Relation with Share
- all (or at least majority of) shares are sold to acquirer
- throw enough money at it and it’s mine
- hostile takeover possible here
- funds are given to previous shareholder e.g. a holding company
- control is now within another entity’s hands
- can also be done off the public capital market
Liability
- liabilities are not transferred, because the target company is still a separate entity, Limited Liability still comes into effect
- if the target company becomes insolvent or is not profitable due to high liabilities the acquirer can still get into trouble because his investment is gone or negative
- additional loans which were used to finance the deal will not be able to be honored resulting in a difficult situation if not insolvency for acquirer
- Debt Push-Down is an issue
Takeover
if more than 30% of shares are bought then the rest of the shares from other shareholders need to be bought as well. Minimum price is the maximum price of the last 12 months.