In public market M&A transactions, where at least part of the consideration is stock of the acquiror public company, the value offered is subject to market risk as the acquiror’s stock price changes. Collars – long underlying, long put options, financed with short call options- provide some degree of price protection to acquiror and target between signing (announcement) and closing. Valuing the hedge correctly is key to making profitable M&A arbitrage trades.
Protectionism includes foreign investment restrictions, antitrust regimes and takeover rules that regulators use to block or influence deal outcomes. Protectionism and trade barriers and inward-looking sentiment is seeping into policy and regulation. There have been many changes in discussions between Congress and Committee on Foreign Investment in the United States (CFIUS). Opposition is no longer just vocal; a lot of activity is taking place behind the scenes in Washington. Constituency interests, too are crowding out traditional policy interests. I describe what’s happening:
M&A Activity Especially Inbound Drastically Reduces
Protectionism Norms: Evolving
Protectionism in Foreign M&A Deals: U.S. Actors
Protectionism in Foreign M&A Deals: Rising
Foreign M&A Deals: Typical Post-Announcement Timeline Delay
Reaction to Japanese Investment: Exon-Florio Amendment
CFIUS Reform: FINSA and FIRRMA
Due Diligence Check List Questions: Acquirer
Post CFIUS >SEC Review Process
Share Purchase Considerations
In the movie “Pretty Woman” hostile corporate raider/black knight Edward Lewis (played by Richard Gere) buys, ransacks, breaks up and sells off the pieces of acquired companies. What defense do his Target companies have to thwart hostile M&A?