Summary: Methods of protection against hostile takeover. Counterattack methods of defense against hostile takeover

Numerous empirical studies in recent years support this assumption. For example, competition has been found to increase the share buyback premium from shareholders of the target corporation from 24% to 41%.

Other studies have shown that competition in a tough takeover increases the size of a tender offer by an average of 23%.

The constant threat of a hard takeover can lead corporate managers to focus not on the stability and prosperity of their company in the long term, but on its current profitability. Management begins to reduce investment in R&D, reject investment projects with a payback period of more than 2-3 years. Indeed, if a corporation can be taken over not today or tomorrow (and after a hard takeover, the management of the corporation will be replaced), then it would be naive to expect that the management of the corporation will be interested in the long term. Moreover, the size of his salary depends primarily on the current results of the corporation. Such management behavior will lead to a decrease in the value of the company and, as a result, to a decrease in the welfare of its shareholders. Absorption protection helps to solve this problem. For example, a manager may be guaranteed a large bonus payout in the event of being removed from a position after a hard takeover.

However, in the light of recent corporate control market research, this hypothesis looks rather pale. The assertion that managers, acting as intermediaries for shareholders, are able to increase the size of the tender offer, does not inspire confidence. As for delaying the takeover process, the shareholders, with their disorganization, will be able to do it better than any manager. There is a vast amount of research on the impact of the threat of a hard takeover on a corporation's long-term investment. For example, investments in R&D can be considered as long-term investment projects. According to the hypothesis just discussed, we should see an increase in R&D investment after the protection is in place. However, in practice, the opposite situation is observed - as soon as management establishes protection for its corporation, the volume of investment in R&D not only does not increase, but decreases. Perhaps management pursues somewhat different interests when deciding to protect their corporation?

Managerial welfare hypothesis)

The managerial welfare hypothesis, in contrast, states that protection from a hard takeover reduces the welfare of a company's shareholders.

Management, by establishing protection against a hard takeover, is pursuing its own interests, namely, it is trying to artificially weaken the disciplining function of the corporate control market. By establishing protection against a hard takeover, the manager is primarily protecting himself, and not his shareholders at all. Now, no matter how badly he manages the corporation, he is not in danger of losing his job (or the likelihood of losing one is significantly reduced) due to a hard takeover. Recall that the well-being of the company's management is wages. The amount of this salary is closely related to the current financial condition of the corporation (through profit sharing schemes, bonus payments and managerial options held by managers). Obviously, the risk of losing wages is closely related to the risk of a hard takeover of a corporation. As soon as the company's performance declines, the likelihood of a hard takeover immediately increases and, as a result, the likelihood of wage loss increases. It is highly likely that risk-averse managers will seek to reduce this risk in all possible ways, one of which may be to provide the corporation with protection against takeovers. Protection reduces the likelihood of a corporate takeover, and therefore reduces the risk of losing wages. Thus, defensive actions that do not benefit shareholders may benefit management, which in this way tries to reduce its risks.

Providing a corporation with takeover protection is often viewed as a problem of agency relationships within the company. To do this, it suffices to assume that the parties to the agency relationship (the manager is the agent of the shareholders, who theoretically should maximize the welfare of the shareholders) will maximize their own welfare.

Thus, many management decisions will be detrimental to the welfare of shareholders. This "harm" is called agency costs. But what is a cost for the shareholders is a net profit for the management.

Most protection methods can be classified into two groups:

Protection methods created by a corporation before the appearance of an immediate threat of a hard takeover;

Protection methods created after the tender offer for share repurchase has been made. – emergency measures

2.1 Pre-offer defenses

Pre-offer defenses - preventive defense methods (preventive) (Appendix 1)

Potential effectiveness is defined as low if its application causes only some inconvenience to the aggressor company or forces it to restructure the tender offer without significantly increasing its size.

Potential efficiency is defined as high if its application allows to completely block any potential takeover attempts, imposing a "veto" on any changes in control over the company.

The most effective and completely blocking any type of takeovers are all modifications of "poison pills" and Recapitalization of the highest class (more on that below).

All other methods, at best, can force the aggressor company to restructure the tender offer, increase its costs, or delay the hostile takeover process.

Separation of the board of directors

The method provides for the introduction of a clause in the company's charter, which stipulates the procedure for dividing the board of directors into three equal parts. Each part can be elected by the meeting of shareholders for only one year and so for three years. Thus (theoretically) the acquiring company is deprived of the opportunity to gain immediate control by acquiring 51% of the shares. This will require at least two annual meetings in order to get their representatives to the board of directors. 5

Supermajority condition

This method also includes amendments to the company's charter, but now in terms of establishing a high percentage of voting shares required to approve the merger. This restriction simultaneously applies to decisions on the liquidation of the company, its restructuring, the sale of large assets, etc. In most cases, the barrier is set between 66.66% and 80% of the shares. Such a restriction makes hostile takeovers much more difficult, as the size of the controlling stake increases, which leads to an increase in the costs of the aggressor company. 6

Fair Price Method

The fair price condition stipulates the condition of repurchase of more than 20 (30)% of voting shares. This condition supplements (strengthens) the supermajority condition and, as a rule, is not applied separately from it. The main goal is to prevent the so-called. bilateral tender offers, in which the price offered for a share in a large package is higher than in a smaller one. This protection forces the acquiring company to restructure the tender offer, while the victim company wins. certain time. At the same time, the application of this protection does not entail an increase in the tender offer. 7

"Poison Pill"

In general terms, poison pills are rights issued by the target company, placed between its shareholders and giving them the right to redeem an additional number of ordinary shares of the company upon the occurrence of a certain event. Any attempt to change control of the company that is not approved by the board of directors of the target company can become a catalyst for the exercise of a buyout right.

