FREE online courses on Mergers & Acquisitions - Chapter 2 - Security Laws

 

Companies registered with the Securities and Exchange Commission (SEC) must deal with several schedules whenever a merger takes place. A full discussion of all regulatory requirements is beyond the scope of this course. In any event, here are some highlights that affect many mergers:

 

Form 8K

 

Whenever a company acquires in excess of 10% of book values of a registered company, the SEC must be notified on Form 8K within 15 days.

 

Schedule 13D

 

Whenever someone acquires 5% or more of the outstanding stock of a public company, the acquisition must be disclosed on Schedule 13D. Six copies of Schedule 13D must be filed with the SEC within 10 days of acquiring the stock. A registered copy must be sent to the Target Company.

 

Schedule 13G

 

Short version of Schedule 13D for cumulative buildup of 5%. If during the last 12 months, no more than 2% of the outstanding stock was acquired and there is no intention of controlling the company, the purchase may be disclosed on Schedule 13G in lieu of Schedule 13D.

 

Schedule 14D-1  Tender Offer Statement

 

When a company makes a tender offer to acquire the stock of another company, the acquiring company must file a Tender Offer Statement (TOC) on Schedule 14D-1. The TOC must disclose:

 

• Name of target company
• Description of securities purchased
• Any past contact with the target company
• Source of funds to acquire the stock
• Description of plans to change the target company, such as selling off assets.
• Complete set of financial statements of the acquiring company
• Exhibits related to financing of the stock purchase

 

In cases where a hostile takeover attempt is involved, it is not unusual for the Target Company to contest the TOC. For example, the Target Company may argue that the acquiring firm lacks the necessary financing to complete the tender offer.

Once the acquiring firm has announced the tender offer, it has 5 days to file the TOS. The acquiring firm must hand deliver a copy to the Target Company and any other company that is engaged in acquiring the target company. A copy must also be sent to all exchanges where the Target Company's stock is traded.

 

Schedule 14D-9

 

The target company is required to respond to the TOS on Schedule 14D-9 within 10 days of commencement of the tender offer. Schedule 14D-9 must disclose the target company's intentions regarding the tender offer - accept, reject, or no action.

 

It should be noted that tender offers must remain open for at least 20 days per the Williams Act. Also, if other companies decide to bid for the Target Company, the tender offer period is subject to an extension for a minimum period of 10 days from the date of other tender offers.