What is the Flip-in Strategy? The flip-in strategy is one of the basic types of poison pill strategies that companies use to benefit their shareholders and help defend their company from an unwanted takeover. In the flip-in strategy, the target company – in order to defend itself against a hostile takeover – dilutes the value of…
What is an Acquiree? An acquiree is a company, business, or corporation that makes for a viable candidate for a merger or acquisition. The acquirer is the company purchasing another company. The process of acquiring the target company can follow different scenarios, depending on the attitude of the acquiree’s management. Often, the owners and shareholders…
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…
