How to Acquire a Public Company

By James Collins, eHow Contributor updated December 06, 2010

y y y y Print this article There are two ways to purchase a public company, by friendly acquisition or hostile takeover. The former is accomplished with the help of management and the current board of directors, the latter is not. In terms of funding this means with a friendly acquisition the company has agreed to a certain price to acquire the company; this is usually more than the current stock price. Either way, both deals require the acquirer to purchase a 51 percent stake in the company's ownership. There are some primary steps involved in acquiring these shares. Difficulty:

Challenging

Instructions
1. o

1
Obtain the most recent annual report published by the company. Most companies provide this as a download on the company website. You can also call investor relations to request that an annual report be sent to you.

2
Turn to the balance sheet in the annual report. This statement provides an overview of the company's stock position, including the number of shares in the hands of shareholders, also known as shares outstanding. This can be found in the section titled, "Stockholders' Equity."

3
Calculate the number of shares you need to own in order to acquire the company. It takes 51 percent ownership in order to acquire a company. Let's say the number of shares outstanding is 100,000. Multiply the number of stock outstanding by .51 in order to calculate the number of shares you need to purchase. For instance, .51 multiplied by 100,000 equals 51,000.

4
Calculate the amount of capital you will need to acquire the company by multiplying the number of shares you need by the current stock price. Let's say the current stock price is $10. The calculation is $10 multiplied by 51,000 or $510,000.

5
Obtain capital. You can use your own funds or secure a loan from a bank based on the acquiring company's cash assets. Bank's use the acquiring company's cash as collateral to help fund a

corporate takeover. This is also known as a leveraged buyout which is commonly used in the case of a hostile takeover.
o

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Purchase shares. Contact your broker or investment bank representative. Tell him how many shares you would like to purchase and at what price. He will also want to know how long you want to keep the order to purchase shares. For instance, in this case you can tell them that you want to purchase 51,000 shares at $10 a share with an order good for 30 days or until filled.

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The answer, if you found this hub looking for details about who owns 'British Petroleum', is nobody. That business no longer exists. The reason for British Petroleum no longer existing is that there really is nothing British about the business. For those of you that found this hub looking for 'BP Plc Ownership', you really have answered your own question. BP is just another of those global businesses open for investment from any individual or organisation with a stock broker on speed dial and a bit of spare cash to spend. The result is a business with no single investor with clear control, and no country which can claim a majority ownership. Not that having a company with 51% of British owners would constitute a 'British Owned' business, since the likely hood of one institution or individual owning 51% of such a massive organisation is practically zero, if even possible.

This hub is actually a response to some criticism of the 'British' by a minority of Americans on the Hubpages forum, most light but some purely placing the blame on the British people for the recent events. The reality of the matter is that the 'BP' which exists today is no longer a British business. It is just as much American as it is British. There can be no blame placed on a nation or a government

for the operational failures of a corporation which is required to operate within globally agreed safety standards. Some of the comments made on the forum include: "If the United States had Exon off the coast of England dumping oil in the same amounts I think their people and Prime minister would be raising all manners of heck too!" - nifty @50 "If this had happened off the coast of England, or any exotic locale of political interest, by now we'd have sent a big bundle of money and manpower their way to help."- KFlippin "If not for BP fuel contracts with the Military they probably would have been bounced out of American Waters years ago."- MikeNV "I dont give a Good GD how OFFENDED the British People feel about the comments made by any American Citizen. Until a part of your Country is killed by us; keep your feelings to yourself."Friendlyword "And the UK better get ready... Obama and the dems ought to be siezing all the BP asssets in this country and pullling a hugo chevez anytime now." - TMMason "Maybe Britain should join us and help with this catastrophic problem that was created by a company based in your country." - woolman60 I now hope to be able to clear up the obvious confusion, or just pure ignorance if you wish, about just who 'owns' BP Plc. The below table shows ownership statistics as of 31st December 2009, as taken from the BP official website. As you can see it shows that UK ownership of BP is only marginally larger than US ownership. One large US investor could complete the swing. The simple fact is that BP Plc is NOT a British company, at least no more than it is an American company. It has effectively been Anglo-American since a 1998 merger with Amoco. Apparently BP employees some 96,000 permanent members of staff for the day-to-day operation of the business, of which 10000 are British and 24000 of them are American.

