Corporate Finance Team
M&A
• Occurs after an IPO
• Public, Floated or Listed is the same as IPO
• Established a considerable reputation
M&A
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Buy the all of the shares of the other company
Bidder – company taking over
Target – company being taken over
If successful – target becomes subsidiary
M&A
• Deals are recommended or hostile
• Recommended – directors of target recommend this to
shareholders
• Advise shareholders to accept bidder’s offer
• Offer document – board’s recommendation
M&A
• If not, reject the bid
• This is when the bid becomes ‘hostile’
• ‘Marching Rights’ – if it matches competing offers in 48
hours
• Generally ‘highly leveraged’ – borrow heavily and load
onto the target
The Bank’s role
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Bidder advised by a bank
Coordinates activities
Issues offer document
Underwrites the cash alternative
Share issue takeover – appoint a broker for subunderwriting
• Market sentiment – monitors the market and LSE
Takeovers
• Bidder makes an offer to shareholders for a certain price
• Cash payment not new shares
• No longer a public company
Takeovers
Takeovers
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Public companies don’t have to pay cash
Offer their own shares
Combined business is seen as better off
Required to provide cash alternative
Bidders need to borrow money to fund this
Takeovers
• Bidder makes an offer to shareholders for a certain price
• Cash payment not new shares
• No longer a public company
Hostile Takeovers
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Persistence
Target’s board are incompetent
Determined to move in to new markets
Want to take out a competitor
Become market competitor
Hostile Takeovers
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Media Attention
Fees for City’s advisers
Fees are seen as irrelevant
Target loses – management sacked
Bidder wins – astute management
Costs of merging are large already
Advisor fees are seen as minimal in comparison
Share Price
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Low share price – exposed
Out of a job
Bid announced – target’s share price
Increases – bidder wants the shares
Buy shares to sell out to the bidder at a higher price
M&A
Timetable of a Takeover
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Bidder plans months in advance
Target prepares itself if it knows it may be subjected
Chairman contact each other
Offer period – publicly announced
Offer document – within 28 days
Approach its own shareholders
Irrevocable undertakings – accept offer
Timetable of a Takeover
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Offer document from the bank
Contractual offer – financial document
Convince the target’s board
In 14 days – ‘First defence circular’
Closing date
Let the bid lapse, extend it or ‘declare it unconditional as
to acceptances’ (more than 50% of shares)
• Target may issue a profit forecast to defend itself
Timetable of a Takeover
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Reaches 90% of shares – can buy 10% compulsory shares
Squeeze out
Concert party – allies buying shares
Payment can be in cash or shares
Paid immediately on completion or deferred