...PeopleSoft v. Oracle: Hostilities Involved in a Takeover Precious Richey OMM 640 Business Ethics and Social Responsibility (MFF1226A) Instructor – Ken Edick Submitted: 7/23/2012 Abstract The hostile takeover of PeopleSoft by Oracle was the results of a lengthy court battle that raised many issues. One issue in particular concerned anti-trust laws and their application to technology companies. The Department of Justice, in an attempt to block the takeover, argued that a merger of this nature would lessen competition and ultimately limit customer choice. An appellant court judge ruled that this case did not meet the criterion of an anti-trust breach and ruled in favor of Oracle. Never the less, many other factors concerning the role of shareholders, the board of directors and chief officers gave rise to some grey areas. It has been speculated that the outcome of this case has paved the way for similar acquisitions in the technology arenas. The hostile take-over bid by Oracle to acquire the controlling shares of PeopleSoft was a long and drawn out acquisition. The process was marked with uncertainties, government intervention, and changed trends. Some analysis considered the move to be a merger while others considered it to be a consolidate that served as a prelude to the inevitable changes in the software market. In 2003 when Oracle’s CEO announced plans to wage an unsolicited takeover of PeopleSoft’s stock (Boatright, 2009), the decision was met with...
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...Case Study 3.1 Teva Acquires Cephalon in a Hostile Takeover in the European Market for Corporate Control 1. While Valeant was more likely to be an aggressive cost cutter, both firms anticipated improving earnings performance through significant cost savings by combining operations and eliminating duplicate overhead. Valeant also believed Cephalon would complement their own offering. Teva was under pressure to diversify its product offering to include a greater percentage of higher margin branded drugs. Like many pharmaceutical companies, they were vulnerable to the loss of patent protection on a key drug and were seeking access to a firm with a substantial number of new drugs under development. 2. Both firms initially approached Cephalon on a friendly basis, interested in avoiding an auction for the target and the potential for customer attrition, loss of key employees, and disruption to suppliers if the acquisition became hostile. However, Valeant decided to pressure the target by going directly to the shareholders with an all-cash hostile tender offer. Simultaneously, the firm initiated a proxy fight in an attempt to change the composition of the Cephalon board in order to have the board rescind the firm’s shareholder rights plan (poison pill), which if triggered would have increased the cost of the takeover. Valeant used a consent solicitation card which would enable Cephalon shareholders to support Valeant’s slate of directors without scheduling a formal shareholders...
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...1. Why is Auhll (CEO of Circon) resisting to the takeover? How do incentives of Auhll conflict with those of other (minority) shareholders? Auhll liked challenges, he had an innovative mind and he liked to do something new and different every time. .Auhll seems to have a soft corner for lost causes, Circon was a lost cause which he had picked up to turn its performance completely. ACMI as well as Cabot fall into the same category as that of Circon Inc. Having seen success with Circon and ACMI, he had an undoubting confidence that he would turn around the performance of Cabot as he did with Circon and ACMI. His approach and belief, that he cannot be wrong had led him on a different path as that of the shareholders. The takeover bid was within the interest of the shareholders for them to enjoy heavy rewards for their holdings in the short term (the $18/share bid was at 83% premium) but Auhll strongly believed that he could obtain long term sustainable competitive advantage which will result in higher returns for shareholders in the long run. He was more concerned about the long term which would have benefited him (since he owned 11.5% share of Circon) and the insiders. Of course here he was in conflict with the minority shareholders as the minority shareholders wanted to reap short term benefits. Also, as stated in the case, he was used to being the CEO of Circon and had emotional ties with the company. He had made enough money and had a prestigious status (both financial and...
