Takeovers : A Strategic Guide to Mergers and Acquisitions

by Brown, Meredith M.; Ferrara, Ralph C.; Bird, Paul S.; Kubek, Gary W.

• ISBN13: 9780735523098
• ISBN10: 0735523096
• Edition: 2nd
• Format: Hardcover
• Copyright: 2001-08-01
• Publisher: Wolters Kluwer

Summary

Written by the experts at Debevoise & Plimpton, this book will help you swiftly master the nomenclature, tempo of deal making and techniques for closing in all types of business combinations. Takeovers: A Strategic Guide to Mergers and Acquisitions gives you a practical understanding of the critical procedures, issues and laws both bidder and target corporations must consider, including: How tender offers are regulated in the United States Tender offer tactics Proxy contests the Hart-Scott-Rodino Act Rules relating To The financing of tender offers Fraudulent conveyance issues in leveraged acquisitions Strategic litigation Federal regulation of a target's responses to a takeover the business judgment rule and state law governing the rights and duties of a target board of directors Defensive charter positions Poison pills and much more!

Table of Contents

About the Authors	v
Introduction	xxi
Acknowledgments	xxix
Glossary	xxxi
PART I. HISTORY OF THE WILLIAMS ACT	1	(10)
Background	3	(4)
Legislative Response	7	(4)
PART II. CONSIDERATIONS FOR THE BIDDER	11	(280)
Planning for a Takeover	13	(14)
The Bidder's Working Group	14	(1)
Know Your Target	15	(7)
The Target's Takeover Defenses	15	(1)
Law of the Jurisdiction of Incorporation	16	(1)
Charter and Bylaws	17	(1)
Poison Pill	18	(1)
Antitrust	19	(1)
Regulatory Issues	19	(1)
Target's Shareholder Profile	20	(1)
``Social Issues''	20	(1)
Financing and Change of Control Issues	21	(1)
Potential Acquirors	21	(1)
Other Due Diligence	21	(1)
Consider the Bidder's Own Vulnerability	22	(2)
Analysis of Ways to Acquire the Target	24	(3)
The Definition of ``Tender Offer''	27	(14)
The SEC's Eight-Factor Analysis	28	(1)
SEC's Past Proposal to Define ``Tender Offer''	29	(1)
Judicial Response to Eight-Factor Analysis	30	(2)
Open-Market Purchases Not Considered a Tender Offer	32	(9)
Initial Purchases	41	(2)
Compliance with the Williams Act; Alternative Takeover Techniques	43	(176)
Schedule 13D and Schedule 13G	46	(29)
Beneficial Ownership	49	(3)
Brokers and Investment Advisers as Beneficial Owners	52	(2)
Group Purchases	54	(4)
Management Groups	58	(1)
Group Filings	59	(1)
Contents of Schedule 13D	59	(3)
Amendments to Schedule 13D	62	(1)
``Material Change''	62	(1)
``Promptly''	63	(5)
Remedies for Noncompliance with Section 13(d)	68	(1)
Private Right of Action	68	(5)
SEC Enforcement Actions	73	(1)
Ten-Day Window	74	(1)
Starting a Tender Offer	75	(91)
``Nibbles'' and ``Bear Hugs''	78	(4)
Disclosures upon Initiating a Tender Offer	82	(4)
Timing Considerations	86	(1)
Period of Tender Offer	86	(1)
Shareholders' Withdrawal Rights	87	(1)
Subsequent Offering Period	88	(1)
Prompt Payment	89	(1)
Proration of Tender Offer Purchases	90	(1)
Exchange Offers	91	(1)
Exchange Offer vs. Cash Tender Offer	91	(4)
Publicity and Gun-Jumping; When Must Written Material Be Filed with the SEC?	95	(2)
Issuer Tender Offers	97	(1)
Issuer Purchases	97	(1)
Going Private Transactions	98	(4)
Issuer Self-Tenders	102	(1)
Equal Treatment of Shareholders: The Best Price and All Holders Provisions	102	(4)
Changes in Tender Offer Terms	106	(6)
Abandonment of Tender Offer	112	(1)
Inside Information	112	(2)
Rule 14e-3	114	(9)
``Disclose or Abstain'' Provision	123	(2)
Anti-Tipping Provision	125	(2)
The Continued Vitality of Section 10(b) and Rule 10b-5 in Takeover Mergers and Acquisitions Settings	127	(24)
