ANTI-TAKEOVER DEFENCES (MU)

PRE-TAKEOVER DEFENCES POST-TAKEOVER DEFENCES BUSINESS ALLIANCES

PRE-TAKEOVER DEFENCES
Staggered board The BOD comprises of 3 equal groups of directors Each year one group is elected Super majority clause A very high % of shareholders to approve a merger

Poison pills existing shareholders are granted the right to buy convertible bonds into equity shares in the acquiring firm in merger on very favorable terms Dual class capitalisation a new class of equity shareholders who enjoy superior voting rights is created People-pill highly valued employees threaten and leave, if it is acquired

Golden parachute the incumbent management is entitled to receive fabulous compensation in the event of takeover Flip in the current shareholders are allowed to buy more stocks at steep discount rates

POST OFFER DEFENCES

Green mail the target co. repurchases the shares cornered by the raider Pac man defense the target co. makes a counter bid for the shares of bidder Litigation filing case against the bidding co. for violating anti-trust laws Asset restructuring the target co. sells its precious crown jewels assets

Liability restructuring the target co. repurchases its own shares at premium (or) issues shares to a friendly 3rd party White-knight To repel the raider, the target co. can appeal the friendly co. to take whole or part of the co. Hence the friendly buyer not to dislodge the management of the target co.

White square selling the shares of Target co. to the other co. which is not interested in takeover

HOSTILE TAKEOVER STRATEGIES

Street sweep the acquirer accumulates huge stock before making an open offer, hence the target co. will not have any choice Bear Hug the acquirer puts on the management by threatening to make open offer. It will make to take over control straightaway

Strategic Alliance by offering partnership and assert control over target co. Brand power buy the powerful brands and make the target co. weaker Proxy Fight the acquirer tries to convince the current shareholders to vote out the current management or BOD in favour of a tem that will

HP takeover of Compaq Huge sums paid to the directors Fight within the company 51% favoured the co.

ANTI-TAKEOVER DEFENCES IN INDIA

Make preferential allotment to promoter group Effect of creeping enhancements Amalgamate group companies Sell the crown jewels Search for a white knight

BUSINESS ALLIANCES FORMS

Joint ventures Is an independent entity formed by two or more companies to undertake financial activity together Project based joint venture The JV entered into by the companies in order to achieve a specific task is known as project based JV

FORMS OF ALLIANCES

Functional based JV the JV entered into by the companies in order to achieve mutual benefit Reliance Retail Marks & Spencers Tata Indicom Virgin mobile Nissan Motors Ashok Leyland Limited Volvo Eicher Motors Walmart Bharathi Enterprises

COMPANIES NISSAN MOTORS & ASHOK LEYLAND LTD VOLVO & EICHER MOTORS WALMART & BHARATHI ENTERPRISES

INVESTMENT 50 : 50

OUTCOMES LIGHT COMMERCIAL VEHICLE (1.25 TON PAYLOAD CAPACITY)

VOLVO INVESTMENT COMMERCIAL - $ 375 million VEHICLES MARKET 50 : 50 WHOLE SALE CASHA ND-CARRY BUSINESS IN INDIA ( INCLUDES SUPPLY CHAIN AND BACK END LOGISTICS)

FORMS OF ALLIANCES.

Strategic Alliance Any agreement between two or more parties to collaborate with each other to achieve certain objectives while remain as independent organisations

STRATEGIC ALLIANCES
AREA R&D COMPANIES MICROSOFT AND NOKIA NATURE OF DEALS A SOFTWARE PARTNERSHIP FOR NOKIAS WINDOWS PHONES PARTNERSHIP TO BUILD COMPACT AND SUB-COMPACT JEEPS. MANUFACTURE NEARLY 100 PRODUCTS UNDER GSK BRAND IN EMERGING MARKETS BIOCONS INSULIN BIOSIMILAR PRODUCTS IN

MANUFACTURE

CHRYSLER & FIAT GSK & Dr.REDDYS LABS

MARKETING

PFIZER & BIOCON

FORMS OF ALLIANCES.
Licensing Licensing specific technology, product and process Licensing trademark or copyrights Franchising alliances Grant rights to sell goods to multiple licensees Network alliances In one market competitor; In other market - collaborate

REASONS FOR ALLIANCES

Sharing risks and resources (high technology industries high risk high cost) Access to New markets high cost ( advertisement, promotion, warehousing and distribution) Cost reduction joint manufacturing operations Favourable regulatory treatment Prelude to acquisition or exit