Chapter 12: M&A Flashcards
(18 cards)
merger
A absorbed in B
consolidation
A and B merge into new entity C
ways of acquiring business
share purchase
asset sales
contribution in kinds
statutory merger
statutory VS non-statutory mergers
formal legal procedure, auto A&L transfer
asset purchases, no formal filling, manual transfer
pre-merger step
assess target value and compare it
calculate exchange ratio
determine amount of shares to be issue
exchange ratio
[W(Y)/Y shares] / [W(X)/X shares]
assess target value methods
appraisal of A&L
PV of earnings
PV of CF
share market price
merger procedure
board approval
SH approval (majority)
merger deed
merger deed includes
confidentiality agreement
non-shop clause
MAC (material adverse change) clause
break up penalties
remedies
monetary damage
(civil) injunction to prevent completion of merger
(common) invalidate SH meeting approving the merger
appraisal right: dissenting SH have their shares independently valued and sold back to company at faire price
Common law
appraisal = ineffective
- not available for listed (sell shares on market)
- complex procedure
- valuation process (expensive and time consuming)
civil law, can challenge merger
procedural flaws
conflict of interest
unfair exchange ratio
EU directive 78/855 (process of due care)
independent expert review fairness of merger’s exchange ratio before vote
conditions for M&A
low interest rate
low stock price
regulatory change (antitrust policy, tax)
DGCL 271 (sales of all assets)
BOD can sell all assets but require stockholder approval but hard to prove transaction is outside company scope
Art. 2361 ICC (asset sales)
sales of all assets = de facto amendment
prohibition of transaction that change corpo purpose
France real estate
real estate sales dont alter copo purpose but require vote is rpz +80% of assets
germany (asset sales)
require SH approval (3/4 majority)
