What is a Pre-offer Defense Mechanism? Pre-offer defense mechanism is a general term for a broad group of defensive strategies in M&A transactions. Essentially, the pre-offer defense mechanism is a preemptive strategy undertaken by a target company to protect itself from a possible bidding offer from a would-be acquirer in a hostile takeover. Objectives of Pre-offer…
What is a Post-offer Defense Mechanism? “Post-offer defense mechanism” is a term used to label a broad group of strategies that can be employed by the target company of a hostile takeover. Unlike pre-offer defense strategies that are more concerned with preventative steps, post-offer defenses are executed when there is a real threat of a…
What is the Black-Scholes-Merton Model? The Black-Scholes-Merton (BSM) model is a pricing model for financial instruments. It is used for the valuation of stock options. The BSM model is used to determine the fair prices of stock options based on six variables: volatility, type, underlying stock price, strike price, time, and risk-free rate. It is…
What is NPV vs IRR? When analyzing a typical project, it is important to distinguish between the figures returned by NPV vs IRR, as conflicting results arise when comparing two different projects using the two indicators. Typically, one project may provide a larger IRR, while a rival project may show a higher NPV….
What are Killer Bees? In the mergers and acquisitions landscape, “killer bees” refers to companies or individuals that assist a company in avoiding a hostile takeover. They are similar to white knights, but utilize a much wider range of takeover defense strategies. Killer bees derive their name partially from the fact that they typically act…
What is a Show Stopper? As is true in the entertainment industry, a show stopper in the business/financial world is an event or situation that causes production or progress to cease. Forward movement, success, or completion of a task, assignment, or project are hindered because of a show-stopping event or circumstance. Show Stoppers in Hostile…
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…