Private Rights of Action for Insider Trading	151	(3)
Rules 10b5-1 and 10b5-2	154	(1)
Rule 10b5-1	154	(2)
Rule 10b5-2	156	(1)
Attempts to Define Insider Trading Statutorily	157	(5)
Other Rules	162	(1)
Rule 14e-4	163	(1)
Rule 14e-5	164	(2)
Section 16 of the Exchange Act	166	(10)
Section 16(a)	166	(1)
Section 16(b)	167	(6)
Exemptions from Section 16(b) Liability	173	(2)
Amount of Liability	175	(1)
Tender Offer Methods	176	(10)
Cash Tender Offers for All Shares	177	(2)
Two-Tier Offers	179	(5)
Exchange Offers	184	(1)
Bust-Up Takeovers and Group Bids	185	(1)
Proxy Contests	186	(33)
Advantages and Disadvantages	186	(3)
Filing Requirement	189	(1)
Schedule 13D	189	(2)
Schedule 14A Proxy Statements	191	(1)
What Is a Solicitation?	192	(5)
Other Proxy Materials	197	(1)
The Impact of the 1992 and 2000 Amendments to the Proxy Rules on Proxy Contests	197	(3)
Strategic Considerations in Proxy Contests	200	(1)
Seven Fundamental Questions for Insurgents	200	(1)
Development of Issues Against Management	200	(7)
Orchestration of Campaign	207	(1)
Obtaining a Shareholder List	207	(5)
Letters to Shareholders	212	(1)
Changes in the Behavior of Institutional Investors	213	(2)
Seeking to Dismantle the Target's Takeover Defenses	215	(1)
Conflicts of Interest and the Bidder's Nominees	215	(1)
Mandatory Bylaw Proposals	216	(3)
Hart-Scott-Rodino Antitrust Improvements Act	219	(10)
Jurisdictional Standards	220	(1)
Premerger Notification Form	221	(1)
Filing Fees	222	(1)
Waiting Periods	222	(1)
Exemptions to the H-S-R Act	223	(6)
Investment Intent Exemption	223	(2)
Convertible Securities	225	(1)
Acquisition by an Acquisition Vehicle	226	(3)
High Yield Financing of Tender Offers	229	(6)
High Yield Financing	229	(1)
The Margin Requirements	230	(5)
Conflicts of Interest and Confidential Information	235	(6)
LBOs and Fraudulent Conveyance Issues	241	(20)
Strategic Litigation	261	(6)
Preparing to Resist the Target's Attack	262	(1)
Suits by the Bidder	263	(1)
Challenging State Takeover Statutes	263	(1)
Suing the Target's Board	263	(1)
Choice of Forum	264	(3)
Special Considerations for Cross-Border Transactions	267	(24)
Challenges	268	(7)
Initiatives by the SEC	275	(11)
Rules on Cross-Border Offers	276	(1)
What the New Rules Do Not Exempt	276	(1)
Tender Offers for Non-U.S. Companies	277	(1)
Tier I Companies	277	(2)
Tier II Companies	279	(1)
Exemption from Securities Act Registration Requirements for Exchange Offers for Non-U.S. Companies That Are No More Than 10 Percent U.S.-Owned	280	(1)
How to Compute Whether the Non-U.S. Company Is Sufficiently Non-U.S. Owned	281	(3)
Case-by-Case Harmonization	284	(1)
Deference to Home Country Rules: The United States-Canada Multi-Jurisdictional Disclosure System	284	(2)
Restrictions on Foreign Ownership of U.S. Corporations	286	(5)
Restrictions in Particular Industries	286	(1)
Communications	287	(1)
Energy and Natural Resources	287	(1)
Defense Contractors	288	(1)
Acquisitions That May Impair National Security: the Exon-Florio Amendment	289	(2)
PART III. CONSIDERATIONS FOR THE TARGET	291	(452)
Planning Considerations for Rebuffing Hostile Tender Offers	293	(26)
Creation of Working Group and Assignment of Responsibilities	294	(3)
The Working Group	294	(2)
Responsibilities	296	(1)
Preparation of Directors and Officers	297	(4)
Preparation of Directors	297	(1)
Preparation of the CEO and Senior Management	298	(3)
Overview of Pre-Tender Offer Defensive Measures	301	(18)
Assessing Vulnerability	302	(1)
Early Warning Systems	302	(2)
Shareholder List Analysis and Shareholder Relations	304	(1)
Advance Research	305	(1)
Existing Takeover Defenses	305	(1)
Additional Background Information	306	(1)
Regulatory Matters	307	(1)
