What is the Flip-over Strategy? The flip-over strategy is a poison pill strategy used by companies to help protect themselves from a hostile takeover. With the flip-over strategy, shareholders of the target company have the opportunity to purchase shares of the acquiring company – the company looking to engage in a hostile takeover – at…
What is a Toehold Position/Purchase? A toehold position is an acquisition or investment strategy where an investor targets a particular company but buys less than 5% of the company’s stock. This “toehold” position is sufficient to enable them to exert pressure on the company, whether aiming to ultimately acquire it or merely to raise its…
What is a Mixed Offering? In merger and acquisition transactions, a mixed offering (also known as a mixed payment) is a form of payment in which an acquirer uses a combination of cash and non-cash payment methods (e.g., equity) to fund the purchase of the target company. For example, an acquiring company employs a mixed…
What is a Defense Mechanism? In M&A transactions, a defense mechanism (also known as a defense strategy) is any set of procedures that are employed by a target company to prevent a hostile takeover. A hostile takeover is a type of acquisition in which a bidder takes over a target company without the consent, and…
What is Purchase Price Allocation? In acquisition accounting, purchase price allocation is a practice in which an acquirer allocates the purchase price into the assets and liabilities of the target company acquired in the transaction. Purchase price allocation is an important step in accounting reporting after the completion of a merger or acquisition. The currently…
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. The resulting…
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…
