M&A

This topic contains 10 replies, has 4 voices, and was last updated by Avatar of johnmoffat John Moffat 1 year, 4 months ago. This post has been viewed 48 times

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    dazhong0703
    Participant
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    Why does the company defend for takeover, is it because mgt may lose their job?
    Are there any cases that the mgt welcome the company being taken over?
    Why doesn’t increase in EPS necessarily mean increase shareholders’ wealth?
    When to raise finance through warrant for takeover?
    Thank you.


    avatar
    AQ!
    Participant
    • Topics: 13
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    There are some disadvantages of takeovers like;
    1-Management Integration problems and
    2-Firm currently being undervalued by the market
    3-Offer is not very attractive (post bid situation)
    4-Bidder has very bad reputation in market
    5-Management is lucrative packages and takeover may cause redundancies.
    6-Company’s future plans are very good and may be currently confidential.

    I think above may be reasons for being against actual bid or expected takeover bid……main is management expect more growth and growth in shareholder wealth by itself rather than merging with some other company.

    Sir John knows almost the perfect answer


    Avatar of johnmoffat
    John Moffat
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    The suggestions by AQ! are perfect :-)

    One reason that an increase in EPS does not necessarily mean an increase in shareholders wealth is that there may be more risk.


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    dazhong0703
    Participant
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    What are the differences between Warrants and Share options, pls?

    In the case of warrants issued with preferred stocks, why stockholders may need to detach and sell the warrant before they can receive dividend payments?


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    dazhong0703
    Participant
    • Topics: 44
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    Kindly explain the two sentences as below, thank you!

    “a general offer to all other shareholders is required if the predator acquires control (30%).”

    “the company’s act prohibits a third party for a fee purchasing the company’s shares.”


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    mtbk
    Participant
    • Topics: 0
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    Daz,
    Tricky,

    Share options are contracts between persons willing to buy or sell stock another at specific prices.somtimes used as derivatives and strike prices change from time to time,while warranties are contracts btn banks & investors whose shares the warraty is based on.Warranties issued to encourage you lend money to a compay for example and they can used as a hedging intaitive also.


    Avatar of johnmoffat
    John Moffat
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    If a company buys shares in another company, then as soon as they hit the limit (30%) then the law requires them to offer to buy the shares of all the shareholders.

    A way round it would be to buy (say) 20% but then pay someone else to buy another 20% (on your behalf) – you could then claim you were below the 30% (even though you effectively are over the limit). So that is why the law does not allow you to pay someone else to buy the shares.


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    dazhong0703
    Participant
    • Topics: 44
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    Sorry, sir, I still don’t quite understand. If below 30%, not all the shareholders have the right to sell shares to the predator, or once bought 30%, the predator must buy 100% shares of the target company? Thanks.


    Avatar of johnmoffat
    John Moffat
    Keymaster
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    If someone buys 30% then they have to offer to buy all the other shares as well. (It is up to the owners of the other shares whether or not they choose to sell them, but the purchases has to make an offer to all the shareholders.


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    dazhong0703
    Participant
    • Topics: 44
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    What does ‘bootstrapping’ mean, pls? Below is my research:

    “Bootstrapping Earnings

    When a company with a high price-earnings ratio (P/E) merges with a low P/E company, the combined firm can enjoy higher earnings per share. This looks like a neat trick, if you can pull it off. The problem is that the company with the lower P/E probably has a lower P/E because it has lower growth or less reliable earnings. The market will value the combined firm at a P/E lower than that of the high P/E firm, because the combined firm has lower growth or less reliable earnings. Bootstrappers assume inefficient markets and investors, who can’t see beyond their nose!”


    Avatar of johnmoffat
    John Moffat
    Keymaster
    • Topics: 3
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    That definition of boot-strapping is a very good one!

    It is the first sentence that explains it (the rest of it is explaining the potential problem).

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