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Related Articles. Career Advice Acquire a Career in Mergers. Partner Links. Friendly Takeover Definition A friendly takeover occurs when a target company's management and board of directors agree to a merger or acquisition proposal by another company. What Is a Predator? A predator is a powerful, financially strong company that grabs up another weaker company in a merger or acquisition. Beachhead Acquisition : An initial block of shares of a takeover target sufficient to enable the purchaser to launch a proxy fight.
Proxy Fight : An attempt by a purchaser to acquire sufficient shares and voting commitments to take control of the takeover target.
Leveraged Buy-Out LBO : The purchase of all publicly- held shares of a takeover target by its management or some other "inside" group, usually through undertaking substantial debt hence, the "leverage" in order to take the company "private" and avoid a hostile takeover by an outsider.
Unfortunately, this usually hurts the company by the huge debt load and possibly poor quality of debt junk bonds, etc.
In general, these are very expensive or hassle filled events that would cause a potential acquirer to think twice about continuing their efforts to acquire the company.
The text has many other examples. Dissolution : The formal disbanding of a corporation, also known as the legal death of a company, which may occur by. Liquidation : The process by which corporate assets are converted into cash and distributed among creditors and shareholders according to specific rules of preference.
In general, there is no requirement in the U. However, certain states not including Delaware have constituency statutes that permit or require the target company board to consider the interests of the target company employees when approving a merger or recommending an offer.
The representations and warranties typically do not survive closing, and the acquiring company is not indemnified for any breaches of such representations and warranties. The acquiring company generally takes comfort from the fact that the target company, as a public company, is subject to the reporting and liability provisions of the U. Tender offer : In a tender offer, the bidder will file a tender offer statement Schedule TO with the SEC, which will include the offer document.
The contents of the tender offer statement are described in response to question 2. Exchange offer : In an exchange offer, the registration requirements of the Securities Act will apply because the bidder is offering securities as consideration. The contents of the registration statement are described in response to question 2.
The contents of the proxy statement are described in response to question 2. If the consideration includes securities of the acquiring company, the acquiring company must also prepare and file with the SEC a registration statement on Form S-4 Form F-4 if the acquiring company is a foreign private issuer. Assuming shareholders of the target company approve the merger, a certificate of merger is filed with the Secretary of State in the state of incorporation in which the surviving corporation is incorporated.
Any time a report or opinion has been received from a third party e. Generally, in a merger in which the consideration offered is cash and only the shareholders of the target are voting, no financial or pro forma financial data relating to the acquiring company is required.
In addition to the disclosure noted above, as described in the response to question 2. In addition to fees paid to legal and financial advisers, the acquiring company will incur costs for printing and mailing the required documentation to the target company shareholders.
Fees will also be payable to the exchange or paying agent retained by the acquiring company to accept and pay for shares tendered into a tender or exchange offer, and to pay the merger consideration to the target company shareholders in a merger.
In a hostile tender or exchange offer, the acquiring company often also engages, and pays a fee to, a public relations firm. If a filing is required by the Hart-Scott-Rodino Act, as described in the response to question 2.
In the event of an unsuccessful transaction, break or termination fees may be payable under certain circumstances. Break fees are discussed in the response to question 6. The SEC must clear any definitive proxy materials before they are mailed to shareholders. If securities are offered as consideration, either in a merger or in an exchange offer, the SEC must declare effective the registration statement with respect to such securities.
As described above, in a merger, the proxy statement and prospectus are usually combined into a single document that will be reviewed by the SEC. The Hart-Scott-Rodino Act prohibits the parties to certain transactions from consummating their transaction until after the parties have filed a notice with the FTC and the DOJ and the statutory waiting period has expired.
In a cash tender offer, a day waiting period commences from the date the acquiring party files notice with the FTC and the DOJ. In an exchange offer or acquisition of securities in the open market from a third party, a day waiting period commences when the acquiring company files a notice with the FTC and the DOJ. In a merger or other transaction to be effectuated pursuant to an agreement between the parties, a day waiting period commences when both the acquiring company and the target company file a notice with the FTC and the DOJ.
During the initial waiting period, either the FTC or the DOJ may issue a request for additional information to one or both of the parties, in which event the waiting period is extended automatically until 30 days 10 days with respect to a cash tender offer after substantial compliance with any such request.
