Mergers & acquisitions: do poison pills cure takeover abuses?

Article Abstract:

The 'poison pill' defense to fend off unwanted corporate takeover efforts has been adopted by nearly 600 firms within the past three years. The defense, which can be adopted quickly without the approval of stockholders, issues a convertible stock to a takeover target's shareholders. It allows shareholders to convert stock to a raider's stock or own concern at very favorable terms, resulting in the dilution of a raider company's investment/stock. Three common poison pill plans are: flip-over provisions; flip-in provisions; and back-end provisions. The advantage of poison pill plans is that they increase the cost of a takeover bid, and provide bargaining power to the board of directors issuing the stock, which makes nonnegotiated acquisition of stock very expensive and difficult. There are negative results of poison pill plans, however. The plans can cause stock values to decrease, and they sometimes are unsuccessful at stopping takeovers. Another objection is that because the plans can be adopted without shareholder approval, some claim the plans deprive shareholders of their rights.

Methods, Corporate anti-takeover measures, Antitakeover strategies

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Make your next acquisition successful

Article Abstract:

Many acquisitions fail because buying companies tend to be overoptimistic about the growth prospects of the entity being sold. Financial managers and management accountants can help deter unproductive acquisitions by helping acquiring companies understand the factors that may affect the transactions. One set of influences are overt. They include overpaying, market share, cash flow and people. The other set of influences, which is typically hidden, includes fatal flaws. They include recent loss of market share or a major customer, resignation of important employees and executives, technologically outmoded products and bad reputation. Although not detectable at first inspection, these flaws can be identified through careful investigation. Financial managers and management accountants should remind their clients not to be easily attracted to companies being sold.

Acquisitions Analysis, Financial analysis

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Dealing with intermediaries

Article Abstract:

Many firms have used intermediaries to help them negotiate during mergers and acquisitions (M&A) to establish reasonable selling prices; collect information; and structure deals. Typical M&A intermediaries are investment bankers, accounting/consulting firms, and increasingly commercial bankers. The most important issue for a firm which is deciding whether to use an intermediary is to locate individuals who can work for the good of the firm. It is also important to select individuals with experience. Firms should also be aware of potential problems involved with working with M&A intermediaries including problems with: fee negotiations, motivation, confidentiality, and conflicts of interest.

Negotiation, Negotiations

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