Defensive tactics agains merger and acquistion

11,939 views
11,427 views

Published on

Published in: Business, Economy & Finance
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
11,939
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
348
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Defensive tactics agains merger and acquistion

  1. 1. DEFENSIVE TACTICS MUHAMMAD SOHAIL KHALIL
  2. 2. Defensive Tactics <ul><li>Following are the different tactics used by companies to avoid acquisitions </li></ul><ul><li>Divesture </li></ul><ul><li>Spin offs </li></ul><ul><li>Split ups </li></ul><ul><li>Golden parachutes </li></ul><ul><li>Crown jewels </li></ul><ul><li>Poison pills </li></ul><ul><li>White Squire </li></ul>
  3. 3. DIVESTURES <ul><li>In divesture a firm sells assets or a division to the highest bidder on the sale it receives cash which is reinvested in new assets or returned to stock holders as dividends or go for stock buy backs </li></ul><ul><li>By Doing so the target firm creates value for the share holders and making the company less attractive for the acquirer </li></ul>
  4. 4. SPIN-OFFS <ul><li>In a spin-off a firm separates out assets or a division and creates new shares with claim on this portion of the business </li></ul><ul><li>Existing stock holders in the firm receive these shares in proportion to their original holdings they can choose to retain these shares or they can sell it in market </li></ul>
  5. 5. SPIN-OFFS <ul><li>The difference between the spin off and divesture is that no cash is generated in the Spin off </li></ul><ul><li>Second the division being spun off becomes an independent entity </li></ul><ul><li>Spin-off can be effective way of creating value when subsidiaries or divisions are less efficient than they could be and the fault lies with the parent company </li></ul>
  6. 6. SPLITUPS <ul><li>In split-up which can be considered as expanded version of a spin-off the firm splits into different line of businesses distributes shares in these business lines to the original stock holders in proportion to their original owner ship in the firm </li></ul><ul><li>Split-up is similar to spin-off in so far as it creates new shares in the undervalued business line in this case how ever the existing stock holders are given the option to exchange their parent company stock for these new shares which changes the proportional ownership in the new structure making it difficult for acquirer </li></ul>
  7. 7. GOLDEN PARACHUTES <ul><li>Target firms make large payments to the managers of a firm if it is acquired which in turn will lead to Cash drain from these payments would render the acquisition or merger in feasible which if acquired will leave the acquirer with huge debt level </li></ul>
  8. 8. CROWN JEWELS <ul><li>IN this a target firm sells major assets (crown jewels) when faced with a take over threat this is sometimes referred to as the Scorched earth strategy </li></ul><ul><li>By doing so the target firm again makes the deal unattractive </li></ul>
  9. 9. POISION PILL <ul><li>In poison pill which occasionally really do amount to committing economic suicide to avoid a takeover are such tactics as borrowing on terms that require immediate repayment of all loan if firm is acquired </li></ul><ul><li>Secondly a right to buy shares in the merged firm at a bargain price the right is granted to the target firm shareholders contingent on another firm acquiring control </li></ul><ul><li>The right dilutes the stock so much that the bidding firm loses money on its shares thus wealth is transferred from bidder to the target </li></ul>
  10. 10. WHITE SQUIRE <ul><li>In white squire an individual or company who is friendly to the current management is asked to buy enough of the target firm shares to block a hostile take over making it almost impossible for the acquirer </li></ul><ul><li>Other methods include trying to convince the target firms shareholder that the price offered is too low </li></ul>

×