The Art of the Deal: Introducing Mergers & Acquisitions: Mergers Happen When Two Companies Pool Their Interests to Become One Company. an Acquisition Is When One Company Takes over Another

Article excerpt

IN the business world, mergers and acquisitions are a common occurrence. Some make major headlines. Just think of the AOL-Time Warner deal or the proposed merger of America West and US Airways. Others are of interest to a relatively small group of people. In the case of Sirsi acquiring Dynix, it's librarians.

Mergers happen when two companies pool their interests to become one company. An acquisition is when one company (the acquirer) takes over another (the target). Acquisitions can be friendly, meaning both companies want the acquisition to occur, or unfriendly, hence the phrase "hostile takeover." Consolidations are slightly different from mergers in that the resulting company is a new entity. M&A activity need not involve entire companies. One company may acquire only a division, subsidiary, regional branches, or some other piece of another company.

Many reasons trigger a company's urge to merge. It can involve a need for cash, the desire to expand its customer base, the advantages of the other company's technology, or bragging rights to being the biggest (which, in some peoples' eyes, still equates to being the best). It can be a combination of factors. Sometimes it's essentially a rescue operation, bailing out a company that is otherwise going to fail and go out of business.

Aside from investors wondering what a proposed deal will do to their stock price and customers pondering whether a new corporate owner will increase or decrease their satisfaction with the product or service, entire professions rely on M&A transaction data. Among them, according to Jan Davis Tudor (Super Searchers on Mergers & Acquisitions: The Online Secrets of Top Corporate Researchers and M&A Pros, CyberAge Books, 2001), are investment bankers, business appraisers, lawyers, business brokers, university students, database producers, and independent consultants.

The authors of the next two articles spend much of their professional time doing M&A research. It seemed logical, therefore, to ask these experts to pool their knowledge about specialized M&A databases. Amy Affelt begins by describing the main databases she uses. Janet Hartmann picks up the story from there with some rigorous testing of the files. She documents how dangerous it can be to rely on only one database, since different databases cough up different answers to the same question.

REGULATORY FILINGS

On the surface, there are multitudinous sources of information on M&A activities. Government agencies that regulate the securities industry are a prime source for publicly traded companies. In the U.S., the SEC (Securities and Exchange Commission) requires regulatory filings if a public company is involved. Privately held companies are exempt from filing, making that data much harder to come by. Some relevant filings for M&A research (the full list of all EDGAR filings, not just those pertaining to M&A can be found at www.sec.gov/info/edgar/forms/edgform.pdf) include the following:

* SC 13D: Filed when a person or group of persons acquires more than 5 percent of a public company's voting stock.

* SC 13E-3: Filed when a company goes private, making a class of its voting securities to be no longer registered under the SEC Act of 1934.

* SC 13E-4: Filed when there is a self tender (leveraged buyout) by a company. Amendments are also filed whenever there are events that significantly affect the tender offer or the final outcome of the tender offer.

* SC 13G: Filed when a purchaser of over 5 percent of public company's voting stock intends only passive ownership.

* SC 14D-1: Filed when there is a tender offer to acquire more than 5 percent of a public company's voting stock. Amendments are filed to report changes in the tender offer, to report any events which significantly affect the tender offer, or to report the final outcome of the tender offer. …

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