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...Pills. [2] Impact of Poision Pills on Stock Prices. [3] List the Preliminary Takeover Steps: a) Bidding Strategies b) Casual Pass c) Bear Hugs [4] What is Tender Offers Throughout the years many acquisitions have been hostile, which has led to companies to creative preventative and defensive takeover methods. Preventative is used as a way to reduce the likelihood of a takeover, and defensive measure (active measures) are used afer a hostile bid has been issued. Keeping the company successful with shares at a high cost prevents short-term gain takeover. There are two hypothesis that explain the impact on management and stockholders during a hostile takeover. Management Entrnechment hypothesis states that nonparticipating stockholders experience a reduction in wealth when management tries to stop a takeover, where Shareholders interests hypotheiss states that stockholders’ wealth rises when management prevent takeover. Companies today monitor it’s shareholders and the percentage that they own as a way to foresee a potential hostile takeover. Many companies even sell and provide their employees with shares because they are more likely to oppose a takeover, whereas an investor shareholder will more likely to favor a takeover. When an increase of trading occurs, the company gets a clue in that a bidder may be preparing to takeover the company. Once an acquirer has purchased a large amount of the company shares, it...
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...the following statements is CORRECT? | a. | Relaxant's shareholders (the ex-partners) will now be exposed to less liability. | | b. | The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. | | c. | The firm will find it more difficult to raise additional capital to support its growth. | | d. | The company will probably be subject to fewer regulations and required disclosures. | | e. | Assuming the firm is profitable, none of its income will be subject to federal income taxes. | Question 3 Which of the following statements is CORRECT? | a. | Conflicts would not exist if the Security and Exchange Commission were abolished. | | b. | The threat of takeovers reduces conflict of interest problems, but only between bondholders and stockholders. | | c. | Compensating managers with stock options can do nothing to help eliminate potential conflicts between stockholders and managers. | | d. | Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are...
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...DQ # 4 Takeover refers to a situation where a company seeks to acquire another to expand product breadth, geographic or customer base or it might want to expand and diversify into related or unrelated product markets, pursue undervalued resources, or manipulate financial indicators, including risk profiles, performance variability, and financial leverage (Pearce & Robinson, 2004).On the other hand, hostile take-over involves an outside entity, making a tender offer to shareholders of a target firm and as suggested by Pearce & Robinson (2004), it involves directly approaching the company’s shareholders ignoring the executives and the board of directors. However, there are appropriate takeover defences that can be utilised to safeguard any hostile takeover and these could be discussed below: Firstly, poison pill is a defense strategy in which the target company offers its stockholders preferred stock in the merged firm at a highly attractive rate of exchange as a mandatory consequence of a successful takeover (Pearce & Robinson, 2004).. The reason behind this is to dilute the stock such that the attacking firm loses money on its investment. Example research conducted by J.P. Morgan offers evidence that poison pills benefit target firm stockholders. Secondly, to prevent unwelcome corporate suitors from acquiring enough stock to take control of the corporation, flip-in poison pills can be used and with flip-in options...
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...behaviour of the management in the event of a acquisition2. Often times when an acquisition occurs, the management of the acquired firm will not stay with the new firm, meaning that their will not benefit from the acquisition, but would rather suffer if the acquisition occurs. As such they might be inclined to try to prevent the acquisition, and not act in the best interest of the shareholders3. The Golden Parachute serves to ensure that the management acts in the best interest of the shareholders by providing a mechanism to protect their own personal self interest. Another objective that is often talked about would be that of an anti-takeover mechanism4. The Golden Parachute serves as a antitakeover mechanism in a number of ways, but in summary it is assumed to increase the cost of acquisition making the company less attractive for takeover. Through the course of this paper, we hope to learn a number of things about the whole Golden Parachute situation. Firstly, focusing on it being a tool to control the behaviour of the 1 Richard A....
