“Transfer of control from one ownership group to another”
- The terms mergers, acquisitions, and takeovers, are often used in different
- One acquiring firm or bidder completely absorbs another target firm.
- Acquiring firm retains identity, while the acquired firm ceases to exist.
- Key idea: the disappearance of the purchased firm as all senior management
functions reside with the acquirer.
- Most acquisitions are made through
- Not always obvious: e.g. Although it was announced two companies, ATI and
AMD, were joining together and that it was a new company, the fact is that
AMD purchased ATI. We know this 1. Because ATI’s shares were delisted
from the TSX and on AMD website, ATI is listed as the “graphics of media
processes” division of AMD
Cash Transactions: the shareholders in the target company receive cash for their
- When one company acquires another: approval of the target company’s
shareholders is required, since they have to agree to sell their shares.
- In an acquisition: shareholders of the acquiring company do not
normally have to give their approval
- Buying another company is regarded as the same as buying a new piece of
equipment or any other purchase.
- If there is some specific provision in the company’s charter do the
shareholders of the acquiring firm get to vote on whether or not the company
should make the acquisition.
Share Transaction: alternative to cash transaction, where the acquiring company
offers shares or some combination of cash and shares to the target company’s
- In contrast to Cash Transaction, a share transactions requires the approval of
the acquiring firms shareholders
- Whether it does or does not require approval depends on whether the firm
has a limit on the authorized share capital.
- If the share holders share capital is limited and it wants to offer shares that
exceed this limit, then shareholder approval is needed.
- To get around this: most companies have sought and received shareholder
approval to issue an unlimited number of shares, however, this does point to
the most basic distinction between merger and an acquisition
- Usually the combination of two firms into a new legal entity
- Not always obvious eg. Benz and Chrysler announced they were combining
as a “merger of equals”. Companies was a hybrid of the merging firms names
and indicated that it was an integration of the two companies with neither
dominant. Appeared if nothing had changed until it was announced that the
merger was in fact a takeover or acquisition of Chrysler. - In a merger a new company is created
- Both sets of shareholders have to agree to exchange their existing shares for
shares in the new company
- A genuine merger is a transaction that requires BOTH set of shareholders to
approve the transaction also known as:
Amalgamation in Canada.
- The two companies approve amalagamation
Final Exam Information MOS1023 (4 options not 5)
- 80 Questions
- 15 True/False
- 65 Multiple choice
- assigned readings AND lecture material
- Additional office hours will be posted prior to the exam date
- Will monitor discussion board
- Not responsible for US legislation but ARE responsible for Ontario
- Bring: student card, quiet food, pencils only, beverage, quiet food, sweater
- Monday December 10 . 7pm to 9pm (Please ensure you go to your assigned
exam room as seating may be limited)
- Room 2028 SSC Corporate Governance
Introduction & Definitions
- Early developments underscored the need to ensure that management acts in
the sustainable well-being of the company and its shareholders.
- Late 1990’s and early 2000’s reinvigorated interest in effective corporate
governance to protect shareholders & stakeholders (ie. Creditors, employees,
customers) from managerial misconduct and corporate wrongdoing