Proposal for a friendly acquisition
Proposal for a friendly
acquisition
Horizon
capital investment Japan &co
Executive Summary
This
proposal suggests a friendly acquisition to prevent your company from a hostile
takeover.
Introduction
We specialize in companies who have defaulted loans. KKL(Kohlberg Krallice Liverpool &
co) which is located on Wall Street committed the branch of our company in
Japan, Horizon Capital Investment Japan, which specializes in these kinds of problems, as a
result of Japan’s rapid economic “grow and collapse” bubble economy. This can
be a source of capitalto buy out your company. However we are going to require
your agreement of acquisition.
The Company
Our
objective is to turn your company around by merger and acquisition and to take control of a poor performing
executive team. We will then reconstruct your company to make it more efficient.
Eventually, our objective will be to earn a profit margin by selling your
company and your company will be independent from our support.
Our Services
This is a corporate development and
restructuring consulting and implementation service for poorly performing
companies. As the manager, I will try to maximize the company’s profits.
We
will face competition and we will need strategy for hostile takeover bids but
our company has so much experience and success in takeover bids and we are
confident we can protect your company.
The Market
Our
target is only large businesses because smaller companies are always unlisted. The
targets of takeover biding are companies which already have gone public. Mergers
and acquisitions in smaller companies are frequent but there is no takeover
bid. It is high probable that your company will be the target of hostile
takeover bid.
Five competitive forces
There
are five forces that shape competition in this industry.
1)
Threat
of new entrants.
Many
hedge funds are always lurking under our market. They have to submit the fund's
report on large shareholders to the Finance Ministry when they reach above 5%
of stock. This is called the 5% rule. However, many hedge funds try to avoid
this rule. As a result, they are invisible.
2)
Bargaining
power of suppliers.
Our competitors
are good at negotiating skill and can prevent us from doing business with some
customers.
3)
Bargaining
power of buyers.
Many
investors research our market, and tend to be attracted to profitable mergers.
4)
Threat
of substitute service.
The
more competitors that exist, the more efficient suggestions will be generated for
the company.
5)
Rivalry
among existing competitors
There are many competitors but not
all of them try to get 50% of the stocks. The reason is some companies want to
profit. This type company is called a “Green Mailer”. They try to pull up their
stock price during the takeover bid term and immediately sell the stock without
acquisition. They are not concerned with managing the company.
Financial Considerations
1.1
Objectives
We
are going to take control of management to turn around your financial
situation. Eventually, your companies will become independent from ours.
1.2 Key to success is to make sure our target.
Because
of your financial condition, you are an easy target for a hostile buyout. The
reason is your PER (Price Earnings Ratio) is unbalanced. If this ratio is low,
it would mean that the company is doing well but the stock price is low. Many
competitors would see this ratio as reasonable.
In
addition, your company seems not to have a successor. This lack of a successor
makes your organization move attractive to our competitors.
The
most important reason for a takeover bid is to keep a secret. It is important
not to publicize a takeover bid. If competitors know our strategy, they can bid
against us.
Company Summary
2.1 Company Ownership
Our
company is a limited company. We specialize in mergers and acquisitions. We
have a focus on operational value creation, a global network of strong business
relationships, a reputation for integrity and fair dealing and a distinguished
track record of generating attractive investment returns.
2.2 Company History
Our
company is a branch of KKL (Kohlberg Krallice Liverpool & co). Our location is in Osaka, Japan.
Through more than three decades of global economic cycles and changes, Horizon
Capital Investments has grown and evolved as one of the world’s largest and
most successful investment firms. Horizon Capital’s success has been built
around a single core concept: Financial buyer. We are going to grow your
company and after that, we will sell your company and make a profit. This
simple strategy structure would be transparent for your company.
Services
3.1 Due diligences and outsourcing
We need to rely on an information collection
company such as S&P. They specialize in collecting particular information.
When we are preparing a takeover bid, they will help us.
The following is outsourcing. We need to make
strong connections between our executive team and main investor. Banks also
help us and provide capital. However, recently, the Volker Rule was passed.
This rule prohibits hedge funds from bank’s bailingouts. We try to recover the
loss by using tax shelters and so on.
3.2 Implementation
We need to have strong leadership among managers and executives. The
top manager’s philosophy will be reflected as the company’s management policy.
The manager must be strong about bids and auctions. We are going to be your
“White Knight” and protect your business.
3.3 turn around the business
If
we succeed in taking over your company, we will provide outsource services, our
specialists, and money to turn your company around.
Strategy and Implementation Summary
4.1 Structure of takeover bid
I
would like to show how we would gather capital for a takeover bid and how we
would turn your business around.
1) LBO
We
would like to earn money from our parent company, KKL. This cash flow would be
defined leveraged buyout (LBO). This strong structure would help your company.
2) MSCB
We
are going to use many Moving Strike Convertible Bonds (MSCB). This is useful
when we face takeover bid. This bond can convert stock and we can avoid
competition other competitors.
4.2 Strategy for hostile takeover bid
When
there is a hostile takeover bid from competitors, we would implement the
strategy below.
1)
Poison
pill
This is
a kind of MSCB. When a competitor suggests a hostile takeover bid, this system
will operate. A competitor has to pay more money than they expected.
2)
Packman
defense
The target company of a hostile takeover bid defends itself by
attempting to take over the potential acquirer. This is named after the Pac-man video game.
3)
Crown
jewel
When a company wants avoid being taken over by selling important assets cheaply, we can use a strategy known as the “Crown
Jewel Defense” In order to be less
attractive to
competitors. We would separate important assets instead of selling them at a
reduced price, and then we would buy them
back later when the takeover is no longer likely to happen.
4)
Stock
Purchase/Subscription Warrant
This is a type of
security issued by a corporation that gives the holder the right to purchase a
certain amount of common stocks. If we use this right during a takeover bid, the
hostile company will not be able to buy the stocks that they aimed to buy. The
reason is this strategy increases the total amount of stock,
and the company which aims to acquire 50% of the stock has to buy more than
they expect or are willing to buy.
5) Golden parachute
Contractual benefits that
assure a high-level employee of generous payments if a company is taken over
and he or she is dismissed as a result. This would be a guarantee.
Reference
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