The Advanced Guide to Mergers & Acquisitions

An important decision in the M&A process is what business entity will be involved in the transaction (hint: it's usually not the Acquiror).  During this Lecture, we will begin our discussion of forming a new business and the two key characteristics that drive the choice of business “organizational form” for the new company - tax treatment and personal liability.  We will close the Lecture by discussing the importance and popularity of Delaware - why a majority of companies organize their business in the state.  This is an important Lecture for anyone who has their own business or is thinking about starting one.

During this Lecture, we will discuss four of the five types of business organization (Sole Proprietorships, Partnerships, Limited Liability Companies, and S Corporations) and the advantages and disadvantages of each.

A majority of M&A activity takes place among "C Corporations".  During this Lecture, we will discuss the fifth type of business organization - C Corporations - in detail, including the advantages and disadvantages of the organizational form, the process of forming a new business, shareholder distributions, and corporate governance.

During this Lecture, we will discuss “private" and “public" companies, including what it means for a business to be private or public, the differences between the two types, their respective advantages and disadvantages, disclosure requirements, and world stock exchanges.  We'll also look at the strange decline in the number of U.S. public companies during the past 25 years.

During this Lecture, we will discuss why some companies want to "go public", the going public process through which a private company becomes a public company, and world stock exchanges.  We will also discuss the steps involved in going public and the advantages and disadvantages of being a U.S. public company.

Bonus Section: Botched Initial Public Offerings.

A company’s “capital structure” refers to the mix of debt and equity it uses to finance its assets and operations.  During this Lecture, we will analyze the components of a company's capital structure, including a detailed discussion of debt and equity securities, the financing costs of debt and equity, and the Order of Priorities.

During this Lecture, we will examine Bankruptcy, the unfortunate end to a business.  Or is it?  Would it surprise you to learn that nearly 34% of U.S. business bankruptcies in 2022 involved companies that had no intention of going out of business?  We will address this, and the types of bankruptcy filings that are available to a company.

Bonus Section: The Bankruptcy of Marvel.

During this Lecture, we will discuss the primary ways in which the states regulate M&A activity, including state antitakeover laws, state securities laws, and state antitrust laws.

The U.S. Federal Securities Laws govern the sale of common stock, including when the Acquiror uses its own common stock as acquisition consideration.  We will discuss the impact of these laws as they relate to M&A transactions.

During this Lecture, we will explore the U.S. Federal Antitrust Laws.  Since horse and buggy times, courts have applied the antitrust laws to changing markets.  Yet, for over 100 years, they've had the same basic objective: To encourage competition among businesses for the benefit of consumers, and to ensure businesses are incentivized to operate efficiently, keeping prices down and quality up.  We will examine this objective and discuss several real-world antitrust cases involving M&A transactions.

During this Lecture, we will discuss three other U.S. Federal regulations that impact M&A activity, including Stock Exchange Rules, direct investment in the U.S., and the Foreign Corrupt Practices Act.

The steps in the M&A process differ by deal, but we discuss the primary steps during this Lecture.

During this Lecture, we will discuss what "Deal Structuring" is and the differences between buying a Target's common stock vs. its assets. 

During this Lecture, we will explore the first type of M&A transaction structure – an Asset Purchase – including the steps in the process, when it should be used, and its advantages and disadvantages to Acquiror and Target.

Bonus Section:

- Asset Purchase Agreement

- AEP Industries Inc. & Borden Inc.

During this Lecture, we will explore the second type of M&A transaction structure – a Stock Purchase – including the steps in the process, when it should be used, and its advantages and disadvantages to Acquiror and Target.

Bonus Section:

- Stock Purchase Agreement

- Vodafone AirTouch & Mannesmann AG.

During this Lecture, we will begin to explore the third type of legal transaction structure – a Merger.  We will start by discussing what a "merger" is before covering Direct (Statutory) Mergers and Triangular Mergers (Forward Triangular Mergers and Reverse Triangular Mergers) – including when they should be used and their advantages and disadvantages to Acquiror and Target.

Bonus Section: Merger Agreement

During this Lecture, we will finish our discussion of Mergers.  We will cover Mergers of Equals and Back-End Mergers (AKA Squeeze-Out Mergers), including when they should be used and their advantages and disadvantages to Acquiror and Target.

Bonus Section: America Online & Time Warner merger.

During this Lecture, we will discuss "consideration", including the three primary types of consideration used in M&A transactions and the advantages and disadvantages of each to Acquiror and Target.

Bonus Section: KKR & Co. and Graduation Alliance Inc.

An Acquiror seeking to purchase a controlling interest in Target rarely pays the current market price of Target's common stock - since Acquiror will gain control of Target, there is additional value in the transaction so Acquiror typically must pay a premium over Target's current stock price - a "Control Premium."  We will discuss Control Premiums and how they work in practice.

The period between when an M&A agreement is signed and when it closes can often be measured in months.  If Acquiror is using shares of its common stock as consideration, its stock price will almost definitely go up or down during that period.  During this Lecture, we will begin discussing the various ways in which the parties can manage this risk, including Purchase Price Adjustments, Earnouts, and Rights, Royalties and Fees, including examples of each.

