This website uses cookies to ensure you have the best experience. Learn more

Money And Banking Essay

1534 words - 7 pages

1. Under what circumstances, if any, is signing a merger or acquisition agreement with a go-shop clause an effective substitute for a pre-signing market check by the seller?
2.
Under Revlon duties, directors are expected to take steps to obtain the best transaction reasonably available for the stakeholders. The Delaware Supreme Court has stated, “there is no single blueprint that a board must follow to fulfill its [Revlon] duties” (citation). After the Smurfit-Stone case, it became clear that board did not need to do a pre-signing market check to fulfill their fiduciary duties. Therefore, “go-shop” provisions have been used more often in place of pre-market checks.
Go-shop clauses ...view middle of the document...

Thus, by choosing a go-shop provision instead of a pre-market check, the target company is still able to canvas the market to help ensure that are receiving the best price. Furthermore, the seller may choose a go-shop provision if the buyer prefers one. Private-equity firms often prefer a go-shop because they like to avoid auctions, believing they are often at a disadvantage to strategic buyers. Professor Subramanian also concludes that go-shop clauses without a pre-signing check, “yield a higher bidder 17% of the time” and “target shareholders receive 5% higher returns” relative to no-shop clauses. These statistics show that go shop clauses can have a positive effect and thus, are an effective substitute.
For example, the go-shop clause was included in the Lear Corporation Shareholder Litigation. The board debated whether to engage in an auction but decided against it believing it would disrupt business and customer relations. Carl Icahn (the buyer), also said he would withdraw his bid if there was a pre-signing market auction. The court notes that the company’s status as one of the 150 largest U.S. corporations, which had a large amount of analyst coverage, elimination of the poison pill, and Icahn’s substantial purchase in 2006 had signaled to the market it was for sale and that a pre-market check was not required. The go-shop provision included a 45-day period, a match right, a fiduciary out provision, and a window shop period, which are important aspects to make a go-shop provision an effective substitute for a pre-signing market check. These same attributes were also found in the Topps case where Vice Chancellor Strine approved the decision to rely on a post-signing market check (although he found that the board violated its duty by not taking advantage of the flexibility of the go-shop). Similar to Lear, the go-shop was an effective substitute because the market seemed aware that Topps was up for sale due in part because of its public dispute with a hedge fund investor and its decision not to adopt a poison pill. Also, the board had reasons to not want to go through another failed auction especially since Michael Eisner declared he would withdraw his bid if there was an auction. The court found that there was an effective post-signing market check with a 40-day go-shop period, the ability to accept an unsolicited bid after the forty days, and a matching right.
Both of these cases contained a go-shop period that were adequate and considered an effective substitute by the courts. In a recent study (insert citation), of those surveys, only 33% engaged in pre-signing market checks in 1H2012 compared to 65% in 2011. Those that did not have a pre-signing check, 100% had a go-shop provision, which further justifies that go-shop clauses can be an effective substitute for sellers based on the circumstances.

. How should the boards of directors of sellers (or committees of those boards) deal with the issues raised by success fees for...

Other Papers Like Money and Banking

Money & Banking Essay

2301 words - 10 pages The Federal Reserve Jermaine C. Taylor ECO320 Money & Banking March 2, 2014 Prof. Diana Bonina, Ph.D. Strayer University The Federal Reserve established on December 23, 1913 when President Woodrow Wilson signed the Federal Reserve Act into law. Although started in 1913, actual operations of the Reserve began in 1914. In order to provide the country with a safer financial system, Congress created The Federal Reserve System as the

Money Banking Essay

631 words - 3 pages Bonds A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, and many other types of institutions sell bonds. Generally, a bond is a promise to repay the principal along with interest on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal. When an investor buys a bond, becomes

Customer Perception Towards Internet Banking

613 words - 3 pages Customer Perception towards Internet Banking –with special reference to State Bank of Mysore, Shivamogga District Introduction Information technology plays a major role in shaping industries all over the world obviously banks reply heavily on IT in conducting their business and spend huge amounts of money on such technology to reduce operation costs and gain the competitive advantage over their rivals by offering customer s better

A Letter to My Parents

571 words - 3 pages those in continental Europe. The nature of their banking was mostly concentrated on granting of loans to the crown, collection and transmission of papal revenues, and financing of trade. Bills of exchange were popularly used but they were not used as money. Bank notes were not known. Interest rates were controlled by the state. Goldsmiths Started Banking 1640, goldsmiths were engaged in money-lending using their own funds. They therefore

