Category 1
What is a tender offer?
This is the formal step in a hostile takeover, where the acquirer invites shareholders to sell their shares.
What is a poison pill?
A defense that gives existing shareholders the right to buy shares at a discount price, explicitly excludes the acquirer.
What is a greenmail ?
When a target company buys back the raider’s block of stock at a premium price, using company money
Who are risk arbitrageurs ?
Professionals who buy the shares of a target company after a takeover announcement, betting that the deal will be completed
What is a staggered board?
A board where only a fraction of directors are up to reelection each year, making it harder for a raider to gain immediate control
What is a white knight ?
A friendly company that rescues a target by making a better bid, allowing current management to potentially keep their positions.
What is the Hart-Scott-Rodino act ?
A 1976 law requiring merging parties to notify the government and wait for approval before completing a takeover above a certain size
What is a supermajority rule?
A rule requiring 80% - 90% approval rather than a simple majority to approve a merger or significant reorganization
What is a golden parachute ?
An extremely lucrative severance package guaranteed to senior managers if they lose their jobs after the takeover.
What are junk bonds ? Why do we talk about it?
High-yield, non-investment grade bonds that fueled the takeover wave in the 1980s, reaching 175$B by 1988
What are fair price clauses?
Clauses that force an acquirer to offer a premium for all shares by imposing stringent supermajority requirements unless an uniform price is offered.
What is a dual-class recapitalization ?
A practice that provides management or family owners with more voting rights than would be warranted by their share ownership