Small Business Finance…Summer 2009

URG MBA ProgramChapters 15-17

M & A – Mergers and AcquisitionsClassic MergersTriangular Mergers

Subsidiary is formed specifically for merger Creates a legal corporate “veil” Reverse triangular merger is the opposite

From last week: http://www.businessweek.com/technology/content/

jun2002/tc20020617_5587.htm

Sale and Acquisition of AssetsPreservation of legal entitySelective transfer of assetsProceeds remain in the company

NegotiatedInapplicability of the securities lawNo direct effect on managementManagementStrategy is in place from both sides

Payment of Merger or AcquisitionCash for sharesCash for assetsStock for stockStock for assetsPrice must be determined (biggest sticking

point)Stock based payment is cheap and has tax

advantages

Small Business Finance…Summer 2009

URG MBA ProgramChapter 18

BankruptcyBankruptcy

Chapter 7 – Company is liquidated Assets are sold Investors enjoy a priority over others

Chapter 11 Company reorganizes Payment of debt is halted until reorganization is

complete Free ticket from bills for a period of time while

income continues—what a deal

DissolutionDifferent states have different rulesAccounting changesSales change, etc.Delay of shareholder distribution could be up

to 210 days