Mergers and Acquisitions: Law and Finance (Aspen Casebook Series)

Offering up-to-date and rich, yet succinct, coverage with the perfect mix of theory and practice, Mergers and Acquisitions: Law and Finance, Third Edition equips students with the legal rules and economic and financial principles they will need to help clients make key strategic choices during an acquisition. Key Features: Cases and materials illustrating Delaware’s embrace of private ordering to minimize judicial review in cash out mergers and other contexts (the M&F Worldwide case and related cases such as In re Volcano Corp.) Twenty-first century changes to the classical “enhanced scrutiny” review of Unocal, Revlon, and Blasius (the Air Gas decision and Chancellor Chandler’s presentation of the 30-year evolution of Delaware law) New presentation of insider trading law that emphasizes its application in a merger context (the U.S. v. Salman case and rearrangement of the material to lead with classical and misappropriation theories before applications like tippee and other theories extending liability Materials on insider trading, poison pill, deal protection devices, activist shareholders, and more. Clear text and charts that facilitate students’ grasp of the financial and legal choices available to planners considering an acquisition. Cover Halftitle Page Editorial Advisors Title Page Copyright Page About Wolters Kluwer Legal & Regulatory U.S. Dedication Contents Preface 1. Why Mergers Happen: Macroeconomic Trends A. Merger Waves B. Macroeconomic Factors That Contributed to Merger Waves C. Who Captures the Benefits of Acquisitions? 1. Target Shareholders and Acquirer Managers 2. Impact on Other Stakeholders 2. Financial and Economic Incentives That Shape Mergers A. Synergies B. Change of Control Benefits and Changes in Financial Aspects of the Business C. Summary of Gains from Acquisitions D. Costs of Acquisitions; Why Acquisitions Fail 1. Costs Incurred in Acquisitions 2. How Acquisitions Destroy Wealth E. Acquisition Financing Decisions 1. How Much of the Target Does the Bidder Wish to Acquire? 2. Currency Choices a. Stock or Cash b. Economic Effects of Financing Choices c. Impact on the Acquirer's Capital Structure and Costs of Capital d. Ownership Structure e. Tax Liability f. Risk Bearing Under Alternative Currencies Problems 3. Legal Shaping of Deals A. The Law's Distinctive Roles B. Mergers and Other Acquisitions as a Decision Governed by Law 1. Corporate Law Reduced to Four (Overly Simplified) Rules 2. The Merger Form as a Template for Understanding Legal Regulation of Acquisition Transactions 3. Alternative Legal Structures for Acquisition That Permit Planners to Avoid One or More of the Requirements of the Merger Template C. Judicial Limits on Private Planning to Avoid Particular Merger Effects: De Facto Merger Hariton v. Arco Electronics, Inc. Farris v. Glen Alden Corp. Terry v. Penn Central Corp. Notes and Questions D. Federal Law Affecting Deals 1. Securities Law a. “Disclosure, Again Disclosure, and Still More Disclosure” Prudent Real Estate Trust v. Johncamp Realty, Inc. Notes and Questions b. Substantive Regulations from Securities Law, Particularly Tender Offers c. Avoiding Securities Regulation 2. Tax 3. Antitrust 4. National Security 4. Deal Strategy: the Bidder's Approach A. Beginning the Deal Dance: Who to Approach? B. Getting to a Definitive Agreement 1. Deal Terms: Financial, Legal, and Social 2. Due Diligence 3. Negotiating the Acquisition Agreement In re IBP, Inc. Shareholders Litigation Notes and Questions Martin Marietta Materials, Inc. v. Vulcan Materials Co. Notes and Questions 5. The Target's Approach: Remaining Independent or Getting the Best Deal from the First or Another Bidder A. The Legal and Economic Framework 1. Financial Defenses 2. Legal Defenses B. Fiduciary Duties and Legal Challenges to Board Action Smith v. Van Gorkom Notes and Questions Gantler v. Stephens Notes and Questions Lyondell Chemical Co. v. Ryan Notes and Questions 6. Judicial Review of Defensive Tactics A. The Corporate Law Template for Considering Takeover Defenses Unocal Corp. v. Mesa Petroleum Co. Notes and Questions Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Notes and Questions B. Applying Unocal and Revlon—The Two Paramounts Paramount Communications, Inc. v. Time Inc. Notes and Questions Paramount Communications, Inc. v. QVC Network Inc. Notes and Questions C. The Evolution of Unocal; Deal Protection Devices Louisiana Municipal Police Employees' Retirement System v. Crawford Omnicare, Inc. v. NCS Healthcare, Inc. Notes and Questions D. State