Importance of Advisory Services in Merger and Acquisition

Takeovers
Concept
A takeover can be a process wherein an acquirer takes over control over the target company. The acquirer may do this without or with the consent from the shareholders. Below are a few of these defenses employed in the U.S, Europe and India

Pac-man Defence

This plan is frequently utilized to prevent a hostile takeover. Here the mark company counters the takeover bid if you attempt to get the bidder’s company by looking into making a counter offer to purchase the business of the acquiring company. This diverts the eye with the acquirer, who becomes busy in preventing the takeover of his or her own company. The hostile takeover attempt of Martin Marietta by Bendix Corporation in 1982 is a good example. As a result of the takeover bid, Martin Marietta started buying Bendix stock for the exact purpose of assuming treating the business.

Nancy Reagan Defence

This tactic will be the one where the board from the directors with the target company avoid the formal bid produced by the acquirer towards the shareholders to acquire their shares. The board of directors have the authority to withstand a takeover attempt and the matter ends here. The constitution in the company offers them this authority. The word refers to a catch phrase coined by U.S. first lady Nancy Reagan advocating “abstinence from recreational drug use’’.

Bank Mail

A bank mail defense strategy is one the place that the bank of the target firm refuses financing options to the firm that's keen on taking it over. This can be done and for the purpose of preventing an acquisition through doing the following:
• Depriving the merger through non accessibility to finance
• Increasing the transaction costs with the acquirer
• Delaying the takeover and permitting the prospective firm to build up other anti-takeover strategies

The acquiring firm may also maintain other companies out of your fray. By way of example, Company A looking to buy Company B may seek a guarantee from your bank that it'll either finance Company A’s bid or no bid at all. This kind of strategy can also be used to block other companies from your takeover fray.



Crown Jewel Defence

Crown jewel represents one of the most valuable unit or department of a company. These products are classified as crown jewels according to their profitability, value of assets owned, and future growth prospects. As these would be the most valuable areas of the company, they are usually utilized as a takeover defense. Here the corporation creates anti-takeover clauses whereby it provides the to certainly unload the crown jewels in case of a hostile takeover.

Sandbag

Sandbag comes about when the target firm has a tendency to defer the takeover or even the acquisition with the aspiration that another firm, with better offers, may takeover instead. Put simply, it is the process through which the target firm “kills time” while expecting a more eligible firm to initiate the takeover.

It is really an anti-takeover strategy whereby the prospective firm issues a charter preventing people with greater than 10% ownership of convertible securities for example convertible bonds, convertible preference shares, and warrants from transferring these securities to voting stock. This charter becomes a barrier and hostile takeover becomes difficult. In the event the acquirer enters this trap, it is hard to exit since the acquirer can neither acquire controlling stake in the business with the target, nor can it exit from the limited stake acquired.

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