Appendix 2 summarizes all the main types of protection with poison pills:

There are at least six main varieties of "poison pills", some of which are listed below:

Preferred stock plans

The issue by the target company of convertible preferred shares distributed among its shareholders in the form of dividend payments on ordinary shares. The holder of a convertible share has the same voting status as the holder of an ordinary share. eight

Flip over plan

The target company declares a dividend on its ordinary shares in the form of rights to purchase a certain type of its securities. The purchase price is set at a level significantly higher than the market value of the securities to purchase which this right has been granted. The rights cannot be exercised until the acquisition of a large block of shares by the aggressor company or the receipt of a tender offer by the company. 9

Flip-in plans

Flip-in plan is an additional "nozzle" to the flip-over plan described above. In the event that the aggressor company transfers the assets of the acquired company on terms that discriminate against its shareholders or reduce their net wealth, the shareholders of the target company have the right to buy back the shares of the aggressor company at a significant discount from their market value. Thus, the use of flip-in protection makes the acquisition a more capital-intensive project for the aggressor company and, at the same time, protects the rights of shareholders of the target company. ten

Flip-out plans

This type of "poison pill" is a purely theoretical concept, which is as follows. Once the victim company is subjected to a hostile takeover attempt, its shareholders acquire rights to buy back the shares of the aggressor company. And, in the end, only theoretically, the aggressor company, having absorbed the victim company, finds that it has acquired its own assets. Flip-out plan is similar to the Pac-Man Defense often mentioned in the literature, which consists in the counteroffensive of the victim company against the shares of the aggressor company. eleven Abstract >> Economics

In 1887, based on the invention of new methods pipe rolling and steel making. After the war... by the company preventive measures, aimed at protection from hostile takeovers. 3. Own vision of the problem Merger process...

In many cases, mergers and acquisitions are carried out by mutual agreement between the senior management personnel of both companies. However, the practice of hostile mergers is also not uncommon.

As we have already noted, hostile mergers and acquisitions- These are mergers in which the management of the target company (target company) does not agree with the upcoming deal and implements a series of anti-seizure measures. In this case, a company that would like to acquire the firm that is interested in it, bypassing managers, addresses directly the shareholders of the target firm.

There are two possible ways of a hostile takeover of a company involving its shareholders:

1. The most common one is direct offer to purchase a controlling stake or otherwise tender offer shareholders of the target company.

2. Another way is called fight for power of attorney , since it involves obtaining the right to vote with other people's shares, i.e. proxy voting. In this case, they try to find support among a certain part of the shareholders of the target company at the next annual shareholder meeting. The pursuit of voting proxies is costly, and it is difficult to emerge victorious from this struggle.

Managers of companies, resisting a proposed takeover, can pursue two goals.:

· to prevent absorption in principle. This happens when managers are afraid that in a new company they will not be able to maintain their position or even their job;

force the buyer to pay a high price for the takeover of the company.

When capturing more or less successful company, especially when management resists, a significant portion of the funds must be paid as a premium to shareholders for the loss of control. In most cases, the premium ranges from 20% to 40% of the “fair” market value of the company.

In some cases, to mitigate conflicts between companies, the managers of the acquired companies are provided with so-called "golden parachutes" those. hefty severance pay in case they lose their jobs as a result of the takeover. Most often, these benefits are paid by the acquiring company, but sometimes by the shareholders of the target firm, so that managers do not interfere with the takeover transaction. At times, such benefits can reach large amounts: for example, the shareholders of Revlon offered the president of the company $35 million. As a result, given the shareholder bonuses and the amounts spent on giving the management team “golden parachutes,” the cost of taking over a company can be prohibitive. The colossal funds invested in takeover projects often only lead to the destruction of the property of the shareholders of the acquiring company.

In world practice, there is a whole anti-seizure system that managers use to counter unwanted deals. In table. 3 and table. 4 we have tried to summarize the most interesting of them and the most applicable in practice.

Table 3. The main methods of protecting a company from a takeover before the public announcement of this transaction

In the 80s. Looking for ways to protect their firms and themselves from hostile takeover attempts, managers and boards of potential takeover firms have tried various methods. Some of them seem to have justified themselves as a means of effectively defending legitimate interests in the face of threats from raiders or strengthening the position of the company's management in negotiations so that, in the end, when the company is sold, the shareholders would receive the maximum possible amount.

However, other methods of protection have led to the emergence of acute ethical and socio-political problems.

Inappropriate and forced offers. At first glance, it is difficult to explain the existence of hostile takeover defenses by anything other than the desire of firm managers and their allies on the boards to maintain their positions. It can be assumed that if the price offered by the buyer is lower than the real value of the company, the shareholders will simply reject this offer. However, in reality the situation is somewhat more complicated.

First of all, it can be difficult for shareholders to determine the value of a firm. As a result, they may not accept the most advantageous offer for them. If the managers and board of a given firm are in the interest of shareholders, then they should try to ensure that the firm is sold only at the highest possible price. However, it may take time to figure out how much you can even get from the party that has already made the offer. For example, it may be necessary to find another bidder for the firm's shares so that competition raises the price to the highest possible level. Consequently, protective measures allowing management and the board to delay the sale process can provide additional value to shareholders.

Moreover, in practice, offers can often be forced, in the sense that individual shareholders may feel pressure to sell shares even if they are aware that the interests of shareholders as a whole require rejection of the offer. In order to understand the reasons for this phenomenon, it is easiest to consider the situation that arises when the offer of the buyer involves the purchase of only a controlling stake. (Small shareholders may feel similar coercion with other acquisition options.) Assume that a raider makes a preferential offer to buy 51% of the shares at a price of pr, but this offer is valid if he acquires at least 51% of the shares. Having achieved its goal, the buyer can achieve by voting a decision to merge this company with another owned by him; at the same time, the valid shares that he did not initially acquire will be bought at a different, less high price.

