What should everyone know about mergers and acquisitions? What happens to the shares/shareholders of company A when company B acquires it by paying cash? What happens when they take A's shares and convert them into B's shares?
Let me take a stab at some perhaps less obvious things to know about M&A (from the perspective of a start-up founder at least):Companies don't buy start-ups. People do -- CEOs and SVPs. There are 1,000 companies Google or Apple or Salesforce or Facebook or Oracle or whomever could buy, that all could make strategic sense. But that's not how M&A happens. It's when a CEO sees a strategic gap in the future, or a VP sees a gap in what he/she can get done in the next 12-18 months -- and fills that gap to with a deal, right or wrong.VC multiples drive deal prices. Many deals are sort of valued off financial metrics and comps, but the actual price is often based on what would "clear" the VCs -- maybe 2x for the late-stage VCs (see Instagram, Yammer, etc. acquired at 2x last round price), or 3-4x mid-stage VCs. Corporate M&A departments and others are OK with this because it's a process and this is what it takes to "clear" seemingly good deals.M&A is Capricious. Because M&A is driven by individual executives at companies, not companies per se ... it's capricious. Especially at the non-CEO level. Priorities change. You may be just as good a strategic fit in 12 months, but if priorities change, that offer may never come back. In fact, it likely will only come once per individual potential acquiror unless you are Twitter, Facebook, etc.You Have to Stay. M&A isn't a one-time cash-out, at least not anymore. Most deals have 2-3 year retention, vesting, and re-vesting programs, and potentially 2-3 year earn-outs. Assume if you get acquired, you're committing at a minimum to 24-36 months at the acquiror.No One May Care That Much in 6-9 Months. You have to make hay after you are acquired. Everyone at the acquiror will have their eyes on you and want to help -- at first. Then, they'll acquire someone else, and attention will go there. You'll have to make it happen, and continue the momentum yourself.Just a few semi-non-obvious learnings/thoughts.
Why don't countries resort to mergers and acquisitions today like corporations?
They do. But it's usually a hostile takeover.Like how China acquired Tibet. The management tried all the anti-takeover strategies they could, but it didn't work out for them. The management was fired and asked to leave the company (exiled) after the acquisition was over.The reason friendly mergers between countries are rare, is that, the CEO of any country would never agree to give up his post (and the power that comes with it) to another CEO. A country can NOT have two heads and two decision-makers.Now you may wonder, why CEOs of companies are okay giving up their post. It's because they are paid to. The objective of any business or any company is to make money. Given enough money, many company heads may be willing to give up their power. The objectives of a government or a country head may be very different. A merger may harm those objectives.Another deterrent is CULTURE. The culture and practices of one nation may not thrive in the newly made nation. The cultural differences may even lead to conflict among people.But yes, the idea could be pretty good. Synergies can be tapped among nations like they are among companies. But it is practical only when the people are mature enough to understand what synergy is and are utilitarian enough to keep utility above culture.And that is too much to ask. Not happening any time soon.
Have corporate takeover defense tactics (i.e. the poison pill) harmed the American economy?
There are two theories on this: the management entrenchment theory and the shareholder protection theory. Management entrenchment is where companies use anti-takeover devices such as poison pills just to preserve the jobs of incumbent managers and directors. Shareholder protection is where the company uses anti-takeover devices to negotiate a better deal, or to thwart lowball offers based on the board's inside information about the true, but undisclosed prospects about the business.The evidence is mixed. On the one hand, companies that adopt takeover defenses see drops in their share price, and companies that give up their takeover defenses see gains in their stock price, which both seem to support the entrenchment theory. On the other hand, companies with strong anti-takeover defenses get much higher premiums on their shares when they sell. Companies that successfully fend off takeovers end up with higher stock prices than their pre-bid stock price, which both seem to support the protection theory.The net of it is that anti-takeover devices result in higher gains for companies that get sold, but the likelihood of these higher gains are largely offset by the lower likelihood of getting sold. The net impact on the overall economy may be negative, but we don't have enough evidence to really conclude that.
By supporting the Clayton Act of 1914, President Wilson hoped to?
Brocke's answer is wrong. The Clayton Act was written to put a lid on monopolies. The Clayton Act prohibits: price discrimination between different purchasers if such discrimination substantially lessens competition or tends to create a monopoly in any line of commerce (Act Section 2, codified at 15 U.S.C. § 13); sales on the condition that (A) the buyer or leaser not deal with the competitors of the seller or lesser "exclusive dealings", or that the buyer also purchase another different product ("tying", also covered by the Sherman Act, Section 1), but only when these acts substantially lessen competition (Act Section 3, codified at 15 U.S.C. § 14); mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at 15 U.S.C. § 18); any person from being a director of two or more competing corporations (Act Section 8; codified at 15 U.S.C. § 19).
What is transnational capital?
provides capital formation, financial structuring, and merger and acquisitions advisory services to emerging growth companies