Corporate Finance Team

M&A Occurs after an IPO Public, Floated or Listed is the same as IPO Established a considerable reputation

M&A Buy the all of the shares of the other company Bidder – company taking over Target – company being taken over If successful – target becomes subsidiary

M&A Deals are recommended or hostile Recommended – directors of target recommend this to shareholders Advise shareholders to accept bidder’s offer Offer document – board’s recommendation

M&A If not, reject the bid This is when the bid becomes ‘hostile’ ‘Marching Rights’ – if it matches competing offers in 48 hours Generally ‘highly leveraged’ – borrow heavily and load onto the target

The Bank’s role Bidder advised by a bank Coordinates activities Issues offer document Underwrites the cash alternative Share issue takeover – appoint a broker for sub-underwriting Market sentiment – monitors the market and LSE

Takeovers Bidder makes an offer to shareholders for a certain price Cash payment not new shares No longer a public company

Takeovers

Takeovers Public companies don’t have to pay cash Offer their own shares Combined business is seen as better off Required to provide cash alternative Bidders need to borrow money to fund this

Takeovers Bidder makes an offer to shareholders for a certain price Cash payment not new shares No longer a public company

Hostile Takeovers Persistence Target’s board are incompetent Determined to move in to new markets Want to take out a competitor Become market competitor

Hostile Takeovers Media Attention Fees for City’s advisers Fees are seen as irrelevant Target loses – management sacked Bidder wins – astute management Costs of merging are large already Advisor fees are seen as minimal in comparison

Share Price Low share price – exposed Out of a job Bid announced – target’s share price Increases – bidder wants the shares Buy shares to sell out to the bidder at a higher price

M&A

Timetable of a Takeover Bidder plans months in advance Target prepares itself if it knows it may be subjected Chairman contact each other Offer period – publicly announced Offer document – within 28 days Approach its own shareholders Irrevocable undertakings – accept offer

Timetable of a Takeover Offer document from the bank Contractual offer – financial document Convince the target’s board In 14 days – ‘First defence circular’ Closing date Let the bid lapse, extend it or ‘declare it unconditional as to acceptances’ (more than 50% of shares) Target may issue a profit forecast to defend itself

Timetable of a Takeover Reaches 90% of shares – can buy 10% compulsory shares Squeeze out Concert party – allies buying shares Payment can be in cash or shares Paid immediately on completion or deferred