1. Copyright © Texas Education Agency, 2012. All rights reserved. 1 Understanding Ownership Changes Statistics & Risk Management

2. Copyright © Texas Education Agency, 2012. All rights reserved. 2 “Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1)Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Call TEA Copyrights with any questions you have.

3. Copyright © Texas Education Agency, 2012. All rights reserved. Restructuring Restructuring is often tied to bankruptcies Restructuring is often tied to bankruptcies Assets are protected from creditors Assets are protected from creditors Debt is discharged or repayment renegotiated Debt is discharged or repayment renegotiated Management teams are changed Management teams are changed 3

4. Copyright © Texas Education Agency, 2012. All rights reserved. Steps Secure enough liquidity to operate during restructuring. Secure enough liquidity to operate during restructuring. Produce accurate working capital forecasts. Produce accurate working capital forecasts. Provide open & clear lines of communication with creditors who control the company's ability to raise financing. Provide open & clear lines of communication with creditors who control the company's ability to raise financing. Update detailed business plan and considerations. Update detailed business plan and considerations. 4

5. Copyright © Texas Education Agency, 2012. All rights reserved. Mergers Good fit companies are combined because Good fit companies are combined because – Combined similar market products reduce competition – Related but different expertise will enhance both – The combination of assets will increase financial flexibility 5

6. Copyright © Texas Education Agency, 2012. All rights reserved. Acquisitions Acquiring Organization will look for an opportunity to purchase the assets, expertise, products, clients, and markets they want for expansion. Acquiring Organization will look for an opportunity to purchase the assets, expertise, products, clients, and markets they want for expansion. 6

7. Copyright © Texas Education Agency, 2012. All rights reserved. Leveraged Buy Outs Acquiring Organization will Finance its purchase of the controlling interest of stock. Acquiring Organization will Finance its purchase of the controlling interest of stock. Loans often secured against company assets. Loans often secured against company assets. Often challenged in Bankruptcy court. Often challenged in Bankruptcy court. 7

8. Copyright © Texas Education Agency, 2012. All rights reserved. Stock Swaps Acquiring company uses its own stock to pay for the acquired company. Acquiring company uses its own stock to pay for the acquired company. 8

9. Copyright © Texas Education Agency, 2012. All rights reserved. Hostile Takeovers Hostile takeovers mean the acquired company does not want to be acquired. Hostile takeovers mean the acquired company does not want to be acquired. However, if they are a publically traded corporation and the acquiring company can afford to buy most its stock new ownership is inevitable However, if they are a publically traded corporation and the acquiring company can afford to buy most its stock new ownership is inevitable Sometime a Poison Pill strategy is used Sometime a Poison Pill strategy is usedPoison Pill Poison Pill Hostile Takeovers are not all bad. Hostile Takeovers are not all bad. 9