Such compliance may take four to six months or longer. The rules also provide for early termination of the initial waiting period if during the initial waiting period the FTC and the DOJ determine not to take any further action. In rare instances, when an identified risk to national security cannot be mitigated and the parties are unwilling to abandon the transaction voluntarily, CFIUS may recommend that the President of the United States stop a transaction, or in the case of a transaction that has already closed, force the divestment of foreign interests in the U.
As part of its deliberations, CFIUS is also authorised to investigate whether a prospective foreign acquirer has had dealings with a sanctioned country or entity, and whether products, technology or funds from an acquired U.
CFIUS is authorised to review acquisitions of real estate that may be sensitive for national security reasons, and certain non-controlling transactions in which a foreign person acquires a minority interest in a U. In the final tranche of regulations implementing FIRRMA, CFIUS defined when parties are required to file in connection with transactions that have a nexus to critical technologies subject to export controls.
CFIUS operates under a statutory timeframe that includes a day initial review period and, when necessary, a second-stage day investigation period, with a potential day extension of the second-stage investigation phase in extraordinary circumstances.
Foreign investors who believe they are pursuing less sensitive transactions will be permitted to submit a shorter declaration to potentially gain a faster response from CFIUS. Following submission of the new declaration, CFIUS will have 30 days to respond, either by clearing the transaction, seeking a full notice of the transaction or initiating a unilateral review of the transaction if the parties are uncooperative.
Certain covered transactions will trigger the filing of mandatory declarations at least 45 days prior to closing. Acquisitions by investment funds with foreign limited partners are not subject to CFIUS review if certain conditions are met, including management of the fund by a U.
CFIUS actions and decisions are subject to judicial review; however, presidential actions may only be challenged on constitutional grounds. In recent years, we have seen increasingly rigorous scrutiny of transactions by CFIUS, with CFIUS requiring investigations in a greater percentage of transactions following the initial review period. Transactions in the information and communications sectors and transactions involving Chinese investors have received particular attention from CFIUS.
The complexity of the acquired businesses and the data privacy and cybersecurity issues implicated by their technologies and services are a likely contributor to the number of cases requiring second-stage investigations.
Before recommending a transaction, CFIUS may require parties to mitigate national security concerns identified during the review process.
Prospective buyers and sellers of sensitive businesses should be aware of the options available to allocate risk, including mitigation covenants, pre-emptive divestitures and reverse termination fees. In a cash tender offer or exchange offer, the bidder specifies the minimum number of shares that must be tendered in order for the transaction to succeed. These back-end mergers are described in further detail in the response to question 7. The level of shareholder approval required under Delaware law for a merger is a majority of the shares issued and outstanding.
The level of shareholder approval required under the principal U. Under the tender offer rules, the bidder must pay for the tendered securities accepted in an offer promptly upon closing of the offer.
In a merger, the merger consideration becomes payable upon effectiveness of the merger, at which time the target company shares are cancelled and only represent the right to receive the merger consideration subject to state appraisal rights, if any.
Hostile transactions may be time-consuming and difficult to complete. As a practical matter, these anti-takeover devices give the target company board time to seek an alternative transaction or negotiate better terms with the hostile bidder. However, simply because a proposal is made, directors of the target company are not obligated to put the company up for sale. After due consideration, the target company board may determine not to proceed with any proposal. If the target company has a poison pill or the target company has not opted out of any applicable state anti-takeover statute, it will be difficult for a bidder to complete a hostile offer without the cooperation of the target company board.
As discussed in the response to question 8. As a result, many hostile offers do not succeed and the target company has either remained independent or been acquired by a third party. There are no statutory limitations on the ability of a potential acquiring company to approach a target.
Before a target company provides confidential information to a potential acquiring company, it is common for the target and the acquiring company to enter into a non-disclosure agreement that restricts the disclosure and use of information provided to the acquiring company in connection with its consideration of a transaction.
The potential acquiring company will typically seek to limit the duration of any standstill provision, and will often seek to negotiate exceptions to the provision if the target enters into a transaction with another party or becomes subject to a hostile bid by a third party.
This provides a potentially powerful litigation tool to corporate directors and officers, so long as shareholders are fully informed when considering a transaction.
In a going-private transaction as described in the response to question 1. To help ensure the fairness of the process, boards of directors often will delegate to special committees — consisting entirely of independent directors — the task of negotiating and approving such transactions. In a going-private transaction structured as a merger, this burden of proof may shift to the shareholder challenging the transaction if there is a properly functioning special committee of the target company board or if the transaction is subject to the approval of a majority of the shares held by target company shareholders not standing on both sides of the transaction.