Let us now consider the incentives that exist for a small shareholder, whose decision has virtually no effect on the likelihood of a buyer acquiring 51% of the shares. If the percentage of shares offered to the buyer is less than 51%, the decision made by this shareholder will not matter, since the transaction will not take place. If the buyer is offered 51% of the shares or more, then this individual will receive p2 if he refuses the initial offer, but if he agrees to this offer, he has a chance to receive pr Thus, consent is a win-win: only it gives the shareholder a chance to get a higher price pr for his shares. However, there is no guarantee that the price px, let alone p2, will be attractive to the shareholder. In the United States, individual state laws ensure that p2 cannot drop too much from the price of the acquired company's shares before the merger, but both px and p2 can be much lower than what shareholders believe is real - and yet they will feel compelled to sell their shares. promotions!40

Although such coercion is theoretically possible, we note that it can only take place if there is only one party willing to acquire shares in the firm. Accordingly, its empirical significance and its explanation for the adoption of measures to protect against hostile takeovers seem doubtful. In particular, the management of the firm can eliminate the threat of such coercion by organizing a share buyback on its own (unless the forced offer comes from the management itself!).

Protection methods. The variety of defenses against hostile takeovers that have been developed is truly astonishing.41 Poison pills (see Chap. 1b) add to the cost of takeovers, because if there is a change in ownership of a controlling interest, a large block of shares, the former shareholders acquire additional voting rights Differentiation of voting rights can give additional votes to those shareholders who own shares for a long time; .Different shapes

I 40 Curiously, if the acquirer is simply trying to buy control

1 package and cannot prevent shareholders who did not respond to his offer to sell their shares at their full value after the takeover, then the optimal behavior strategy for small shareholders is to refuse to sell shares until a price is offered to them, equal to the full value of the shares after the takeover. In this case, again, unless control of the firm changes hands, the decision of any individual shareholder will be irrelevant. If there are changes, then the shareholder who accepted the offer to sell shares will receive the offered price p. The shareholder who rejected the offer receives v - the value of the share with the new composition of owners. For a much more detailed discussion of this topic, see: Weston J. F., Kwang S. Chung, Hoag S. E. Mergers. Restructuring and Corporate Control. Ch. twenty.

Scorched-earth tactics involve deliberately reducing the value of a firm to the acquirer, even if it also reduces its value to shareholders. For example, Marathon Oil, resisting a takeover attempt by Mobil, granted USX the right to acquire at a discounted price its "master treasure" - the oil field in Yeats in the event that any other company takes control of Marathon ".

A similar but less drastic defense is firm restructuring, which makes it harder for the raider to repay its loans after the merger. For example, a firm can separate from itself the most attractive divisions, at the expense of income from which the raider can expect to repay the loans it has attracted after the merger. In addition, the corporation may reduce its financial resources, which could also be used to repay loans after the takeover. One of the possible ways to carry out this operation is to buy shares, another is to buy other companies at prices that may turn out to be inflated. Closed, or protected, boards where only a subset of members are re-elected each year, and overwhelming majority rule that any change in control of a firm must be approved by at least 90% of the votes make it difficult to gain control of a firm even after buying as many shares as otherwise forms a controlling stake. The move could be bolstered by a large shareholding for ESOP, which is expected to be voted in favor of the administration as workers fear losing their jobs in a takeover. The state in which the firm is incorporated may enact regulations to prevent hostile takeovers; such rules, for example, were introduced in Minnesota to protect Dayton Hudson; in addition, the company may re-register in a state where such rules apply. This list is just the tip of the iceberg.

All of these methods could only be seen as the gimmicks of managers defending their positions, were it not for the fact that the use of many of them can be prohibited by the board of directors. This means that these measures can be used both to frustrate unwanted proposals and to strengthen the board's negotiating position. Of course, if the board and administration are positive about the proposal, they refuse to use protection measures. To get an idea of ​​how various hostile takeover defenses work, let's take a closer look at the three defenses.

"Golden Parachutes" As noted in Chapter 13, the golden parachute is a clause in an executive's contract that provides him with some very attractive compensation in the event that control of the corporation changes hands. One of the strongest arguments advanced in defense of golden parachutes is that professional leaders have a legitimate right to expect protection from the rewards they have earned through years of hard and skilled work. Moreover, in the absence of adequate protection, executives will fiercely resist any attempts to undermine the rights they have won, which will dramatically reduce the likelihood of profitable takeovers, make it impossible for firms to make painless changes, and divert their attention from those activities that create value.

PARAMOUNT AND TIME WARNER: IN WHOSE INTERESTS?

In early 1990, Time, Inc. - the largest magazine publisher in the United States (Time, Fortune, People, Sports Illustrated magazines) acquired Warner Brothers, a company specializing in the production of films, television programs, video and audio recordings (the recording company Warner-Reprise " and "Atlantic"); however, according to most observers, in reality, it was Warner that absorbed Time.

The firms were negotiating a shareholder-approved merger when Paramount Communications (film, sports, and publishing - it owns Prentice Hall) offered to buy all of Time's stock at a price of $200. per share paid exclusively in cash. Having secured a court order giving the firm's board the right to simply say "no" to the offer - without consulting stockholders - Time bought Warner for what knowledgeable observers estimated was a generous premium. This way the transaction was carried out meant that Time's management did not have to vote among the firm's shareholders, who might prefer to sell their shares to Paramount.

Time's management claimed that the acquisition of Warner brought the firm's real net asset value per share to $250. and, accordingly, the offer of "Paramount" - 200 dollars. per share - was completely unacceptable. However, the market price of Time Warner's shares never exceeded $125, and in June 1991, as a result of the firm's efforts to liquidate much of its merger debt, its share price fell to less than $85. per share.

Source: Jarrell G. A. The Paramount Import of Becoming Time Warner: A Present-Value Lesson for the Lawyers // Wall Street Journ. 1989. 13 Jul. A-14.

These two arguments are easily understood from a performance perspective: executives may not be willing to invest in their careers unless they are confident that the returns from such investments cannot be easily appropriated by outsiders. Moreover, if managers' investments in their careers are not protected, they will spend their energy to the detriment of their duties in resisting hostile takeover attempts; as a result, both they and the raiders will spend huge amounts of money on paying for the services of lawyers and other specialists, and in general there will be an unproductive expenditure of resources that does not provide any increase in production. These costs represent influence costs; they arise in the process of the struggle of individual individuals for the preservation of their non-guaranteed rents.

