M&A exam with comprehensive Questions and Answers
Why did the merger of Bank of America and Nations Bank occur?✔️✔️this deal created the first
coast to coast banking company
- this deal will bring in more customers because it creates convenience when traveling from coast
to coast (less fees etc.)
when did the bank merger between Bank of America and Nations Bank occur? and
Why?✔️✔️1998
- in 1994, federal law was passed that you could operate across any state as a bank
- thus, this deregulation made it now legal which increased the likelihood of success
- this was due to political and economic conditions
What makes a deal likely to pass antitrust laws?✔️✔️If the merger is productive and convenient
for the customer, the better.
When will a merger have issues with antitrust laws?✔️✔️If the merger is designed to increase
prices and decrease competition
Why might technology have had an impact on the Bank of America and NationsBank
Deal?✔️✔️ATMs were readily available at this time.
Information in NationsBank✔️✔️-NCNB stands for North Carolina Nations Banks
- CEO: Hugh McCoe
- Headquartered in Charlotte
How was Bank of America initially formed in 1998?✔️✔️Nations Bank acquired BankAmerica,
and was then named Bank of America to operate across states
,What was Bank of America's founded as?✔️✔️Bank of Italy by Amadeo Gianini.
Where was BankAmerica headquartered and NationsBank headquartered before and after their
merger?✔️✔️-BankAmerica was headquartered in San Fransisco before the merger
-NationsBank was headquartered in Charlotte before the merger.
After: they became Bank of America and headquartered themselves in Charlotte.
- the CEO if the combined company was Hugh McColl
Friendly merger✔️✔️Target Board approves and agrees on a price/shares
Hostile Takeover✔️✔️At some point in the process, the target board says no to the deal
What are some reasons for an issue in the merger process between the target and the bidder?✔️✔️-
Valuation of the target company could be off
Why might a target board in good faith decline a valuation of their current value in a merger
deal?✔️✔️If they think that they will grow fast than what the street thinks in the future years
- or if the board or executives feel as though they will lose their jobs in the deal and want to
continue to hold their positions
Which legal structure is more likely to be used in a hostile takeover? A merger or a tender offer?
Why?✔️✔️A tender offer: this has a lot to do with publicity. This will put pressure on
management of the company being offered the merger, by letting shareholders know of the offer.
What gives the target board a reason to say no to the offer?✔️✔️Ownership - property rights: if
you own the assets, you don't legally have to surrender the property
- often, agency costs are the reason the target board doesn't want to sell their company (losing
their job)
, Common in the 80s, what gives the target board the bargaining power to resist a hostile
takeover?✔️✔️If a company/firm/person acquires 10% of shares, the target board can issue more
shares to dilute the 10% (sharks)
What percent of shares of a corporation do you need to own to establish supermajority?✔️✔️70%
- and there must be a vote to establish the possibilities
Poison Pill✔️✔️Similar to dilution of common-stock, but using preferred stock. In the instance of
a hostile takeover (say someone buying up all the shares in attempt to take control of the
company), the target firm can issue preferred stock to all shareholders for a cheap price, making
the common-stock worthless.
Who cam up with the poison pill?✔️✔️Martin Lipton
Is there a shareholder vote to issue a poison pill?✔️✔️No there is not, however, there is a
shareholder vote necessary for the dilution of shares or establishing a supermajority
What happened in the Oracle takeover of PeopleSoft?✔️✔️Example of a hostile takeover. At one
point it became a proxy-contest: shareholders are given their right to vote but not everybody can
attend to vote, so they send in their votes to the board in order to represent them.
What is an issue with hostile takeovers?✔️✔️it is incredibly difficult for buyers to conduct du
diligence without the cooperation of the target's management
Engelhard and BASF merger✔️✔️Engelhard was a New Jersey based chemical company, and
BASF was a German company.
- BASF wanted to buy Engelhard in 2005-2006, to which they would say no.
- But BASF and Engelhard had entered into a confidentiality agreement where Engelhard would
share private information with BASF
- In return to Engelhard books, BASF agreed to not pusue any additional hostile measures for
one month.
