs around every turn as a deal you think is wrapped up one day falls apart thenext day . . . only to come back together on the third day. You have to be able to keep an evenkeel.

Check emotion at the door. Despite the frustrations of M&A, you need to keep your emotions in

check. Yelling and screaming don't get the deal done. Logic, facts, and a cool demeanor do.

Don't jump at the first offer. Ideally, you want to have multiple offers before deciding which dealto accept. Having options increases your chances of getting a great deal.

Don't hold out for a marginally better offer. If you want to do a deal and the offer is sufficient,take it. Part of something is better than all of nothing, which may be what you get if you waitaround for the perfect deal that never comes.

Know when your position is weak or strong. Overplaying a strong hand can chase off otherwisesuitable deals; misplaying a weak hand can scuttle the deal and perhaps your career!

The market is the best way to determine your company's valuation. In other words, businessappraisal services have limited value. Get out in the market and have actual conversations withactual Buyers.

Lobster Trap

Definition of 'Lobster Trap'A strategy used by a target firm to prevent a hostile takeover. In a lobster trap, the companypasses a provision preventing anyone with more than 10% ownership from convertingconvertible securities into voting stock.

Investopedia explains 'Lobster Trap'Examples of convertible securities include convertible bonds, convertible preferred stock, andwarrants.

Greenmail

A situation in which a large block of stock is held by an unfriendly company. This forces thetarget company to repurchase the stock at a substantial premium to prevent a takeover.


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It is also known as a "bon voyage bonus" or a "goodbye kiss".

Greenmail or greenmailing is the practice of purchasing enough shares in a firm to threaten atakeover, thereby forcing the target firm to buy those shares back at a premium in order tosuspend the takeover.

The term is a neologism derived from blackmail and greenbackas commentators and journalistssaw the practice of said corporate raiders as attempts by well-financed individuals to blackmail acompany into handing over money by using the threat of a takeover.

Grey Knight

In business, a white knight, or "friendly investor," may be a corporation or a person that intendsto help another firm.[1]There are many types of white knights. Alternatively, a grey knightis anacquiring company that enters a bid for a hostile takeover in addition to the target firm and firstbidder, perceived as more favorable than the black knight(unfriendly bidder), but less favorable

than the white knight (friendly bidder).

[2]

The first type, the white knight, refers to the friendly acquirer of a target firm in a hostiletakeover attempt by another firm. The intention of the acquisition is to circumvent the takeoverof the object of interest by a third, unfriendly entity, which is perceived to be less favorable. Theknight might defeat the undesirable entity by offering a higher and more enticing bid, or strike afavorable deal with the management of the object of acquisition.

The second type refers to the acquirer of a struggling firm that may not necessarily be underthreat by a hostile firm. The financial standing of the struggling firm could prevent any otherentity being interested in an acquisition. The firm may already have huge debts to pay to its

creditors, or worse, may already be bankrupt. In such a case, the knight, under huge risk,acquires the firm that is in crisis. After acquisition, the knight then rebuilds the firm, or integratesit into itself.

White Knight

Inbusiness, a white knight, or "friendly investor," may be acorporationor a person that intendsto help another firm.[1]There are many types of white knights. Alternatively, a grey knightis anacquiring company that enters a bid for a hostile takeover in addition to the target firm and firstbidder, perceived as more favorable than the black knight(unfriendly bidder), but less favorablethan the white knight (friendly bidder).

[2]

The first type, the white knight, refers to the friendly acquirer of a target firm in ahostiletakeoverattempt by another firm. The intention of theacquisitionis to circumvent the takeoverof the object of interest by a third, unfriendly entity, which is perceived to be less favorable. Theknight might defeat the undesirable entity by offering a higher and more enticing bid, or strike afavorable deal with the management of the object of acquisition.
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The second type refers to the acquirer of a struggling firm that may not necessarily be underthreat by a hostile firm. The financial standing of the struggling firm could prevent any otherentity being interested in an acquisition. The firm may already have huge debts to pay to itscreditors, or worse, may already bebankrupt. In such a case, the knight, under huge risk,acquires the firm that is in crisis. After acquisition, the knight then rebuilds the firm, or integrates

it into itself.