AT general plan these arguments are in line with the arguments we have already made about the benefits of secure property rights. It is difficult to give a general assessment of such arguments, since in each specific case it is necessary to test their initial positions. On the whole, given that executives have made some valuable, specific investments over the course of their careers, it is surprising that raiders so often seek to get rid of these executives. It seems more reasonable to assume that the raiders are getting rid of those managers who are not doing their job well and who will desperately resist the takeover because they cannot expect similar working conditions in other firms.

In any case, "golden parachutes" are usually given only to the most senior executives, who have already made most of the possible investments in firm-specific human capital. Therefore, the explanation of this practice by considerations of stimulating investment seems unacceptable, at least for this category of managers.

The first objection to the use of "golden parachutes" is that they do not protect the firm, but the managers "entrenched" in it, which is costly to shareholders. Moreover, if these "parachutes" are too large, managers may be too willing to encourage changeover operations and fail to protect the interests of shareholders. Further, this practice can encourage valuable employees to leave the firm after a change of ownership, which reduces the attractiveness of even desirable mergers.

Redemption payments. The main problem with the implementation of measures to protect corporations from raiders is that these measures can be used both to protect incompetent management and to protect the interests of managers even when they are contrary to the interests of shareholders and other parties. One of the most morally disturbing examples of this problem is the practice of payouts, which are essentially bribes paid by managers of firms to raiders from shareholder funds in order for the raiders to give up their encroachment on these firms (although such payments are not are against the law). ]

An example of payouts is the case of Walt Disney! Productions. At the beginning of 1984, the price of the shares of this company fluctuated between 50-55 dollars. per share. Raider Saul Steinberg started buying up these shares, and their price began to rise. On June 4, 1984, an article appeared in Forbes magazine stating that the total value of the assets of this company - in the event of their sale in parts - would be $110 per share. On June 8, Steinberg offered to buy a 37% stake in Walt Disney Productions for $67.50. per share. After three days of negotiations, the firm agreed to buy back Steinberg's shares at a price of $70.83. and pay him another 28 million dollars. as reimbursement for his "investment costs". Disney's share price plummeted to less than $50. per share. j

From the point of view of a small shareholder, payoffs are the company's money that was paid to the raider by the company's administration so that everything remains the same as it was before the start of the "raid". In this story, someone was left in the cold, but who exactly? Should Walt Disney Productions executives be condemned for spending shareholder money to keep their positions of command? Or should they be congratulated for having maintained a productive organization despite the shameless machinations of greedy financiers? Anyone who believes that the price of a company's stock gives the best indication of its value (as most economists and financiers believe) will consider that the management of Walt Disney Productions, by their actions, reduced the value of the company, as evidenced by the fall in the share price after the payment of the ransom. Those who distrust market valuations, believing them too vulnerable to various manipulations, may conclude that the market valuation of this company has been underestimated all the time and that its management has actually acted in the interests of permanent shareholders. Data on the accuracy of stock prices as valuations of firms is controversial, and the debate continues.

Voluntary restructuring. The success of a wave of hostile takeovers in the 80s. and the resulting rise in stock prices convinced many firm leaders that the raiders' organizational strategies—narrower definition of goals, more leveraged use, and greater use of incentive pay—did indeed drive up value. Some firms have undertaken voluntary restructuring programs designed to capture the benefits of LBOs while avoiding the costs associated with them. the participation of managers of operational units in the income received by their units. In effect, corporate headquarters were becoming creditors to divisions, and divisions were becoming more leveraged, even though the firm as a whole maintained a more traditional equity-to-ownership ratio. borrowed capital, allowing it to weather economic downturns without cutting long-term investment too sharply.

The term "mergers and acquisitions" English language sounds like "Merger & Acquisition" (M&A), means the process, the result of which is the formal or informal transfer of control over the company from one person to another. A takeover is amicable when the offer to acquire is supported by the management of the company being taken over, and the merger takes place on the basis of the common will and benefit from the merger. In the event that the management of the company that is being taken over opposes the merger, but the takeover still occurs, such a case belongs to hostile (hostile) takeovers. M&A does not always have a well-defined economic basis. Often this is a way to enter new markets or expect synergies.

Mergers and acquisitions that take place in the Russian Federation are distinguished by their national specifics, which are associated primarily with the history and methods of the primitive accumulation of capital in the 90s of the last century by domestic oligarchs. The main feature of Russian M&A operations is the overwhelming use of the acquisition method, rather than a merger, which is characterized by the acquisition of new assets, markets and distribution channels within an existing market segment. In Russia, often the acquisition of property in the form of large or promising companies was illegal in nature, associated with forgery of documents, bribery of government officials, violation of the criminal code, forcible entry into the territory of enterprises, that is, with actions aimed at depriving the rightful owners of property through a certain sequence of illegal actions .

In order to protect the company from a hostile takeover, it is advisable to apply precautionary measures not only in cases of the risk of taking over the enterprise, but also in advance, excluding such a scenario. In the list of precautionary measures that are part of the mechanism of protection against absorption, we can distinguish the following:

Firstly, the management of the company should not include random, unreliable, unverified people who can work for the raider company;

Secondly, company executives should not sign and hand over blank sheets and other documents;

Thirdly, the enterprise must pay off its debts on time;

Fourthly, the constituent and title documents of the enterprise must be properly drawn up and stored in a safe, secure place.

In the event of a raider attack, the owners and managers of the enterprise should immediately contact law enforcement and other authorities. If specific criminal acts have been committed in relation to the enterprise or facts of corruption and bribery of officials become known, one should also contact law enforcement agencies with a corresponding statement. For characteristics of friendly and hostile takeovers, see Appendix 1.

