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Takeovers and acqusiitons - Coggle Diagram
Takeovers and acqusiitons
The object of a takeover transaction is the acquisition, usually by a company of the whole or majority of the issued share capital of another company
Types of takeover
Share sale agreement
A formal agreement may be made with the shareholders of the target company.
Used where there is a small number of sharheolders
Usual type of takeover transaction for private companies
It will be necessary review both the Articles and any shareholder agreements to consider the effect of any pre-emption or any rights requiring a purchaser of a significant block of shares to acquire shares from other members on the same terms
Public purchase
Arrangements may be made to purchase on public market, blocks of shares in a company in order to build up a sizeable holding which could form the basis on which to launch a bid for the remainder of the issued capital
Necessary where the target company is a public company to have regard to the provisions of the City Code on Takeovers and Mergers
Takeover offer
The acquiring company may make a public offer to the shareholders of the company to be acquired by sending documents to its shareholders making an offer to acquire their shares on stated terms
Scheme of arrangement or compromise
A takeover may be effected under a scheme of arrangement
Agreements with individual members
A simple way of effecting a transfer of ownership of a company is by making agreements with individual members
Can be effected merely by the exchange of the consideration for duly executed transfers with share certificates
A formal agreement in entered into between the parties which should be drawn up with legal advice.
The agreement should cover such matters as full details of the shares to be acquired and the consideration to be paid for them with a time for completion and set out who will be responsible for paying legal costs, duty and any other related expenses
Often warranties are required from the directors of the offeree company containing financial information about the offeree company, the title to its property, pending litigation etc, including any changes affecting the company that may have occurred since the date of the last balance sheet
Purchases in the market
Arrangements may be made whereby a company obtains a significant proportion of the shares in a publicly quoted company by purchases of the companys shares on the market
Fewer formalities are involved with this type of transaction but care should be taken to ensure compliance with the rules of the City Code
Public offers
A public offer is a takeover made to all the shareholders of a company to acquire all or a proportion of their holdings in the offeree company, either for cash or for shares and/or other securities in the offeror company
Public offers involve many more procedural steps than takeovers by agreement with individual members or by limited purchases on a public market
Where the target company is or has recently been a public company, it is necessary to ensure strict compliance with the City Code, LR or market rules that apply to the target company
Private shareholders tend to accept offers early in the process while institutional shareholders will not usually accept the offer until the final few days before the closing date.
The panel requires stringent procedures to be followed to avoid possible double counting of acceptances and purchases of the same shareholding
The offer may be extended indefinitely subject to the offer being declared unconditional by the 60th day after the posting of the offer, the offer becomes unconditional when the minimum number of acceptances has been reached
The minimum is rarely less than 50% and often set up at 75% or even 90%. A 75% level of acceptance gives the acquirer control while a 90% acceptance level allows the acquirer to compulsory acquire the remaining shares
Action following the first closing date of a public offer
Totals of the complete and incomplete acceptances will be calculated and the board of the offeror company will then consider whether the level of acceptance is such that it may declare the bid to be unconditional or whether it will extend it for a further period
If the level of acceptance is small, the offeror company may decide to extend the period for acceptance and perhaps improve the terms of the offer
Once the offer has been declared unconditional it is necessary to prepare to issue consideration shares and/or to prepare cheques or bank transfer instructions
Upon an offer becoming unconditional, share options and other employee share incentive schemes may become exercisable
Transferors to offeror company
The transfer that is executed by or on behalf of offeror company covering the shares in respect of which duly executed forms of acceptance and transfer have been received in order to put these shares into the name of the offeror company is known as a 'bulk transfer'
It is used in conjunction with the individual forms of acceptance and transfer for each separate accepting shareholder
The bulk transfer is obviously more convenient than dealing separately with the many individual forms of acceptance and transfer, each of which has been signed by an accepting shareholder and each of which would have to be duly stamped by HMRC before registration
The completed forms of acceptance and transfer, together with the covering share certificates and the duly stamped bulk transfer are lodged with the offered company
Acceptances settled through CREST have the duty automatically calculated and deducted as the acceptances are processed