During this Lecture, we will finish our discussion of ways in which the parties can manage the risk of Acquiror's stock price going up or down during the period between signing and closing an M&A transaction.  Specifically, we will discuss Contingent Value Rights and Collar Arrangements.

During this Lecture, we will discuss Shareholder Meetings, including Annual Meetings of Shareholders and Special Meetings of Shareholders, as well as "proxies" and "proxy cards."

During this Lecture, we will discuss common stock and the various ways in which it is classified, including Basic vs. Fully-Diluted shares outstanding, Treasury shares, and retired shares.  We will then cover a company's "Voting Base" and "Voting Standard" and Broker Non-Votes.

Bonus Section: Tesla and Broker Non-Votes.

During this Lecture, we will explore what Board/shareholder approvals are required for Asset Purchases, Stock Purchases, and Mergers.

During this Lecture, we will discuss Friendly Takeovers, including what makes a friendly deal friendly and the steps involved.

During this Lecture, we will discuss the tactics available to a hostile Acquiror.  Tactics come into play in connection with Acquiror's initial contact with Target, initial accumulation of Target common stock, and Bear Hug letters.

Bonus Section: The Xerox-HP Case Study is a great illustration of how these tactics are used in actual hostile takeover attempts.

During this Lecture, we will discuss the first of two ways to acquire a Target in a Hostile Takeover: a Two-Step Transaction.  We will cover Step One - a Tender Offer - before moving on to Step Two - a Back-End (Squeeze-Out) Merger.

Bonus Section: American Health Products & American Cyanamid.

During this Lecture, we will discuss the second of two ways to acquire a Target in a Hostile Takeover: a Proxy Contest.

Targets that want to repel a hostile Acquiror have many available takeover defenses, some of which Target establishes prior to a hostile Acquiror approaching Target (Pre-Offer Takeover Defenses) and some of which are best established after the hostile bid has been made (Post-Offer Defenses).  During this Lecture, we will discuss the origin of Takeover Defenses and those defenses that are best put in place prior to a hostile offer, including Shareholder Rights Plans (Poison Pills), ESOPs, Golden Parachutes, Poison Puts, Staggered Board of Directors, and Changes to a Target's Charter, with examples of each.

Bonus Section:

- Carl Icahn vs. Netflix

- Elon Musk vs. Twitter

Targets that want to repel a hostile Acquiror have many takeover defenses, some of which are best established by Target after a hostile Acquiror approaches Target with an unsolicited bid.  During this Lecture, we will discuss the most common Post-Offer Takeover Defenses, including the Crown Jewels, Greenmail, Pac-Man, White Knight, White Squire, Scorched Earth, and "Just Say No" defenses, with examples of each.

During this Lecture, we will discuss "business valuation" and what it is, the many reasons one may need to determine how much a business is worth, and the three primary ways in which to value a business - Discounted Cash Flow Analysis, Comparable Companies Analysis, and Comparable Transactions Analysis.

The headline today read, "Acquiror purchases Target for $1 billion".  But what does that mean?  We will discuss this, as well as how to value a company's debt, preferred stock, and common stock.  We will conclude by exploring "Enterprise Value" - the value of an entire company and how to measure an acquisition's Internal Rate of Return (IRR).

During this Lecture, we will begin our discussion of the first of the three most common ways to value a public company – Discounted Cash Flow (DCF) Analysis.  To perform DCF Analysis, we must (1) recast Target's most recent financial statements to reflect only cash inflows and outflows, (2) forecast Target's financial results over the next X years, (3) determine the appropriate Discount Rate, and (4) value the Target.  In this Lecture, we will cover (1) and (2).

During this Lecture, we will continue our discussion of Discounted Cash Flow Analysis.  To perform DCF Analysis, we must (1) recast Target's most recent financial statements to reflect only cash inflows and outflows, (2) forecast the next X years of Target's UFCF, (3) determine the appropriate "Discount Rate", and (4) value Target.  In this Lecture, we cover step one of (3).

During this Lecture, we will continue our discussion of Discounted Cash Flow (DCF) Analysis.  To perform DCF Analysis, we must (1) recast Target's most recent financial statements to reflect only cash inflows and outflows, (2) forecast Target's financial results over the next X years, (3) determine the appropriate Discount Rate, and (4) value the Target.  In this Lecture, we will finish covering (3).

During this Lecture, we will continue our discussion of Discounted Cash Flow (DCF) Analysis.  To perform DCF Analysis, we must (1) recast Target's most recent financial statements to reflect only cash inflows and outflows, (2) forecast Target's financial results over the next X years, (3) determine the appropriate Discount Rate, and (4) value the Target.  In this Lecture, we will cover (4).

During this Lecture, we will provide an overview of absolute and relative business valuation methods and discuss the second of the three most common ways to value a public company – Comparable Companies Analysis –including the steps, its advantages and disadvantages, and examples.

During this Lecture, we will provide an overview of absolute and relative business valuation methods and discuss the third of the three most common ways to value a public company – Comparable Transactions Analysis – including the steps, its advantages and disadvantages, and examples.