If a tender offer or exchange offer is commenced, the target company board must advise its shareholders of its position with respect to the offer or that it expresses no opinion or is unable to take a position, and the reasons for the position taken, lack of opinion or inability to take a position.
The duty to communicate a position on the offer applies regardless of whether the offer is friendly or hostile. Schedule 14D-9 requires disclosure of information relating to:. The target company board must promptly disclose and disseminate all material changes to the information set forth in a Schedule 14D-9, including any actions the target is taking in response to an unsolicited bid.
Failure to disclose actions taken in response to an unsolicited bid could result in an SEC enforcement action and fines. In a merger transaction, there is no requirement that the target company file and disseminate a Schedule 14D The tender offer is the most effective structure for a hostile offer because it can be commenced and, subject to the following sentence, consummated quickly, and generally does not require the cooperation of the target company board or management.
As discussed in the response to question 3. The acquiring company also will have access to any registration statements that the target company has filed in connection with the issuance of securities, as well as any proxy statements that the target company has used to solicit proxies in connection with meetings of target company shareholders. Companies operating in regulated industries may make filings with applicable government regulators that may be available to the public. As described in the response to question 5.
An acquiring company is also able to obtain non-public information from a target company if both parties are willing to sign a non-disclosure agreement. As a particular application of this rule, initial confidential contact from a party seeking to acquire all or part of the target company, or preliminary discussions following such contact, should not trigger disclosure obligations, assuming no circumstances exist which created such an obligation.
Even if material discussions are commenced, the general rule that disclosure is not required still applies. For example, care should be taken to avoid making statements that could give rise to an affirmative disclosure obligation if facts change. There is no requirement that preliminary merger negotiations be disclosed in the periodic reports of the target company or the acquiring company.
However, where one of the parties is in the process of registering securities for sale under the Securities Act, the SEC requires disclosure of material probable acquisitions and dispositions of businesses. To accommodate the need for confidentiality of negotiations, the SEC permits registrants not to disclose in registration statements the identity and the nature of the business sought if the acquisition is not yet probable and the board of directors of the registrant determines that the acquisition would be jeopardised.
However, unusual trading activity may create practical pressure that results in a decision by a target company to disclose preliminary merger negotiations. There is no legal requirement that a company restrict access to information with respect to merger negotiations; however, selective disclosure of material non-public information is prohibited.
If a person acting on behalf of a public company provides material non-public information to an investment professional or shareholder who may trade on the information, the company must make prompt public disclosure of that information by filing a current report on Form 8-K. The disclosure requirement is not triggered if the recipient of the material information has agreed to hold it confidential.
As a practical matter, companies engaged in merger negotiations generally will limit the number of persons who are aware of the discussions so as to avoid premature leaks to the market that may jeopardise completion of the transaction. In addition, persons with material non-public information such as negotiations regarding a merger or offer must refrain from trading shares of the target company or the acquiring company while in possession of such information, and must not disclose such material non-public information to persons who then trade on the basis of such information.
There is no statutory trigger in the U. See the response to question 2. The acquiring company must update and correct information disseminated to the target company shareholders if that information becomes inaccurate or materially misleading.
If any material change is made by the acquiring company to the offer document in a tender offer or exchange offer, the offer must be kept open at least five additional business days after such change, and at least 10 additional business days if there is a change in the price or the percentage of securities sought in the offer. This period must not exceed 12 months, but it can be extended if there are special reasons for doing so.
Visit the Swedish Tax Agency for more information about merger plan decisions in Swedish. Foreign companies involved in the merger apply for permission under the rules in force in those countries. If there are no obstacles to the merger, the Swedish Companies Registration Office must register permission to implement the merger plan. The Swedish Companies Registration Office registers its sanction of the merger and sends a merger certificate to the Swedish company.
If the Swedish Companies Registration Office decides that the company is not allowed to carry out the merger, the company can appeal the decision. The appeal must have been lodged with the Swedish Companies Registration Office within two months of the decision. After the registration authorities of the merging companies authorise the implementation of the merger plan and issue merger certificates, the merger must be completed.
This is done differently depending on which company, the Swedish or the foreign company, is the transferee in the merger. If the Swedish company is the transferee, it must notify the Swedish Companies Registration Office that the merger has been completed, no later than six months after the merger certificate was issued.
The legal effects of the merger come into force when we at the registration office register the merger. The legal effects include the dissolution of the transferor company and the transfer of its assets and liabilities to the transferee company.
The Swedish Companies Registration Office informs the registration authority of the foreign company that the merger has been completed.
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