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Mergers and acquisitions (M&A) involve significant business transactions where companies either join to form a new entity or one company acquires another. A merger results in a new single company, while an acquisition usually makes the target a subsidiary. Common M&A methods include tender offers, stock swaps, and various filing types. Hostile takeovers and buyouts represent aggressive acquisition strategies. This overview covers essential definitions, common types, and regulatory filings that shape the M&A landscape.
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Mergers & Acquisitions Mark Siciliano
Definitions • Merger – A joining of two companies to form a new single company. Executives and board may reflect equality upon consummation of the transaction. (Sears/Kmart) • Acquisition – Taking over of nearly all of one company by another entity. The result will usually be the target becoming the subsidiary of the acquiring company (Progress Energy/Duke Energy)
Common Types • Tender Offer – Acquiror offers cash or a combination of cash/stock directly to target shareholders. Offer must remain open for 20 business days and a minimum number of target shares must be tendered • Stock Swap – Shares of acquiring company are offered for each share outstanding of target company. Upon completion target shareholders will have some ownership of larger entity.
Filing Types • Tender offer – Acquiror must file an SC TO-T. Target must respond with an SC 14D9. • Stock Swap – Either acquiror (or newco) must file an S-4; the issuance of new securities. • In both instances a Merger Agreement (usually in the form of an 8-K) and a proxy must be filed. Proxies may accompany the aforementioned documents or may be issued via a DEFM14A/DEFM14C.
Hostile – Acquiror makes offer to board of target company and is rejected. Acquiror continues without support of target • Buyout – An investor group (that may include current management) and makes the acquisition • Bear Hug – Letter is sent to target ‘threatening’ a takeover if the board doesn’t agree to terms of acquiror (usually board representation)