Considering terms such as "dawn raid", "poison pill", "anti-shark repellant", one might assume that these are the names of operations from the James Bond films, but in fact they are the names of methods for protecting companies from hostile takeovers. All methods of protection against hostile takeover, which are used by companies in the world market, can be conditionally divided into two classes - preventive and active methods. The following preventive methods of protection against hostile takeovers have gained the greatest popularity:

Reorganization: delisting and transformation into a CJSC (LLC);

Redemption of shares from minority shareholders (protection against green blackmail);

- “Freezing out” of minority shareholders (withdrawal of assets and further buyback of shares);

Company section;

Liquidation of the company and transfer of its property to a new legal entity (LLC or CJSC);

Transfer of assets to subsidiaries (CJSC or LLC);

Change of registry holder;

Debt monitoring;

Shark repellant;

The search for the "white knight";

Creation of a strategic alliance.;

Exit to IPO

Let's look at some of the preventive and proactive methods of protecting companies from hostile takeovers.

Dawn Raid (original name - "Dawn Raid"). This method is most widely used in the UK. In this method, a firm or investor attempts to acquire share capital to control the company by specifically instructing brokers to buy certain shares as soon as the stock exchange opens, with the buyer (the "Predator") similarly disguising their identity and true intentions.

Golden parachute (original name - "Golden Parachute"). With this method of protection, the management of the company, which is threatened by a takeover, offers its key specialists, who may lose their jobs, significant compensation payments and benefits, such as the right to purchase shares of companies at preferential prices, various bonuses, etc. This method is costly (can cost millions of dollars), but is quite effective and is a strong deterrent, as well as allowing you to bargain on the price of the company, citing high staff costs incurred.

Protection against green blackmail (original name - "Greenmail"). This method of protection is applicable when a hostile company owns a significant block of shares, and consists in buying shares from minority shareholders in order to exclude any attempt at a hostile takeover by a predatory company. This method is also known as the "Bon voyage bonus" or "Goodbye kiss".

Macaroni Defense (original name - "Macaroni Defense"). This is a specific tactic in which a company in danger of being taken over issues a certain number of bonds with a guarantee that they can be bought back at a higher price if the company is taken over. Where does this original name come from? What is meant here is that if a company undergoes a takeover, then its liabilities expand like pasta that is boiled in a saucepan. This is a very useful tactic, but the company must be careful not to issue more debt than it can financially support.

People's pill (original name - "People Pill"). If a company is in danger of being taken over, the entire management team is threatened with simultaneous dismissal. This results if they are true professionals, and their departure can seriously bleed the company, which makes the predatory company think twice about the advisability of taking over. However, this may not work if most of the management was somehow planned for dismissal, i.e. Here the main role is played by the human factor.

Poison Pill (original name - "Poison Pill"). With this strategy, the company tries to downplay its attractiveness to a potential buyer. There are 2 types of poison pills. With the "click-in" pill, current shareholders are encouraged to buy more shares at a discounted price, as long as it does not conflict with the company's statute. The purpose of "click input" is to dilute the stock held by a potential buyer, making a takeover of the company unpredictable and expensive. In a "click-back" poison pill, current shareholders are encouraged to buy more shares of a potential buyer at a reduced price in the event that the merger does occur. If investors are unable to financially support this method, the stock will not be diluted enough and a takeover may still occur.

An extreme version of the poison pill, the "Suicide Pill" (originally called "Suicide Pill") is also a means of protecting a company from an unwanted takeover, but this method can have disastrous consequences for the defending company. For example, a company carries out a massive replacement of equity capital with borrowed capital. Of course, such actions can scare away a predatory company, since the takeover process will become too expensive for them, but at the same time, the financial condition of the company itself will deteriorate sharply, it may not be able to fulfill its obligations. financial obligations, and in the long term - inevitable bankruptcy for this company.

White Knight (original title - "White Knight"). The White Knight is a friendly company, a kind of "good guy", which makes every effort to protect from capture by the "bad guy" company. The white knight usually offers a friendly merge as an alternative to a hostile takeover.

Repeated recapitalization (original name - "Leveraged recapitalization"). Under this defense method, the company undertakes an extensive recapitalization of its assets, issues financial liabilities, and then buys them into its own ownership, while the current shareholders usually retain their control over the shares. This action makes it much more difficult for the company to be taken over.

Fair Price Amendment (originally titled Fair Price Amendment). Under this protection method, a fair price adjustment is included as an addendum to the company's Articles of Association, which prevents the acquiring company from offering different prices for different shares held by the company's shareholders in a takeover attempt. This technique discourages takeover attempts and makes the predatory company pay a higher price.

"Just say no" defense (original title - "Just say no" defense). In this method of protecting a company from being taken over, its management simply go to great lengths to lobby its shareholders against accepting the most tempting offers from the invading company.

Staggering of the Board of Directors (original title - "Staggered board of directors"). This method of protection works when the directors of the company are elected for a term of no more than one year. Therefore, a potential buyer cannot instantly replace the entire Board of Directors, even if it controls the majority of votes. At each annual meeting, one third of the directors and nominees will be eligible for shareholder ratification for a 3-year period. The effect of the protection method is that it takes at least 2 years to re-elect 2/3 of the directors and take control of the Board. And, as a rule, a predator company cannot wait that long.

Restrictive takeover laws (originally called "Restrictive takeover laws"). With this method of protection, those companies that do not want potentially hostile mergers may consider re-incorporation into such corporations that have adopted stricter laws against possible takeovers.

Restricted voting rights (original name - "restricted voting rights"). With this method of protection, a company adopts a legal mechanism that limits the ability of shareholders to vote their shares if their fractional ownership is above a certain threshold level (for example, 15%). This method encourages potential acquirers to negotiate with the Board of Directors, as it can exempt its shareholders from these restrictions.

Defense Jewel (original name - "Crown Jewel Defense"). In this method, a company can sell off its most attractive assets to a friendly third party, or combine valuable assets into a separate entity. In this case, the unfriendly bidder is less attracted to target assets.