E-Banking

3905 words - 16 pages banking system can add value and value chain can be created in the e-business process. In turn it helps to raise gross domestic product (GDP) of the economy as a whole. EBanking facilitates instant access to account information, maintain control over the finances, saving time, avoiding trips and phone calls to the bank. It enables account access that isn’t limited to a specific PC and usages of money management software like Quicken and Microsoft

M Commerce

1453 words - 6 pages money transfer services in the country, Doughan says mobile banking in the UAE will continue to cater to a niche segment of the market that is looking for convenience. “Many argue that mobile banking is highly effective in countries where consumers are living in remote areas and do not have easy access to local banks. In the UAE, we have relatively easy access to bank branches and exchange houses which are seen as a big competitor to mobile banking

About Mobile Banking

910 words - 4 pages started using their mobile phones in performing transactions to avail of the different financial services offered by financial intermediaries and have experienced its convenience. However, many people remain skeptical of the benefits of mobile banking services and whether it is a much safer way to perform financial transactions. In the Philippines, mobile banking started in the year 2000 when Smart Communications launched Smart Money which is

Describe Three Financial Innovations Which Have Been Introduced By Banks In Kenya In The Recent Past As A Way To Increase Effeciencyand Reduce Cost

431 words - 2 pages great success, where shopkeepers operate bank accounts for millions of customers. Mobile Phone Banking Mobile Phone Banking is integrated into the M-Pesa menu or is accessible through Equity Bank’s own mobile banking service. Customers can deposit and withdraw money from their M-Banking account by transferring value to/from their M-Pesa account, which they can cash in or cash out from at any M-Pesa outlet, or through a link to a Bank’s account

The Reason of Using E-Banking

731 words - 3 pages , because nowadays, world technologies are improving rapidly. The workloads of Hong Kong citizens are big, they might not have enough time to visit bank branches for their finical activities. Therefore, a majority of Hong Kong citizen, who are familiar with the Internet, will choose to use E-banking as the services of this system is time-saving, convenient and 24-hours access because time are important to those wage earner, since time is money. The E

Bank of America

1600 words - 7 pages of New York Mellon, Jp Morgan Chase & Co., Wells Fargo & Co., Citigroup, and PNC Financial Service. All of these major banks also have mobile banking and majority of their functions are the same. If BoA, were to create a more complex/ detailed mobile banking program then, yes, it would cost the company more money, however it would set their product apart from its competitors. Another pro to this alternative is that over time the more in

Universal Banking

1505 words - 7 pages UNDERSTANDING UNIVERSAL BANKING Universal Banking is a multi-purpose and multi-functional financial supermarket (a company offering a wide range of financial services e.g. stock, insurance and real-estate brokerage) providing both banking and financial services through a single window. Definition of Universal Banking: As per the World Bank, "In Universal Banking, large banks operate extensive network of branches, provide many different

Related Essays

Money And Banking Practice Exam Essay

2584 words - 11 pages 1 of 9 Economics 310 Money and Banking Practice Midterm Exam Winter 2008 The actual midterm will involve only 25 multiple choice questions, to be completed in 80 minutes. No calculators, no cell phones, no personal digital media players or any other electronic equipment should be visible or in use during the exam. Each question will score 4 points if correct, 1 point if unanswered and 0 points if incorrect. This means that your final exam

Money And Banking Essay

1144 words - 5 pages Free Money for Strangers South University Government assistance programs are supported by tax dollars. This is controversial for hardworking Americans. It seems as though those less fortunate get a pass and receive an income without working for it, while those working, continue to struggle to make what little they do have, stretch. That’s not total freedom in the land of opportunity. So the question that remains is what responsibility is

Money & Banking Essay

2669 words - 11 pages Kelcie Jeffries Money & Banking Mr. Foster March 8, 2014 How Technology has changed the Banking World over Time The ATM “In 1939, Luther Simjian patented an early and not-so-successful prototype of an ATM. However, some experts have the opinion that James Goodfellow of Scotland holds the earliest patent date of 1966 for a modern ATM, and John D White in the US is often credited with inventing the first free-standing ATM design. In 1967

Money&Banking Essay

3131 words - 13 pages Problem Sheet | The Economics of Money, Banking & Financial Markets | 2014 | Ch 3 Sheet 3 | Instructor: Hala A. Fares | Tutor: Sarah Mostafa | MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) To an economist, ________ is anything that is generally accepted in payment for goods and services or in the repayment of debt. 1) _______ A) credit B) money C) wealth D) income 2) Money