State Takeover Statutes	308	(1)
Charter Amendments	308	(3)
Bylaw Amendments	311	(2)
Structural Changes	313	(1)
Poison Pills	314	(2)
Defensive Acquisitions	316	(3)
Williams Act Regulation of Tender Offer Responses	319	(78)
Target Response	320	(11)
``Stop-Look-and-Listen'' Letters	321	(1)
Announcement of Target's Position on Offer	321	(2)
Duty to File Schedule 14D-9	323	(1)
Contents of Schedule 14D-9	324	(3)
Management's Self-Interest	327	(2)
Basis for Deeming Offer Inadequate	329	(1)
Discussions with Potential Buyers	329	(1)
Curative Effect of Disclosure by Offeror	330	(1)
Remedies for Misstatements	330	(1)
Lack of a Federal Substantive Remedy Under Section 14(e)	331	(11)
Pre-Schreiber Cases	332	(5)
Schreiber	337	(2)
The Post-Schreiber Era	339	(3)
Section 14(e) as a Federal Disclosure Remedy	342	(55)
Standing	343	(1)
Materiality	344	(1)
Bidder's Financial Condition	345	(7)
Projections	352	(6)
Possible Harm to Target from Change in Control	358	(3)
Reasons for the Offer	361	(1)
Disparity of Treatment	362	(1)
Intention to Exercise Control	362	(1)
Scienter	363	(6)
Causation/Reliance	369	(4)
``In Connection With''	373	(3)
The Target's Duty to Disclose Negotiations with a Bidder	376	(1)
Duty to Disclose	377	(13)
``No Corporate Developments'' Statements	390	(7)
State Law Regulation of Tender Offer Responses: The Business Judgment Rule and Other Standards	397	(90)
The Role of Target Management	400	(2)
The Standards for Reviewing Actions by the Target's Directors	402	(60)
The General Business Judgment Rule: Recent History	405	(2)
The Duty of Care and the Duty to Be Informed	407	(3)
The Duty of Loyalty and the Absence of Conflicting Interests	410	(1)
The Duty to be Informed About Alternatives in a Negotiated Stock Merger	411	(1)
Ace Ltd. u Capital Re Corp	412	(2)
Phelps Dodge v. Cyprus Amax Minerals Co.	414	(1)
Moral	415	(1)
Do's and Don'ts from the Cases	416	(1)
Cautionary Tale: Smith v. Van Gorkom	416	(8)
Doing It Right: Moran v. Household	424	(2)
Enhanced Scrutiny in the Case of Defensive Actions: the Unocal Test	426	(4)
Reasonable Grounds for Believing There Is a Danger to Corporate Policy and Effectiveness	430	(5)
The Reasonableness of the Defensive Response in Relation to the Threat Posed	435	(3)
A Variant to Unocal: The Test under the Principles of Corporate Governance	438	(1)
Enhanced Scrutiny in the Case of Sale of Control: Revlon and QVC-Paramount	439	(1)
Revlon	439	(10)
QVC-Paramount	449	(3)
What Circumstances Trigger the Duty to Seek Best Value?	452	(4)
How to Seek the Best Value	456	(2)
States Other Than Delaware	458	(1)
Actions That Thwart a Shareholder Vote	458	(3)
The Entire Fairness Test	461	(1)
Counseling the Target's Board in Responding to a Third-Party Tender Offer	462	(5)
Adequate Notice and the Absence of Unnecessary Rush	462	(1)
Proper Documentation	463	(1)
Adequate Information	464	(3)
Counseling the Target's Board in Responding to an Offer from a Controlling Shareholder: Going Private Transactions	467	(12)
The Key Players	468	(1)
The Work of the Committee and Its Advisers	469	(1)
The Financial Adviser's Work	470	(3)
Structuring the Transaction	473	(2)
What If No Agreement Can Be Reached?	475	(1)
Financing the Deal	476	(1)
Going Private Disclosure Issues	476	(1)
Going Private Litigation	477	(1)
But It Can Be Done!	478	(1)
State Legislative Developments Relating to the Duties of Directors	479	(8)
Limits on Directors' Liability for Damages	479	(1)
Delaware	480	(1)
New York	481	(2)
Other States	483	(1)
Statutory Permission to Submit a Merger Agreement to Shareholders for Approval, Even Though Directors No Longer Believe the Agreement Is Advisable	484	(3)