- Engelhand was hoping for another offer in the bidding war
Why did the merger of Bank of America and Nations Bank occur?✔️✔️this deal created the first
coast to coast banking company
- this deal will bring in more customers because it creates convenience when traveling from coast
to coast (less fees etc.)
when did the bank merger between Bank of America and Nations Bank occur? and
Why?✔️✔️1998
- in 1994, federal law was passed that you could operate across any state as a bank
- thus, this deregulation made it now legal which increased the likelihood of success
- this was due to political and economic conditions
What makes a deal likely to pass antitrust laws?✔️✔️If the merger is productive and convenient
for the customer, the better.
When will a merger have issues with antitrust laws?✔️✔️If the merger is designed to increase
prices and decrease competition
Why might technology have had an impact on the Bank of America and NationsBank
Deal?✔️✔️ATMs were readily available at this time.
Information in NationsBank✔️✔️-NCNB stands for North Carolina Nations Banks
- CEO: Hugh McCoe
- Headquartered in Charlotte
How was Bank of America initially formed in 1998?✔️✔️Nations Bank acquired BankAmerica,
and was then named Bank of America to operate across states
,What was Bank of America's founded as?✔️✔️Bank of Italy by Amadeo Gianini.
Where was BankAmerica headquartered and NationsBank headquartered before and after their
merger?✔️✔️-BankAmerica was headquartered in San Fransisco before the merger
-NationsBank was headquartered in Charlotte before the merger.
After: they became Bank of America and headquartered themselves in Charlotte.
- the CEO if the combined company was Hugh McColl
Friendly merger✔️✔️Target Board approves and agrees on a price/shares
Hostile Takeover✔️✔️At some point in the process, the target board says no to the deal
What are some reasons for an issue in the merger process between the target and the bidder?✔️✔️-
Valuation of the target company could be off
Why might a target board in good faith decline a valuation of their current value in a merger
deal?✔️✔️If they think that they will grow fast than what the street thinks in the future years
- or if the board or executives feel as though they will lose their jobs in the deal and want to
continue to hold their positions
Which legal structure is more likely to be used in a hostile takeover? A merger or a tender offer?
Why?✔️✔️A tender offer: this has a lot to do with publicity. This will put pressure on
management of the company being offered the merger, by letting shareholders know of the offer.
What gives the target board a reason to say no to the offer?✔️✔️Ownership - property rights: if
you own the assets, you don't legally have to surrender the property
- often, agency costs are the reason the target board doesn't want to sell their company (losing
their job)
, Common in the 80s, what gives the target board the bargaining power to resist a hostile
takeover?✔️✔️If a company/firm/person acquires 10% of shares, the target board can issue more
shares to dilute the 10% (sharks)
What percent of shares of a corporation do you need to own to establish supermajority?✔️✔️70%
- and there must be a vote to establish the possibilities
Poison Pill✔️✔️Similar to dilution of common-stock, but using preferred stock. In the instance of
a hostile takeover (say someone buying up all the shares in attempt to take control of the
company), the target firm can issue preferred stock to all shareholders for a cheap price, making
the common-stock worthless.
Who cam up with the poison pill?✔️✔️Martin Lipton
Is there a shareholder vote to issue a poison pill?✔️✔️No there is not, however, there is a
shareholder vote necessary for the dilution of shares or establishing a supermajority
What happened in the Oracle takeover of PeopleSoft?✔️✔️Example of a hostile takeover. At one
point it became a proxy-contest: shareholders are given their right to vote but not everybody can
attend to vote, so they send in their votes to the board in order to represent them.
What is an issue with hostile takeovers?✔️✔️it is incredibly difficult for buyers to conduct du
diligence without the cooperation of the target's management
Engelhard and BASF merger✔️✔️Engelhard was a New Jersey based chemical company, and
BASF was a German company.
- BASF wanted to buy Engelhard in 2005-2006, to which they would say no.
- But BASF and Engelhard had entered into a confidentiality agreement where Engelhard would
share private information with BASF
- In return to Engelhard books, BASF agreed to not pusue any additional hostile measures for
one month.
- Engelhand was hoping for another offer in the bidding war