Benefical Owners Of BP Plc

Holdings By Principle Area United Kingdom United States Rest of Europe Rest of World Miscellaneous Total Institutions 33% 25% 10% 7% 4% 79% Individuals 7% 14% 0% 0% 0% 21% Total Percentage Shares 40% 39% 10% 7% 4% 100%

Securities of a public company Usually, the securities of a publicly traded company are owned by many investors while the shares of a privately held company are owned by relatively few shareholders. A company with many shareholders is not

necessarily a publicly traded company. In the United States, in some instances, companies with over 500 shareholders may be required to report under the Securities Exchange Act of 1934; companies that report under the 1934 Act are generally deemed public companies. The first company to issue shares is generally held to be the Dutch East India Company in 1601[citation needed] , but quasi-corporate entities, often trading or shipping concerns, are known to have existed as far back as Roman times.
[edit]Advantages

Publicly traded companies are able to raise funds and capital through the sale of its securities. This is the reason publicly traded corporations are important: prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. The financial media and city analysts will be able to access additional information about the business.[clarification needed]
[edit]Disadvantages

Privately held companies have several advantages over publicly traded companies. A privately held company has no requirement to publicly disclose much, if any financial information; such information could be useful to competitors. For example, publicly traded companies in the United States are required by the SEC to submit an annual Form 10K containing a comprehensive detail of a company's performance. Privately held companies do not file form 10-Ks; they leak less information to competitors, and they tend to be under less pressure to meet quarterly projections for sales and profits. Publicly traded companies are also required to spend more for certified public accountants and other bureaucratic paperwork required of all publicly traded companies under government regulations. For example, the Sarbanes-Oxley Act in the United States does not apply to privately held companies. The money and income of the owners remains relatively unknown by the public.
[edit]Stockholders

In the United States, the Securities and Exchange Commission requires that firms whose stock is traded publicly report their

major stockholders each year.[1] The reports identify all institutional shareholders (primarily, firms owning stock in other companies), all company officials who own shares in their firm, and any individual or institution owning more than 5% of the firms stock.[1]
[edit]General

Trend

The norm is for new companies, which are typically small, to be privately held. After a number of years, if a company has grown significantly and is profitable, or has promising prospects, there is often an initial public offering which converts the privately held company into a publicly traded company or an acquisition of a company by publicly traded company. However, some companies choose to remain privately held for a long period of time after maturity into a profitable company. Investment banking firm Goldman Sachs and shipping services providerUnited Parcel Service (UPS) are examples of companies which remained privately held for many years after maturing into profitable companies.
[edit]Privatization

Less common, but not unknown, is for a public company to buy out its shareholders and become private. This is typically done through a leveraged buyout and occurs when the buyers believe the securities have been undervalued by investors. Publicly held companies can also become privately held by having all of their shares purchased by an individual or small group of investors, or by another company that is privately held. In addition, one publicly traded company may be purchased by one or more publicly traded company(ies), with the bought-out company either becoming a subsidiary or joint venture of the purchaser(s) or ceasing to exist as a separate entity, its former shareholders receiving either cash, shares in the purchasing company or a combination of both. When the compensation in question is primarily shares then the deal is often considered a merger. Subsidiaries and joint ventures can also be created de novo - this often happens in the financial sector. Subsidiaries and joint ventures of publicly traded companies are not generally considered to be privately held companies (even though they

themselves are not publicly traded) and are generally subject to the same reporting requirements as publicly traded companies. Finally, shares in subsidiaries and joint ventures can be (re)-offered to the public at any time - firms that are sold in this manner are called spin-outs. Most industrialized jurisdictions have enacted laws and regulations that detail the steps that prospective owners (public or private) must undertake if they wish to take over a publicly traded corporation. This often entails the would-be buyer(s) making a formal offer for each share of the company to shareholders. Normally some form of supermajority is required for this sort of the offer to be approved, but once it happens then usually all shareholders are compelled to sell at the agreed-upon price and the company either becomes a subsidiary, ceases to exist or becomes privately held.
[edit]Trading

and valuation

The shares of a publicly traded company are often traded on a stock exchange. The value or "size" of a publicly traded company is called its market capitalization, a term which is often shortened to "market cap". This is calculated as the number of shares outstanding (as opposed to authorized but not necessarily issued) times the price per share. For example, a company with two million shares outstanding and a price per share of US$40 would have a market capitalization of US$80 million. However, a company's market capitalization should not be confused with the fair market value of the company as a whole since the price per share are influenced by other factors such as the volume of shares traded. Low trading volume can cause artificially low prices for securities, due to investors being apprehensive of investing in a company they perceive as possibly lacking liquidity. For example, if all shareholders were to simultaneously try to sell their shares in the open market, this would immediately create downward pressure on the price for which the share is traded unless there were an equal number of buyers willing to purchase the security at the price the sellers demand. So, sellers would have to either reduce their price or choose not to sell. Thus, the number of trades in a given period of time, commonly referred to as the "volume" is important when determining

how well a company's market capitalization reflects true fair market value of the company as a whole. The higher the volume, the more the fair market value of the company is likely to be reflected by its market capitalization. Another example of the impact of volume on the accuracy of market capitalization is when a company has little or no trading activity and the market price is simply the price at which the most recent trade took place, which could be days or weeks ago. This occurs when there are no buyers willing to purchase the securities at the price being offered by the sellers and there are no sellers willing to sell at the price the buyers are willing to pay. While this is rare when the company is traded on a major stock exchange, it is not uncommon when shares are traded over-thecounter (OTC). Since individual buyers and sellers need to incorporate news about the company into their purchasing decisions, a security with an imbalance of buyers or sellers may not feel the full effects of recent news.
[edit]