Specific Defensive Devices and Strategies	487	(228)
Shark Repellents	490	(32)
Supermajority and Fair Price Provisions	491	(7)
Elimination of Consent or Requiring Unanimity for Consent	498	(1)
Consent Procedure and Record Date	499	(5)
Authority to Consider Noneconomic Factors	504	(1)
Cumulative Voting	505	(1)
Antigreenmail Amendments	506	(1)
Increase in Authorized Shares	506	(1)
Staggered Board	507	(1)
Limitations on Director Eligibility, Size of Board, or Power to Remove Directors	508	(1)
Calling of Special Meetings	508	(2)
Notice of Shareholders' Business	510	(2)
Director Qualifications	512	(10)
Poison Pills	522	(30)
The Most Common Kind: The Call Plan	522	(1)
How a Call Plan Works	522	(1)
Adoption of a Rights Plan	523	(1)
Terms of a Typical Call Right	523	(2)
Variants from the Typical Call Right	525	(4)
Tax and Accounting Aspects	529	(1)
Call Rights in the Courts	530	(11)
Restrictions on Which Directors Can Redeem the Pill, and When: Dead Hand and Slow Hand Pills	541	(2)
Benefits and Costs of a Call Rights Plan	543	(1)
Benefits	543	(1)
Costs	544	(2)
How a Bidder Deals with a Poison Pill: Possible Antidotes	546	(1)
Condition to the Offer	546	(1)
Litigation	547	(1)
Proxy Fights: Taking the Case to the Shareholders	547	(2)
Other Types of Poison Pill Plans	549	(1)
Put Plans	549	(1)
Value Assurance Plans and Protect Preferred	550	(1)
Voting Plans	551	(1)
Restructured Voting Rights	552	(14)
Dual-Class Common Stock	552	(1)
Terms	553	(1)
Voting and Dividend Rights	553	(1)
Convertibility	553	(1)
Transferability	554	(1)
Distribution	554	(1)
One Share/One Vote, SEC Rule 19c-4, and Stock Exchange Rules	554	(1)
One Share/One Vote and Rule 19c-4	554	(1)
Stock Exchange and NASD Rules	555	(4)
Supervoting Preferred Stock	559	(6)
Other Voting Restructuring Plans	565	(1)
Antitrust Challenges	566	(8)
Acquisitions by Target	566	(2)
Standing of Target Under the Clayton Act	568	(4)
Standing of Target Under the Hart-Scott-Rodino Act	572	(2)
Purchase by the Target of Its Own Shares from Persons Other Than the Bidder	574	(16)
State Law Duties of Care and Loyalty	575	(10)
Financing Issues	585	(1)
Federal Law Questions	586	(1)
Rule 13e-1	586	(1)
Rule 13e-4	587	(2)
Regulation M	589	(1)
Greenmail	590	(12)
Judicial Treatment	591	(6)
Federal Legislation Relating to Greenmail	597	(1)
Federal Issues	598	(2)
The Future of Greenmail	600	(2)
Recapitalizations	602	(35)
Examples of Recapitalizations in General	612	(8)
Recapitalizations and ESOPs	620	(1)
Financing a Recapitalization Through a Leveraged ESOP	621	(4)
Fiduciary Duties and ESOPs	625	(12)
Issuance of Stock	637	(8)
Pac-Man Defense	645	(2)
Employee Compensation	647	(18)
Golden Parachute Cases	648	(15)
Pension Parachute Cases	663	(2)
Antitakeover Provisions in Collective Bargaining Agreements	665	(1)
White Knight Mergers	666	(3)
Treatment of Competing Bidders	669	(14)
Careful Scrutiny If the Transaction Is with an Insider	669	(13)
Requiring Bidders to Sign a Confidentiality Agreement Containing Standstill Provisions	682	(1)
Deal Protection Provisions	683	(32)
Crown Jewel Options	684	(11)
Stock Options	695	(1)
Termination Fees and Reimbursement of Expenses	696	(4)
No-Shop and No-Talk Provisions	700	(12)
Guidance as to Deal Protection Provisions	712	(3)
State Takeover Legislation	715	(24)
``First-Generation'' Statutes	715	(6)
``Second- and Third-Generation'' Statutes	721	(18)
Control Share Acquisition Statutes	721	(10)
Other State Approaches: Fair Price/Supermajority Statutes and Business Combination Statutes	731	(8)
Federal Tax Changes Regarding Takeovers	739	(4)
Anti-Morris Trust Provisions	739	(2)
Non-Qualified Preferred Stock Provisions	741	(2)
Table of Cases	743	(28)
Index	771