Anti-Takeover Statutes as Defensive Mechanisms Amanda Acquisition Corp. v. Universal Foods Corp. Notes and Questions 7. Poison Pills: a Case Study of Defensive Tactics and Judicial Review A. The Challenge Facing the Drafters of the Poison Pill Wachtell, Lipton, Rosen & Katz, The Share Purchase Rights Plan Notes and Questions B. Judicial Review of Director Action to Implement or Continue a Poison Pill Moran v. Household International, Inc. Notes and Questions City Capital Associates Ltd. Partnership v. Interco Inc. Notes and Questions Air Products and Chemicals, Inc. v. Airgas, Inc. Notes and Questions C. Evolution in the Poison Pill and Judicial Responses Carmody v. Toll Brothers, Inc. Quickturn Design Systems, Inc. v. Shapiro Notes and Questions 8. Is a Defense Affecting Voting Different? Schnell v. Chris-Craft Industries, Inc. Blasius Industries, Inc. v. Atlas Corp. Notes and Questions Unitrin, Inc. v. American General Corp. Notes and Questions MM Companies, Inc. v. Liquid Audio, Inc. Notes and Questions 9. Finance Foundation for Valuation A. Introduction B. A Primer on Financial Theory Underlying the Discounted Cash Flow Method of Valuation Problem C. The Mechanics of a Discounted Cash Flow Analysis 1. Forecasting Free Cash Flow a. The Explicit Forecast Period (i.e., The First Five Years) b. Terminal Value 2. Picking an Appropriate Discount Rate 3. Adjustments 4. Forecasting Change in Free Cash Flow from the Merger D. Deal Comparables, Company Comparables, and Other Measures 10. Cash-out Mergers A. Majority Power, Minority Rights to Exit Via Appraisal or Gain Judicial Review for Breach of Fiduciary Duty Weinberger v. UOP, Inc. Notes and Questions Cede & Co. v. Technicolor, Inc. Notes and Questions B. Valuation Techniques In re Emerging Communications, Inc. Shareholders Litigation Notes and Questions C. Planning to Minimize Judicial Review Kahn v. M&F Worldwide Corp. Notes In re Volcano Corporation Stockholder Litigation Notes and Questions Notes on Shareholder Litigation in Mergers D. Short-Form Mergers Glassman v. Unocal Exploration Corp. Notes and Questions Berger v. Pubco Corp. 11. Sale of Control for a Premium Perlman v. Feldmann Notes and Questions Mendel v. Carroll Notes and Questions In re Synthes, Inc. Shareholder Litigation Notes and Questions 12. Disclosure and Limits on the Use of Information A. Risk Arbitrage, Mandatory Disclosure, and the Search for Information B. Law's Effect on Information 1. Mandatory Disclosure from Federal Law 2. Mandatory Disclosure's Impact on Information About Merger Transactions and the Additional Effect of Antifraud Prohibitions a. When Will Merger Information Have to Be Disclosed? b. Remedies for Failure to Comply with Mandatory Disclosure or Antifraud Provisions Relating to Mergers 3. Disclosure Duties Arising from State Law Fiduciary Duty C. Law's Limits on the Use of Inside Information 1. Classical Insiders and Misappropriators Chiarella v. United States Notes and Questions United States v. O’Hagan Notes and Questions 2. Extensions of Classical and Misappropriation Liability a. Tippee Liability Salman v. United States Notes b. Insider Trading Liability Under Rule 14e-3 United States v. O’Hagan 3. Assembling the Bases for Insider Trading Liability 13. Financial Reorganizations: Highly Leveraged Transactions, Going Private, Asset Restructuring A. Leveraged Buyouts, Going Private, and Other Transactions Making Use of Leverage 1. Economic Factors Used to Create Wealth in LBOs 2. It's Not for Everyone: The Ideal Candidate for an LBO; Empirical Evidence on Post-Transaction Performance 3. Exit 4. Law Shaping the LBO Deal Metropolitan Life Insurance Co. v. RJR Nabisco, Inc. 5. HCA's LBO as a Case Study 6. Topps as a Case Study of the Overlap of Federal Disclosure and State Intermediate Scrutiny In re The Topps Co. Shareholders Litigation Notes and Questions B. Leveraged Recapitalizations C. Asset Restructuring 1. Divestitures 2. Carve-Outs 3. Spinoff 14. Activist Shareholders A. Who Are Activist Shareholders? B. Patterns of Engagement CSX Corp. v. Children's Inv. Fund Management (UK) LLP Notes and Questions 15. International Transactions A. Determining Which Law B. More Expansive Roles for Shareholders in Friendly Deals C. Roles for Groups Other than Shareholders D. Different Approaches to Ability of Management to Oppose Deals Favored by Shareholders E. Different Rules in Deals by a Controlling Shareholder F. Different Methods of Conflict Resolution G. Cadbury/Kraft as a Case Study Appendix A: Delaware General Corporation Law Appendix B: Federal Statutes & Regulations Table of Cases Index