1. Friendly Agreement Hostile Agreement
Date (in
weeks)
Cash Tender Offer Date (in
weeks)
Cash Tender offer
1-2 Bidder CEO makes phone call to the
target (CEO)
Bidder receives information fromthe
target and checks the target certificate
of incorporation.
Bidder hires a consulting team for a
valuation of the target
Bidder hires a legal adviser team for the
projectto structurethe offer program,
draftand negotiate documentation and
agreements’ provisions
Bidder signs a non-disclosureagreement
(with deal protection devices) with the
target and receive non-public data of
the target and all due diligence
materials (fromthat day, it cannot trade
any share of the target w/o violation of
law. Also, it can limit any discussion
with knowledgeableinvestors)
Bidder drafts merger agreement
providing the tender offer
Bidder negotiates merger agreement
with the target CEO (who will secretly
and regularly consults its board of
directors)
Bidder files clearance under HSRAct
with the US DoJ and FTC, it will require
an automatic notification requirement
waiting period and extension of 30 days
(but 15 days for cash tender after
compliance with any such request). HSR
thresholds aresubjectto size
transaction and sizeof person tests
1-2 Bidder CEO makes phone call
to the target CEO
Bidder checks the target
certificate of incorporation
Bidder talks to rating agencies
for company’s rating
Bidder talks to large
institutional investors agencies
about this acquisition plan
Bidder hires a consulting team
for due diligence and valuation
of the target
Bidder hires a good legal
advising team for the drafting
of the proposaland the
structureand strategy of the
program
Bidder discusses secure
financing and strategy with
investment bankers and others
Bidders hires financial PR firm
for media road show and
others media involvement
Bidder drafts tender offer
proposalproviding possible
different pricing offers
Bidder calls again the target
CEO and sale him his due
diligence finding while offering
a new price and other exit
provisions
Target hires investmentbank
to analyze the bidder’s offer,
assistwith the target response
to the offer and the
development of the defense
campaign platform, strategy
2. and tactics
Target hires a law firmto brief
its board and its management
on fiduciary duties, ensures
compliance with federal
securities laws and state
corporatelaw, reviews all
communications, drafts any
proxy/tender offer materials,
and handles any possible
litigation
3 Both boards conductpre-marketsigning
check and approvemerger agreement
Merger agreement executed
Pending transaction leak to the media
(issuepress release)
Bidder files preliminary communication
on Schedule TO by publishing a
summary advertisementin a daily
newspaper with national circulation
(such as the Wall Street Journalor The
New York Times)
Bidder team drafts and files tender offer
statement on Schedule TO
Bidder mails tender offer material to
target shareholders (20 days offer
period commences at 12:01 AMon this
day)
Target has within 10 days to draftand
file recommendation statement on
schedule 14D-9. 14D-9/A mustbefiled
promptly. This duty to communicate a
target board position on the offer
applies regardless of whether the offer
is friendly or hostile. Itmust also
disclosewhether its financial advisor
believes the bidder’s offer is fair and
whether its executive officers and
directors intend to tender their own
shares.
3 Executive committee meets to
evaluate their options
including implementation of
defense strategies and how to
keep the board of directors
informed and involved
Target hires a financial PR firm
to draft press releases, ‘fight’
letters and other
communication related to
media involvement
Bidder board must conduct
pre-marketsigning check and
approvedifferent pricing
offers and other provisions
Bidder files pre-liminary
communication on Schedule
TO by publishing a summary
advertisement in a daily
newspaper with national
circulation (such as the Wall
Street Journal or the New York
Times)
The bidder must give TV,…
interviews to pressurethe
target including lawsuits
Bidder launches unsolicited
offer, drafts and files tender
offer statement on schedule
3. TO
Bidder mails tender offer
material to target shareholders
(20 days offer period
commences at 12:01 AMon
this day)
Target has within 10 days to
draftand file recommendation
statement on schedule 14D-9.
Target has a duty to
communicate its board
position regardless of whether
this offer is hostile by filing a
14D-9 or 14D-9/A promptly.
Bidder hires antitrustlegal
adviser to file a clearance
under HSR Act with the US DoJ
and FTC, it will requirean
automatic waiting period and
extension of 30 days (but 15
days for cash tender after
compliance with any such
request)
7 Filing of material changes will require
extension of offer from5 to 20 days,
amendment must be filed promptly and
may subjectofferor to an obligation to
extend the tender offer. Also, the
bidder may voluntarily extend the offer
if it publicly announces such extension
by the business day following the
scheduled expiration date and discloses
the approximate number of shares
tendered as of the date of such
extension.
Bidder files final schedule TO/A to
include results of the tender offer
Tender Offer periodis normally closed
absent of any staff comment and
significant extension
7 Target board may meet to
review and approvethe
merger proposal. Its
management sets up investor
meetings, organizes meetings
and calls with proxy advisory
firms and tracks the flow of
tenders and votes
Any filing of material change
will extent the tender offer
period
Bidder files final schedule TO/A
to include results of the tender
offer
Tender Offer periodis
normally closedabsent of any
staff comment and significant
4. Bidder promptly pays for target
company shares tendered. The FRB
regulation prohibits a lender from
extending credit that is secured by
publicly traded stock in the amountthat
exceeds 50% of the market value of the
stock and no assetof the target can be
pledged as collateral for financing until
the 2nd
step squeezeout is complete
Bidder CEO calls again the target CEO for
an express authorization
If the bidder owns 90+% shares of the
target company, it is eligible for a short
formmerger
o Bidder files a certificate of merger
with the secretary office
o Bidder pays the remaining
shareholders who may be entitled
for appraisalrights under ‘all
holders/best price’s provision
If the bidder owns only a majority of
shares over 50% butless than 90% of
the target and the target is incorporated
in Delaware (251 (h) merger)
o Itwill useits top up option and
buy additional tendered share
after the tender offer to reach the
90% threshold
o Bidder files a certificate of merger
with the secretary office
o Bidder pays the remaining
shareholders.
Remember that any second step merger
transaction must be executed within
one year of the date of termination of
the tender offer and can take a formof
shortformmerger, long form or 251 (h)
merger
Only option left now is the long form
merger
extension
Bidder promptly pays for
target company shares
tendered. The FRB regulation
prohibits a lender from
extending credit that is
secured by publicly traded
stock in the amount that
exceeds 50% of the market
value of the stock and no asset
of the target can be pledged as
collateral for financing until
the 2nd
step squeezeout is
complete
Bidder CEO calls again the
target CEO for transfer of
power (boards, executives and
other issues) and requestan
express authorization to buy
the remaining shares
Plan for extraordinary board
meeting and (shareholders) for
integration and new culture
and organizationalstructureof
the futurecompany
If the bidder owns 90+shares
of the target in 2 to 7 days, it
will close its shortform
merger, all remaining minority
shareholders squeezeout.
The worstcase scenario is the
long formmerger, in
unchanged hostile
environment, Itmay not
achieve it (fight for more seats,
control, ROI,…) or it will take
months or years to close with a
lot of lawsuits and legal costs
(the premium will be too high
in this kind of environment)