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...ETHICS IN FINANCE Meaning of Ethics Ethics is the study of human behavior which is right or wrong. In general, ethics means doing right things to others, being honest to others, being fair and justice to others. Even ethics in finance is a compartment to general ethics. Ethics are very important to maintain constancy in social life, where people work together with one another. In the process of social development we should not be conscious of ourselves but also conscious to take care of others. WHAT IS FINANCE Finance means fund or other financial resources; it deals with matter related to money and the market. The field of finance refers to the concept of time, money and risk and how they are interrelated. Banks are the main facilitators of funding. Funding means asset in the form of money Finance is the set of activities that deals with the management of funds. It helps in making the decision like how to use the collected fund. It is also art and science of determining if the funds of an organization are being used in a right manner or not. Through financial analysis, any company or business can take decision in making financial investments, acquisition of company, selling of company, to know the financial standing of their business in present, past and future. It helps to stay competitive with others in making strategic financial decisions. Finance is the backbone of business; no business can run without finance. WHAT IS ETHICS IN FINANCE Ethics in finance...
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...Chapter 3 Case Study: Mittal Acquires Arcelor in a Battle of Global Titans 1. Identify the takeover tactics employed by Mittal. Explain why each was used. Answer: Mittal attempted a friendly takeover by initiating behind the scenes negotiations with Guy Dolle, CEO of Arcelor. However, after being rebuffed publicly, Mittal employed a two-tiered cash and stock tender offer to circumvent the Arcelor board. To counter virulent opposition from both Arcelor management and local politicians, Mittal announced that it would condition the second tier of its tender offer on receiving more than one-half of the Arcelor voting stock. However, the second tier offer would be at a slightly lower price than offered in the first tier. This was done to encourage Arcelor shareholders to participate in the first tier offering. If Mittal could gain a majority of voting shares it would be able to acquire the remaining shares through a backend merger. Moreover, Mittal sued to test the legality of Arcelor’s moving its recently acquired Dofasco operations into a trust to prevent Mittal from selling the operation to help finance the takeover. Mittal also attempted to rally large shareholder support against what were portrayed as Arcelor management’s self-serving maneuvers. Finally, Mittal continued efforts to appeal to shareholders by raising its bid from its initial 22 percent premium to the then current Arcelor share price to what amounted to a 93 percent premium and agreeing to eliminate...
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... Introduction The 1980s was an era of expansive mergers and acquisitions fueled by the popularity of corporate raids. Although this drastically changed the landscape ofmany industries, the banking industry was relatively untouched. Commercial banks were protected from hostile takeovers by federal regulations. The McFadden Act of 1927 and the Bank Holding Company Act of 1956 supported the existence of 24,495 small banksl in 1985.However, by 2003 there were 11,021 small banks and 80 banks had adopted a poison pill plans (Critchfield, Davis, Davison, Gratton,Hanc, Samolyk, 2004). The Riegle Neal Interstate Banking and Branching Efficiency Act of 1994 was the catalyst of the rapid consolidation. Prior to this act, a commercial bank could only make acquisitions across state lines if state the bank was operating in and the state of the target allowed interstate banking. Riegle Neal removed state and federal restrictions on bank mergers creating rapid consolidation in the industry. During this period of deregulation, a growing number of banks adopted poison pill plans. A poison pill plan is a defensive measure adopted by a management team to protect a company from an unwanted takeover. Functionally, this measure releases additional shares of stock, at a discount, to shareholders of record when an unwanted acquirer achieves pre-specified stake in the company. This version of a poison pill plan is known as "flip-in rights." Stockholders are allowed to flip-in...
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...Investment Notes -T-Bills: Treasury bills (or T-bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. -Federal Funds: overnight borrowings between banks and other entities to maintain their bank reserves at the Federal Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. -Eurodollars: are time deposits denominated in U.S. dollars at banks outside the U.S. and thus are not under the jurisdiction of the Federal Reserve. -The term was originally coined for U.S. dollars in European banks. -There is no connection with the euro currency or Eurozone. -FRA: a forward rate agreement (FRA) is a forward contract, an over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. -Investing in International shares: -Carry trade: is a strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return. This strategy is very common in the foreign exchange market -Counter-trade: an umbrella term used to describe many different types of transactions, each “in which the seller provides a buyer with goods or services and promises in return to purchase goods or services from the buyer” ...
