Summary: M&a Class Notes

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• class notes

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• What is the general rule regarding acquisitions for cash or cash equivalents?

  •  when  the purchasing firm is paying cash or cash equivalents (non-voting, non-convertible stock or non-convertible debt), in general the shareholders of the purchaser do not vote.

• What is the general rule in a cash for assets acquisition?

  • In a cash-for-assets acquisition, the shareholders in the target vote, but the shareholders in the purchasing firm don’t.

• What is the general rule in a cash merger?

  • In cash mergers, the shareholders of the target vote, if an only if the target mergers into the purchasing corporation and there is no change to the rights and privileges

• What is a reverse acquisition?

  • A reverse acquisition is having the actual target firm technically purchase the assets of the actual purchasing firm

• How are the voting rights allocated in a reverse acquisition?

  • planners can allocate the voting rights to shareholders in the purchasing firm and eliminate the shareholder voting rights in the target.

• What are the dissenter's rights?

  • Dissenter’s rights are also known as “appraisal rights” or “buy-out rights”.  They give the right to petition a state court for the fair cash value of their shares.

• What is a statutory merger or consolidation (Plain vanilla merger)?

  1. 2 corporations (A & B) with separate owners (their shareholders), B merges into A, so A is the surviving corporation.  

  1. The shareholders of A continue to hold their stock.  The shares of A are exchanged for the shares in B and all the assets and liabilities of B are transferred to A.
  2. The shareholders of B now hold newly-issued additional A stock, and B shares are cancelled.
  3. The transaction is considered as an A reorganization and therefore, a tax-free merger

• What is an asset acquisition?

  • The buyer acquires certain enumerated assets and liabilities of the seller in exchange for the buyer’s cash, stock or other property.  
  • The acquirer only acquires those liabilities explicitly assumed.  
  • The seller will continue in place as it existed prior to the transaction.

• What is a squeeze out?

  • Applies for the minority of shareholders.  
  • If the buyer acquires typically 90% in the stock purchase step of the transaction, stockholders approval may not be required to effect the back-end merger, which may allow the buyer to use a stock purchase to acquire a company even when it is not able to directly acquire every last share.

• What is a stock purchase?

  • The buyer negotiates directly with the target and its stockholders to acquire the target’s outstanding shares of capital stock directly from each of the target’s stockholders.  
  • The buyer may pay cash, capital stock, debt or other property or a combination of any of these. 
  • After the closing, the target will continue as it existed prior to the acquisition with respect to the ownership of its assets and liabilities, its employees and the conduct of its business.