What are Friendly Takeovers vs Hostile Takeovers? In mergers and acquisitions, there is often confusion between friendly takeovers vs hostile takeovers. How can one differentiate between the two? The difference between a friendly and hostile takeover is solely in the manner in which the company is taken over. In a friendly takeover, the target company’s…
What is a Fair Price Amendment? A fair price amendment is a provision contained in a public company’s charter that requires potential acquirers of the company to pay “a fair price” in order to acquire shares held by the company’s stockholders. The formula for calculating the fair market price that bidders should pay is provided…
What is a Bear Hug? A bear hug is a hostile takeover strategy where a potential acquirer offers to purchase the stock of another company for a much higher price than what the target is actually worth. The acquirer makes a generous offer to acquire the company at a price that exceeds what other bidders…
What are the Different Motives for Mergers? Companies pursue mergers and acquisitions for several reasons. The most common motives for mergers include the following: 1. Value creation Two companies may undertake a merger to increase the wealth of their shareholders. Generally, the consolidation of two businesses results in synergies that increase the value of a…
What is a Lobster Trap? A lobster trap is a strategy that target companies utilize in the event of a hostile takeover attempt. The strategy involves the use of a charter issued by the target company with a directive that prevents shareholders with more than 10% of convertible securities – which includes warrants, convertible bonds,…
What are Priority Sector Lending Certificates (PSLCs)? Priority sector lending certificates (PSLCs) are certificates that are issued against priority sector loans for banks. They allow banks to meet their targets and sub-targets – when it comes to priority sector lending – by buying the instruments. The banks use PSLCs to guard against shortfalls. The lending certificates…
What is Transaction Risk? Transaction Risk is the exposure to uncertainty factors that may impact the expected return from a deal or transaction. It can include but is not limited to foreign exchange risk, commodity, and time risk. It essentially encompasses all negative events that can prevent a deal from happening. A deal with a…
What are Negative-Yielding Bonds? Negative-yielding bonds are bonds that cause bondholders to lose money when they mature. This happens when holders of such bonds will end up with less money than what they used to purchase them. In 2019, the amount of negative-yielding bonds in the global market is $13 trillion. How do Negative-Yielding Bonds…
What is Merger Monday? Merger Monday refers to the practice by companies of announcing major mergers and acquisitions on a Monday. The involved parties finalize the details of the deal over the weekend and make the announcement first thing on Monday morning. The goal is, of course, to pass on the information about the joining…
