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takeoverdefenses

takeoverdefenses
1.TakeOverdefensesMERGERANDACQUISITION
2.Introduction<ul><li>Notallmergersarewelcome</li></ul><ul><li>Duringthe1980s,avarietyofdevices
weredevelopedtodefendfirmsfromunwelcometakeoverproposals</li></ul><ul><li>Antitakeoverdefenses
</li></ul><ul><ul><li>Preventivemeasures</li></ul></ul><ul><ul><li>Activemeasures</li></ul></ul>Chapter
19
3.<ul><li>PoisonPill</li></ul><ul><li>Flipinplan</li></ul><ul><li>Flipoverplan</li></ul><ul><li>Backend
plans</li></ul><ul><li>Votingplans</li></ul><ul><li>Peoplepill</li></ul>Preventivemeasures<ul>
<li>Greenmail</li></ul><ul><li>Standstillagreement</li></ul><ul><li>Whiteknights</li></ul><ul><li>White
squire</li></ul><ul><li>Pacmandefense</li></ul><ul><li>Restructuring</li></ul><ul><ul><li>Activemeasures
</li></ul></ul>
4.MemorandumArticleofAssociationCorporatecharteramendmentsSharkRepellantLegalexistence
CorporationsnameExistencepurposeAuthorizedShareIdentityofDirectorsRulesgoverningtheinternal
management
5.Corporatecharteramendments<ul><li>Commontypes</li></ul><ul><ul><li>Classifiedboards</li></ul>
</ul><ul><ul><li>Supermajorityprovisions</li></ul></ul><ul><ul><li>Fairpriceamendment</li></ul></ul><ul>
<ul><li>DualCapitalization</li></ul></ul>
6.Classifiedboards<ul><li>Dividedintodifferentclasses</li></ul><ul><li>Oneclasstobereselectedeach
year</li></ul><ul><li>Delayseffectivetransferofcontrolintakeover</li></ul><ul><li>Example</li></ul><ul>
<ul><li>Supposetwelvemembersinagroup</li></ul></ul><ul><ul><li>Dividedintogroupofthree</li></ul>
</ul><ul><ul><li>Hostilebidderhastowaittwomoreannualmeetingsinspiteofholdingmajorityofstocks</li>
</ul></ul>
7.Supermajorityprovisions<ul><li>Approvalbylargenumberofvotes</li></ul><ul><li>2/3rdor80%votes
formergerapproval</li></ul><ul><li>Boardoutclause</li></ul><ul><ul><li>Giveupthesupermajority
provision</li></ul></ul><ul><li>Interesteddirectorscannotparticipateinvotingonissueofmerger</li></ul>
8.Fairpriceamendments<ul><li>Acquirertopayfairpricetoshareholdersofthefirm</li></ul><ul><li>Statein
formofminimumpriceorP/Emultiple</li></ul><ul><li>Useattwotieredbidbytheacquirer</li></ul>
9.Dualcapitalization<ul><li>Newclassofsecuritieswithvotingrights</li></ul><ul><li>Tofriendlystockholders
</li></ul><ul><li>Stockholderspreferspecialvotingstocks</li></ul><ul><ul><li>Increasedividendandpower
</li></ul></ul><ul><li>Managementretainsthevotingpower</li></ul>
10.ActiveAntitakeoverdefenses
11.Greenmail<ul><li>Buyingbackofshareatpremium</li></ul><ul><li>SigningaStandstillAgreement</li>
</ul>StandstillAgreement<ul><li>Nottoincreaseholdingsforparticularperiod</li></ul><ul><li>Accompanied
bytargetsagreement</li></ul><ul><ul><li>Acquirer'srefusal</li></ul></ul><ul><ul><li>Preventsfallinginto
handsofanotherbidder</li></ul></ul>
12.WhiteKnights<ul><li>Anothercompanymoreacceptable</li></ul><ul><li>Morefavorabletermsthan
originalbidders</li></ul><ul><li>Termsrequired</li></ul><ul><li>Nottodisassemble</li></ul><ul><li>No
layoffs</li></ul>
13.Whitesquire<ul><li>Targetsellsonlyablockofitsstocktothirdpartyitconsiderstobefriendly</li></ul>
<ul><li>Inreturn,whitesquiremayreceive:boardseats,dividend,discountedshares</li></ul><ul>
<li>Preferredstockusuallyusedinwhitesquiretransactionsbecauseitenablesboardtotailorcharacteristics
ofstockasdescribed</li></ul>
14.PacManDefense<ul><li>Highlyaggressivedefensetechnique</li></ul><ul><li>Countertenderofferin
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response</li></ul><ul><li>Possibleonlyiffinancialresources</li></ul><ul><li>Mayresultinto</li></ul><ul>
<ul><li>Maydefend</li></ul></ul><ul><ul><li>Mayendupextremelydestructive</li></ul></ul><ul><ul>
<li>Highdebts</li></ul></ul>
15.Restructuring<ul><li>Goingprivate</li></ul><ul><ul><li>Buyingbulkoftheshares</li></ul></ul><ul>
<li>Salesofattractiveassets</li></ul><ul><ul><li>Makinglessattractive</li></ul></ul><ul><li>Undertaking
majoracquisitions</li></ul><ul><ul><li>Drainingitsexcesscashbalance</li></ul></ul><ul><li>Liquidatingthe
firm</li></ul><ul><ul><li>Whenliquidationisbetterthanthebid</li></ul></ul>

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