Mergers, Acquisitions, and Corporate Restructurings

By Patrick A. Gaughan | Go to book overview

3
LEGAL FRAMEWORK

OVERVIEW
The legal requirements governing mergers and acquisitions differ depending on whether a transaction is a friendly merger or a hostile deal. Within each of these categories the rules vary depending on whether the transactions are cash or stock financed. The regulatory framework of each of these alternatives is described below.
Friendly merger—cash financed. The bidder is required to file a proxy statement with the SEC which describes the deal. Usually the bidder has to file a preliminary statement first. If the Commission makes comments, the preliminary statement may be changed before it is finalized. The finalized proxy statement is then mailed to shareholders along with a proxy card which they fill out and return. Following this, the deal has to be approved at a shareholders meeting whereupon the deal can then be closed.
Friendly merger—stock financed. This process is similar to a cash financed merger except that the securities used to purchase target shares have to be registered. The bidder does this by filing a registration statement. Once this is approved, the combined registration/proxy statement can be sent to shareholders.
Hostile deal—cash tender offer. The bidder initiates the tender offer by disseminating tender offer materials to target shareholders. Such offers have to be made pursuant to the requirements of the Williams Act. This law is discussed at length in this chapter. However, unlike the friendly transactions described above, the SEC does not have an opportunity to comment on the materials that are sent to shareholders prior to their dissemination. The SEC may do so, however, during the minimum offer period which will be described later in this chapter.
Hostile deal—stock tender offer. The bidder first needs to submit a registration statement and wait until it is declared effective prior to submitting tender offer materials to shareholders. The SEC may have comments on the preliminary registration statement which have to be resolved before the statement can be considered effective. Once this is done the process proceeds similar to a cash tender offer.

LAWS GOVERNING MERGERS, ACQUISITIONS, AND TENDER OFFERS

Several laws regulate the field of mergers and acquisitions. These laws set forth the rules that govern the merger and acquisition process. Because target companies use some of

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Mergers, Acquisitions, and Corporate Restructurings
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface xi
  • Part One - Background 1
  • 1: Introduction 3
  • 2: History of Mergers 21
  • 3: Legal Framework 61
  • 4: Merger Strategy 116
  • Part Two - Hostile Takeovers 173
  • 5: Antitakeover Measures 175
  • 6: Takeover Tactics 243
  • Part Three - Leveraged Transactions 289
  • 7: Leveraged Buyouts 291
  • 8: Junk Bonds 330
  • 9: Employee Stock Ownership Plans* 372
  • Part Four - Corporate Restructuring 395
  • 10: Corporate Restructuring 397
  • 11: Restructuring in Bankruptcy 432
  • Part Five - Valuation for Mergers and Acquisitions 459
  • 12: Financial Analysis 461
  • 13: Valuation of a Publicly Held Company 491
  • 14: Valuation of Privately Held Businesses 557
  • 15: Tax Issues 589
  • Glossary 607
  • Index 615
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