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...When we talk about acquisitions or takeovers, we are talking about a number of different transactions. These transactions can range from one firm merging with another firm to create a new firm to managers of a firm acquiring the firm from its stockholders and creating a private firm. We begin this section by looking at the different forms taken by takeovers. 1. TAKEOVER A corporate action where an acquiring company makes a bid for an acquire. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. There are three types of takeovers: 1.1 Friendly takeovers A "friendly takeover" is an acquisition which is approved by the management. Before a bidder makes an offer for another company, it usually first informs the company's board of directors. In an ideal world, if the board feels that accepting the offer serves the shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. 1.2 Hostile takeovers A "hostile takeover" allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a...
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...Definition of 'Goodwill' An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company is purchased by another company. In an acquisition, the amount paid for the company over book value usually accounts for the target firm's intangible assets. Investopedia explains 'Goodwill' Goodwill is seen as an intangible asset on the balance sheet because it is not a physical asset such as buildings and equipment. Goodwill typically reflects the value of intangible assets such as a strong brand name, good customer relations, good employee relations and any patents or proprietary technology. Definition of 'Negative Goodwill' A gain occurring when the price paid for an acquisition is less than the fair value of its net tangible assets. Negative goodwill implies a bargain purchase. Negative goodwill may be listed as a separate line item on the acquiring company's balance sheet and may be considered income. For the purchased company, negative goodwill often indicates a distress sale, and the unfavorable sale conditions lead to a depressed sale price. Investopedia explains 'Negative Goodwill' Negative goodwill is based on the concept of goodwill, an intangible asset that represents the worth of a company's brand name, patents, customer base and other items that are difficult to price but that help to make a company valuable. Most of the time, a company will be purchased for more than the value of its tangible assets, and...
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...(Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: (1.2) Goal of firm Answer: b Diff: E [i]. The proper goal of the financial manager should be to maximize the firm's expected profit, since this will add the most wealth to each of the individual shareholders (owners) of the firm. a. True b. False (1.2) Goal of firm Answer: b Diff: E [ii]. If a firm has a single owner, we may say that the proper goal of a financial manager would be to maximize the firm's earnings per share. a. True b. False (1.2) Managerial incentives Answer: b Diff: E [iii]. Executive stock options are shares of stock awarded to managers on the basis of corporate performance. a. True b. False (1.2) Social welfare and finance Answer: b Diff: E [iv]. The goal of maximizing stock price is a detriment to society in that few of the actions that result in maximization of stock price also benefit society. a. True b. False (1.2) Social welfare and finance Answer: a Diff: E [v]. If a firm's managers want to maximize stock price it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate. a. True b. False (1.3) Agency Answer: b Diff: E [vi]. An agency relationship exists when one or more persons hire another person...
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...Case Study: Circon Student’s Name Institutional Affiliation Question one The CEO, Mr. Richard is a resilient individual who likes challenges including those that regard his investments. He does not believe that there are unmanageable conditions in any business context but he feels that those who decide to give up are cowards. His ambitious and resilient nature is depicted through his decision to pursue a business course that has a lot of competition unlike his first qualifications which centered on engineering. These personal traits seem to be the reason that made Richard to be attracted to businesses that were proving to be perennial loss making organizations. Circon had already shown indications of being wound up but he decided to venture into its revival. He was in a position to rescue the company from closure into a profit generating organization. The CEO believes that through strong relationships with customers a company can achieve its objectives. According to the case, the CEO had a strong personality and this is what pushed him into taking business risks. He believed in strong business relationships with suppliers and employers as he regarded to be part of the success of the business. His strong personality made him to aim at making the business to be more stable. However, his strong personality had some elements of organizational arrogance. Organizational arrogance arose because he had friends on the board of management of the company. The...
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