Examples of white knights

1953 - United Paramount Theaters buys nearly bankruptABC 1982 -Allied CorporationbuysBendix Corporationin a situation involving the "Pac-

Man defense". Allied is drafted in when the company that Bendix tries a hostile takeoveron fights back by buying up Bendix stock in attempt to create areversehostile takeover.

1984 -Chevron CorporationacquiredGulf Oilafter Gulf tried being a white knight toCitgoin 1982 in order for Citgo to avoid a hostile takeover byT. Boone Pickens. Pickensthen turned his attention to Gulf, leading to the Chevron-Gulf deal.

1984 -Sid Bassand his sons buying significant interest inWalt Disney Productionsas adefense againstSaul Steinberg'shostile bid for the company.

1986 -George Soros's Harken Energy buyingGeorge W. Bush'sSpectrum 7 1998 -Compaqmerging with financially weakDEC 2001 -Dynegyattempts to merge withEnronto cover Enron's massive debts (the merger

failed as it became obvious that Enron had been committing fraud, resulting in the Enronscandal).

2003 -SAPwas seen by analysts as the most likely to help defeatOracle's hostile bid forPeopleSoft, but it came to nothing.

2006 -Severstalalmost acted as a white knight to Arcelor as the merger negotiationswere in place betweenArcelorand Mittal Steel

2006 -Bayeracted as a white knight to Schering as the merger negotiations were in placebetween Schering andMerck KGaA

2007 -Nissin Foodslaunching a friendly 37bn yen ($314m; 166m) bid forMyojo Foodsafter UShedge fundSteel Partnersoffered 29bn yen to buy the firm.

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2008 -JPMorgan ChaseacquiredBear Stearnsallowing Bear Stearns to avoid insolvencyafter Bear Stearns stock price suffered a precipitous decline, with its market capitalizationdropping by 92%.

2008 -PNC Financial ServicesboughtNational City Corp.after National City wasdeniedTARP fundsin order to stay afloat due to increasing concerns that National Citywouldfaildue to thesubprime mortgage crisis

2009 -Fiattakes overChrysler, saving the struggling automaker from liquidation.Hostile takeovers

