Beachhead Takeover Discussion

Chapter 40 Discussion

Review Exhibit 40-2 on page 272 of your text. Exhibit 40-2 lists “Types of Takeovers”.

Prior to taking this class, had you ever heard of a beachhead acquisition takeover? Why does this form of takeover exist? What would a person highly value if he/she thinks that beachhead takeovers are a good idea?

INSTRUCTIONS

Make an initial post that is responsive to the above prompt and all questions posed in it.

Your post must be between 200-500 words.

a. Initial response to discussion question(s)

b. Two replies to other students’ postings

video chapter

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Chapter 40
Corporations: Mergers,
Consolidations, Terminations
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Overview
• LO40-1: What are mergers and
consolidations?
• LO40-2: What are the procedures for mergers
and consolidations?
• LO40-3: What are asset purchases?
• LO40-4: What are stock purchases?
• LO40-5: What is a takeover?
• LO40-6: In what ways could the termination
of mergers and consolidations occur?
40-2
What Are Mergers and
Consolidations?
• Merger: Legal contract combining two or
more corporations such that only one of
the corporations continues to exist; in
essence, one corporation absorbs another
corporation
• Consolidation: Legal contract combining
two or more corporations, resulting in an
entirely new corporation; in consolidation,
neither of the original corporations
continues to exist
40-3
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Procedures for Mergers and
Consolidations
• Boards of directors of all involved corporations must
approve the plan
• Shareholders must approve the plan through a vote
at a shareholder meeting
• The corporations must submit their plan to the
secretary of state
• The state must review the plan and, if it satisfies
legal requirements, grant an approval certificate
40-4
Terminology and Rights Regarding
Mergers and Consolidations
• Rights of shareholders: Shareholders vote only
on exceptional matters regarding the corporation
• Short-form merger (parent-subsidiary merger):
Parent corporation merges with a subsidiary
corporation; does not require shareholder
approval
• Appraisal right: Shareholder’s right to have
his/her shares appraised, and to receive
monetary compensation for their value
40-5
Purchase of Assets and Stock
• Purchase of assets: One corporation can extend its
business operations by purchasing the assets of
another company
• Corporate assets: All intangible items (corporate
goodwill, company name, company logo, etc.) and
tangible items (buildings, property, etc.) owned by the
corporation
• Note: Generally, corporation that purchases assets of
another corporation does not acquire its liabilities
• Purchase of stock: An acquiring corporation can take
control of another corporation by purchasing a
substantial amount of its voting stock
40-6
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Types of Takeovers
• Hostile takeover: A takeover to which management of the
target corporation objects
• Tender offer: Aggressor (acquiring corporation) offers
target shareholders a price above current market value of
their stock
• Exchange offer: Aggressor offers to exchange target
shareholders’ current stock for stock in aggressor’s
corporation
• Cash tender offer: Aggressor offers target shareholders
cash for their stock
• Beachhead acquisition: Aggressor gradually accumulates
target company’s shares
40-7
Responses to Takeovers
• Self-tender offer: Response to corporate takeover
attempt in which target corporation offers to buy its
shareholders’ stock; if shareholders accept offer,
target corporation maintains control of business
• Leveraged buyout: Occurs when group within a
corporation (usually management) buys all
outstanding corporate stock held by the public;
group gains control over corporate operations by
going private (i.e., becoming a privately held
corporation)
40-8
Termination of Mergers and
Acquisitions
• Dissolution: Legal termination of
corporation
• Two types: Voluntary and involuntary
• Liquidation: Process by which trustee
converts corporation’s assets into cash,
and distributes them among corporation’s
creditors and shareholders
40-9
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Voluntary versus Involuntary
Dissolution
• Voluntary dissolution: Occurs when
directors or shareholders initiate the
dissolution process
• Involuntary dissolution: State government
forces the corporation to close
40-10
Reasons for State-Initiated
Involuntary Dissolution
• Corporation failed to pay taxes within 60 days of due
date
• Corporation failed to submit its annual report to
secretary of state with 60 days of due date
• Corporation did not have a registered agent or office in
the state for 60 days or more
• Corporation failed to notify secretary of state within 60
days that its registered agent/registered office had
changed
• Corporation’s duration (as specified in its articles of
incorporation) has expired
40-11
Reasons for Court-Ordered
Involuntary Dissolution
• Corporation obtained its articles of
incorporation fraudulently
• Corporate directors have abused their
power
• Corporation is insolvent
40-12
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Life Stages of a Corporation
• Incorporation: Company becomes incorporated when
articles of incorporation signed
• Corporation conducts business: Directors and officers
oversee business, as shareholders ensure company’s
stock has value
• Dissolution: Corporation legally terminated, either
voluntarily or involuntarily
• Liquidation: Directors convert corporate assets into cash
and distribute them among corporation’s creditors and
shareholders
40-13
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