Pac-man defense (original name - "Pac-man Defense"). The name of the protection method comes from the name of a computer game that was popular in the 80s of the 20th century. At the same time, the target firm by all means prevents the predator firm from imposing a tender offer on it, while making a profitable counter offer to the potential buyer.

White Esquire Defense (original name - "White Square Defense"). This method is very similar to the White Knight method, except that this friendly company does not own a controlling stake, but a significant minority stake. With the Esquire there is always a so-called. A "white squire" who has no intention of taking over the company, but is used as a figurehead to protect against a hostile takeover. The White Esquire can often obtain special voting rights for its shares.

Supermajority (original name - "Supermajority voicing provisions"). This method is used when special decisions are made, such as when considering an offer to buy a company in a takeover or a change in its management. Super-majority positions range from 60% to 80%, which is the minimum percentage of shareholders required to approve any decision. This measure limits the ability of the acquiring company to take over the target company, even if the aggressor has managed to take control of the board of directors, and helps to balance the interests of management with the interests of the shareholders of the target company. A number of studies show that supermajority clauses increase the value of shares, with rising shareholder coordination costs often offset by lower costs.

Creation of a strategic alliance (original name - "Defense of strategic alliance"). This type of protection also resembles the White Knight method, but unlike the latter, it is applied before the threat of absorption arises. A strategic alliance between two or more businesses can protect all parties from unwanted takeovers. But at the same time, there is a risk that the strategic partner will transform into a “gray knight” and will try to take over the partner company using the insider information available to him.

Asset protection. One way to almost perfectly protect the company. This is a set of legal actions of the company, the purpose of which is to make its assets less interesting and more inaccessible to the company-invader. This protection method may include the following:

Legal remote removal of assets from the figure of the real owner, which is usually solved by transferring property to a third party (offshore companies, various funds, etc.).

This is a common measure of protection in Russia. As a rule, such agreements are rather controversial, sometimes imaginary, and do not provide for a replacement of the corresponding equivalent, but they violate the rights of minority shareholders. In case of insufficient legality of the agreement and the loss of assets, shareholders can sue in order to receive compensation for the losses incurred;

Encumbrance of own assets in such a way that in the end they are less attractive to the opposing party;

Protecting assets by hiding information about the assets themselves and their owner, while the legal service of the defending company provides the most high level confidentiality of information.

Another type of asset protection is the restructuring of liabilities through debt buildup. This means the transfer of all assets and liabilities of the company to the enterprise that conducts economic activities.

takeover merger company value

• Monitoring the current state
• Managers Motivation

Why is it always necessary to defend against an unfriendly attack, and not when it has already begun

The development of effective measures to minimize the risk of financial and property losses from the actions of unfriendly companies is largely based on the creation of practical obstacles in the way of the aggressor.

As you know, guessing and fortune-telling about whether something will happen or not, in the matter of protecting a money-bearing asset, can lead to a complete loss of business. There are many examples of this, it is no coincidence that there are special divisions in FIGs that develop options hostile takeover competing companies.

Perhaps someone will say that these are "games the mighty of the world However, this is not the case. At any level (international, regional, city) there are people ready to pick up everything that is bad. For this purpose, specialized companies are often created that receive an order to take over a particular enterprise or asset. Moreover, as a rule, such companies work for a percentage of the acquired asset, i.e. their financial interest in the positive outcome of the acquisition is obvious.

Of course, it is necessary to defend against such aggressors. However, agreeing with this need, many owners of enterprises consider it sufficient to bring their block of shares to 75% or appoint "their own" CEO. And then they stop paying attention to protecting their assets. And only with obvious signs of an unfriendly takeover or merger, they remember the need to build a comprehensive defense. But to what extent will it become complex and, consequently, effective? Acquisition practice and common sense show that individual measures are less effective than timely developed comprehensive strategic and tactical defense.

The main methods of hostile takeover

One of the basics of the tactics of military operations is the principle "Know the weapon of the enemy, be able to resist it and use it in your own interests."

Modern business in the face of fierce competition is the same war, only waged by other means. Therefore, in order to effectively build a system of protection against hostile attacks, first of all, it is necessary to determine those possible acquisition methods that can be applied to the enterprise.

Most common in modern Russia methods of hostile takeover of steel:

• Consolidation (purchase) of small blocks of shares
• Deliberate bankruptcy
• Purposeful reduction in the value of the enterprise and the acquisition of its assets
• Challenging ownership of strategically important assets (industrial and technological complex, subsoil use rights, etc.)
• "Purchase" of enterprise managers

As can be seen from the above list, these methods are quite diverse, and any reader who is somewhat experienced in Russian business will surely immediately recall familiar examples of the use of these absorption methods. Therefore, we do not set ourselves the task of telling about all of them, and even more so, to oppose adequate protection options to each method. We will try to give an overview of the systematic approach to enterprise protection. Systems approach involves the systematic use of a combination of many methods of defense - placing on the enemy's path the optimal (in terms of the ratio of defense effectiveness / defense costs) number of "slingshots", their use depending on the intentions and actions of potential and real aggressors.

Strategic and tactical defenses

Strategic methods of protection - methods provided for by the company's strategy (i.e., a long-term business development plan), their use causes serious organizational changes in the business management system (for example, the transition to a holding structure). These methods are used in the systematic organization of business protection, as a rule, when the attack has not yet begun and there is no real visible threat of takeover.

Nevertheless, the majority of active and dynamically developing Russian business structures, when forming their development strategy, must take into account the factor of business protection.

Strategic methods of protection include, mainly, organizational and managerial measures - building a corporate structure (the structure of organizations that are part of a holding, a group of companies), forming a system of business economic security, organizing an effective system of motivation for top managers, etc.

Tactical methods of defense are used when the attack has already begun, or when the threat of attack is already obvious. They do not require major strategic and organizational innovations. As a rule, these are legal actions.