A "hostile takeover" allows a suitor to take over a target company whose management isunwilling to agree to a merger or takeover. A takeover is considered "hostile" if the targetcompany's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the
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arnshttp://en.wikipedia.org/wiki/Bear_Stearnshttp://en.wikipedia.org/wiki/PNC_Financial_Serviceshttp://en.wikipedia.org/wiki/PNC_Financial_Serviceshttp://en.wikipedia.org/wiki/National_City_acquisition_by_PNChttp://en.wikipedia.org/wiki/National_City_acquisition_by_PNChttp://en.wikipedia.org/wiki/National_City_Corp.http://en.wikipedia.org/wiki/National_City_Corp.http://en.wikipedia.org/wiki/National_City_Corp.http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Programhttp://en.wikipedia.org/wiki/Troubled_Asset_Relief_Programhttp://en.wikipedia.org/wiki/Troubled_Asset_Relief_Programhttp://en.wikipedia.org/wiki/Bank_failurehttp://en.wikipedia.org/wiki/Bank_failurehttp://en.wikipedia.org/wiki/Bank_failurehttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Fiathttp://en.wikipedia.org/wiki/Fiathttp://en.wikipedia.org/wiki/Fiathttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Fiathttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Bank_failurehttp://en.wikipedia.org/wiki/Troubled_Asset_Relief_Programhttp://en.wikipedia.org/wiki/National_City_Corp.http://en.wikipedia.org/wiki/National_City_acquisition_by_PNChttp://en.wikipedia.org/wiki/PNC_Financial_Serviceshttp://en.wikipedia.org/wiki/Bear_Stearnshttp://en.wikipedia.org/wiki/JPMorgan_Chasehttp://en.wikipedia.org/wiki/White_knight_(business)#cite_note-2http://en.wikipedia.org/w/index.php?title=Steel_Partners&action=edit&redlink=1http://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/w/index.php?title=Myojo_Foods&action=edit&redlink=1http://en.wikipedia.org/wiki/Nissin_Foodshttp://en.wikipedia.org/wiki/Merck_KGaAhttp://en.wikipedia.org/wiki/Scheringhttp://en.wikipedia.org/wiki/Scheringhttp://en.wikipedia.org/wiki/Bayerhttp://en.wikipedia.org/wiki/Mittal_Steelhttp://en.wikipedia.org/wiki/Arcelorhttp://en.wikipedia.org/wiki/Severstalhttp://en.wikipedia.org/wiki/PeopleSofthttp://en.wikipedia.org/wiki/Oracle_Corporationhttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/Enron_scandalhttp://en.wikipedia.org/wiki/Enron_scandalhttp://en.wikipedia.org/wiki/Enronhttp://en.wikipedia.org/wiki/Dynegyhttp://en.wikipedia.org/wiki/Digital_Equipment_Corporationhttp://en.wikipedia.org/wiki/Compaqhttp://en.wikipedia.org/wiki/Spectrum_7http://en.wikipedia.org/wiki/George_W._Bushhttp://en.wikipedia.org/wiki/Harken_Energyhttp://en.wikipedia.org/wiki/George_Soroshttp://en.wikipedia.org/wiki/Saul_Steinberg_(business)http://en.wikipedia.org/wiki/The_Walt_Disney_Companyhttp://en.wikipedia.org/wiki/Sid_Basshttp://en.wikipedia.org/wiki/T._Boone_Pickenshttp://en.wikipedia.org/wiki/Hostile_takeoverhttp://en.wikipedia.org/wiki/Citgohttp://en.wikipedia.org/wiki/Gulf_Oilhttp://en.wikipedia.org/wiki/Chevron_Corporationhttp://en.wikipedia.org/wiki/Takeover#Hostile_takeovershttp://en.wikipedia.org/wiki/Reverse_takeoverhttp://en.wikipedia.org/wiki/Pac-Man_defensehttp://en.wikipedia.org/wiki/Pac-Man_defensehttp://en.wikipedia.org/wiki/Bendix_Corporationhttp://en.wikipedia.org/wiki/AlliedSignalhttp://en.wikipedia.org/wiki/American_Broadcasting_Companyhttp://en.wikipedia.org/wiki/United_Paramount_Theatershttp://en.wikipedia.org/wiki/Bankrupthttp://en.wikipedia.org/wiki/Creditor


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offer directly after having announced its firm intention to make an offer. Development of thehostile tender is attributed to Louis Wolfson.

A hostile takeover can be conducted in several ways. A tender offer can be made where theacquiring company makes a public offer at a fixed price above the current market price. Tender

offers in the United States are regulated by the Williams Act. An acquiring company can alsoengage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simplemajority, to replace the management with a new one which will approve the takeover. Anothermethod involves quietly purchasing enough stock on the open market, known as a "creepingtender offer", to effect a change in management. In all of these ways, management resists theacquisition, but it is carried out anyway.

The main consequence of a bid being considered hostile is practical rather than legal. If the boardof the target cooperates, the bidder can conduct extensive due diligence into the affairs of thetarget company, providing the bidder with a comprehensive analysis of the target company'sfinances. In contrast, a hostile bidder will only have more limited, publicly-available information

about the target company available, rendering the bidder vulnerable to hidden risks regarding thetarget company's finances. An additional problem is that takeovers often require loans providedby banks in order to service the offer, but banks are often less willing to back a hostile bidderbecause of the relative lack of target information which is available to them.

Documents

Merger & Acquition Terms