Basic strategic defenses

As already noted, the use of strategic methods of protection requires serious organizational and managerial innovations. What are these changes in the traditional structure of medium-sized businesses? It:

• Business integration (vertical or horizontal)
• Defense through attack
• Diversification (distribution) of property and financial risks in the holding structure

The use of the first two strategic methods of protection is typical for enterprises - industry leaders. This and the spread of its power up and down the production chain. Buying up and directly capturing smaller competitors, building a production and marketing network in the regions is also one of the effective methods of protection at the strategy level.

Let's leave the market leaders and their aggressive methods of protection alone and tell you more about another common way to protect large and medium-sized businesses - diversification of property and, to some extent, financial risks. This method is based on the use of a simple worldly principle: "do not put all your eggs in one basket." In relation to the production, technological and financial complex of an enterprise, this means - do not concentrate all assets in one organization, if you attack it, you can lose everything at once.

Let's take an example of how the most "advanced" business structures operate in this direction. The holding scheme depicted in the figure is a kind of collective image of many really operating business structures. Let's see how they are organized.

The real owners of the business, as a rule, do not advertise their predominant participation in authorized capital production business units directly. They operate through specially created companies - owners. Often these companies are registered in offshore zones, since the legal status and procedure for registering an offshore company in some jurisdictions allows not disclosing information about the composition of shareholders (members) of this organization. There are also exotic examples registration in Russia for nominees of the owner company with the same purpose - to keep secret information about the real owners of the business.

Owning companies (and there are two types - owners of blocks of shares and intangible assets, and owners of capital-intensive and most liquid property) do not themselves conduct any financial and economic activities, which allows minimizing the risk of their capture through the concentration of accounts payable or by imposing liability for the activities of the production business units of the holding. They only determine the key appointments in the management company and exercise control over the use of the holding's main assets.

The direct management of the holding's activities is carried out by a specially created management company, which exercises its power in relation to production business units and service companies through an agreement between the management company and the subsidiary. This agreement defines the delimitation of powers and responsibilities between the management company and the subsidiary, defines the mechanism for coordinating and making decisions on key aspects of activity. Depending on the distribution of powers that have taken place, the degree of centralization / decentralization of management in the holding is determined.

At one time (in the middle of the 1990s), during the period of the most active corporate construction, a scheme of over-concentration of powers in the holding's management company was widespread in the Russian raw material industries. This scheme was implemented through the transfer of powers of executive bodies subsidiary company management company (Article 103 of the Civil Code, Article 69 of the Federal Law "On Joint Stock Companies"). Thus, all legally significant actions on behalf of the subsidiary were carried out directly by the management company. On the one hand, this made it possible to concentrate power over business in one hand, on the other hand, it made it difficult to manage territorially remote business units. As the system of corporate management of raw materials holdings was being built, the oil and metallurgical "wars" subsided, most of the integrated structures switched to a less centralized management model, although there are still cases of applying the scheme of over-centralization of powers.

In addition to the actual production business units, the holding structure includes service companies serving commercial and auxiliary functions. In some sectors with a significant movement of personnel (for example, in construction), it has recently become common to create specialized personnel companies that, from the point of view of the risk allocation scheme, bear the burden of responsibility for relationships with labor collective, trade unions and regulatory authorities (state labor inspection, immigration services, etc.). In recent years, a popular trend in the oil and gas industry has been the creation of service companies for production drilling and workover of wells, which, again from the point of view of the protection scheme, allows the distribution of ownership of the most capital-intensive assets.

The use of service companies serving commercial functions (as a rule, sales and supply) allows you to separately control the material and financial flows of an enterprise, organize a protective buffer in the way of an aggressor who attacks through the concentration of accounts payable.

Let's consider two examples of using a risk sharing scheme in the interests of an average Russian enterprise operating, for example, in the food industry. With protection method 1, the production business unit "Plant" is protected from external counterparties by two buffers - trading house"Snab" and Trading House "Sbyt", which provides the necessary protection, and also allows you to flexibly vary the flows financial resources between holding companies. With protection method 2, a production business unit with the conditional name "Operating activities" directly interacts with external counterparties, i.e. is at risk of capture through the concentration of accounts payable, but its most "tasty" assets are isolated in companies - owners that do not conduct current activities.

Tactical defenses. a brief description of

When applying tactical methods of protection, serious strategic and organizational innovations are required. However, for them effective application the ground must be prepared in advance in the form of a system of internal documents of the enterprise that regulate the emergence of rights and the assumption of obligations. When forming such a package of documents Special attention should focus on the following areas:

• regulation of the formation and activities of governing bodies
• regulation of transactions with shares
• current state monitoring system

Let us dwell in more detail on the most significant aspects of tactical methods of protection against hostile takeovers.

Regulation of the Formation and Activities of Governing Bodies as a Way of Reasonably Restricting the Powers of Governing Bodies

Successful protection against hostile takeovers and mergers is based on confidence in the clear and coordinated work of society as a whole, its governing bodies and managers as the main driving force that overcomes any encroachment. Internal lack of control, vagueness in the delimitation of powers or excessive inertia in decision-making can in themselves lead to negative consequences, and if they are present during the attack of the aggressor, the ship will sink without even having time to fight.

The legal basis for the protection of society should be scrupulously developed internal documents (Charter, Regulations on governing bodies, Agreement with management company etc.) corresponding to the chosen protection strategy. Often, these documents are treated as an unpleasant formality, repeating the imperative norms of corporate law in them. Business owners often do not take into account that in the event of a threat of a hostile takeover, they may simply not have enough time to eliminate contradictions in documents and make the additions necessary for organizing protection. Modern Russian business has recently “stepped over” a ten-year milestone in its development, and history already knows a lot of cases when former friends and partners, having decided to divide the business, enter into such a clinch that they create the most favorable ground for an aggressor to attack. And mainly why? Because they did not bother in advance to clearly define the procedure for making strategic decisions about the fate of the business, the procedure for exiting the business, the procedure for determining the price of the ceded share in the business.

First of all, you should pay attention to the following key points when developing a package of internal documents of the company. In an unfriendly takeover, the aggressor seeks to gain operational control over the enterprise. For this purpose, a change of governing bodies is being carried out. Most often, attempts to change are carried out even before gaining control over even half of the company's shares. The current joint stock legislation provides for alternatives regarding the body competent to elect the general director or the chairman of the board of directors. If the right to elect them is attributed to the competence general meeting, then the aggressor to get operational control it will no longer be enough to enlist the support of half of the members of the board of directors, the convening of a general meeting of shareholders is required. And if we additionally provide for the election of the board of directors by cumulative voting, then the term for holding an extraordinary general meeting can be postponed from 40 days to 70. In terms of protection, an additional month may not be superfluous at all.

During the takeover of one company, the aggressor managed to negotiate with several members of its board of directors, offering them guarantees for the extension of their powers under the new owner. However, the aggressor could not remove the general director and seize the operational management of the company, since in its charter the election of the general director and members of the board of directors was referred to the competence of the general meeting.

Of course, at the request of members of the board of directors, an extraordinary general meeting of shareholders was convened. But the charter provided for the election of the board of directors by cumulative voting, and the period for holding an extraordinary general meeting was automatically moved from 40 days to 70. In the issue of protection, an additional month played a decisive role. During this time, the company has taken a number of actions, including an exemplary purchase of its shares at an inflated price, which actually blocked the subsequent increase in the aggressor's shareholding, and work was carried out with shareholders. After an extraordinary general meeting was held, which did not re-elect unfriendly members of the board of directors and confirmed the powers of the acting general director, the company's stake was bought back from the aggressor at an acceptable price.

In this regard, it is reasonable to talk about the adoption of a charter that protects against takeovers. A statute that protects against takeovers is a collective term that refers to a whole range of measures that exclude the possibility of an aggressor using common mistakes and provide additional opportunities for procedural protection.

Ways to reasonably limit the competence of the General Director and managers of the company

One of the most common types of hostile takeovers is the purchase of accounts payable. And in this regard, the eternal question of the main shareholder of the company will be - does the management act in the interests of the company and does it make decisions on concluding transactions with due diligence?

The current legislation allows shareholders to legitimately restrict the capabilities of individual officials, in particular the CEO, in order to avoid accidentally or deliberately creating an unfavorable situation in society.

First of all, this is a direct indication in the Charter of additional restrictions on transactions by their size (the option of restrictions by types of transactions, by counterparties is not excluded). The sole executive body under the current legislation independently concludes transactions up to 25% of the book value of the company's assets. In order to establish greater control over its activities, it can be limited to 5-10%, etc. This is especially expedient with a significant balance sheet value of assets or in the presence of several technologically interconnected, but legally separate industries.

The competence of the general director in the implementation of transactions can be limited through a change in the structure of management bodies. In companies where the presence of a board of directors is not mandatory, it is possible to introduce this body and transfer part of its powers to it. In medium and large companies, the powers of the executive body are redistributed between the CEO and the board. The creation of a board of directors and a board of directors also makes it possible to use such a tactical method of protection as the bureaucratization of the decision-making procedure in society. As already mentioned, it is possible to transfer the powers of the general director of the management company.

The procedural issues of making decisions that are strategically important for society should be clearly regulated in the regulations on governing bodies and in such an extremely important document for any commercial organization as the Regulations on the procedure for concluding contracts. The correct alignment of the management process of concluding an agreement and its clear legal regulation allows in most cases to avoid the threat of actions by the management and employees of the company in the interests of the aggressor (accept the terms of the transaction that are enslaving for society, provide an easy opportunity for the aggressor to buy up the obligations of the company, etc.).

Creation additional protection through a reasonable distribution of powers between the company's management bodies, limiting the uncontrolled powers of management, does not allow an unfriendly company to force the company's managers to conclude a deal or make a decision that does not correspond to the interests of the company. In fairness, it should be said that such restrictions will not be able to fully protect society from the actions of an unfriendly CEO. But even in such an extreme situation, he will not deprive the enterprise of the most significant asset in one hour and will not concentrate significant accounts payable with an unfriendly company.

Stock transactions as a high-risk area

The most popular way to gain control over a joint-stock company is to buy its shares. When building takeover protection through the consolidation of blocks of shares, special attention should be paid to the minimum necessary requirements presented in this regard to the charter and to the registrar of the company.

In the practice of corporate warriors, where conflict resolution goes beyond negotiations and all available funds attacks and defense, very often there are cases of challenging the decisions of the governing bodies on the basis of non-compliance with the decision-making procedure. Since the options for contesting on such grounds are diverse, it is necessary to impose additional requirements on the charter of the company, in particular, regulate:

• the procedure for notifying shareholders and the Company about the offer of shares for sale (for CJSC);
• the procedure for the acquisition by the Company of unredeemed shares;
• the procedure for making a decision to increase the authorized capital (declared shares);
• the procedure for converting equity securities into shares.

But, having developed and adopted the most protective charter, there is no need to make elementary mistakes. The real owner of the business legally registered the company for another individual. While the business was not large, there were no questions. With the advent of good profits, the official shareholder began to demand more and more sums under the threat of selling the business, to the creation of which he had only an indirect relationship. To the credit of the real owner, he decided to get out of this situation with the help of lawyers. A scheme was developed to create debt from the official shareholder for his personal obligations, and the shareholder transferred the entire block of shares to pay off debts.

A separate issue of protection is the choice of a registrar. Societies do not always transfer their register to a professional registrar, when this is not directly required by law. But when they come to the enterprise with a custom "check" government bodies(whether it is the prosecutor's office or the Ministry of Internal Affairs with their new powers, it does not matter) and, based on the extended list of documents that they have the right to request, require the submission of a register of shareholders, one has to come up with formal grounds for refusal. When is the register joint-stock company transferred to a well-audited specialized registrar, it can be expected that during the verification it will refer to an exhaustive list of grounds for disclosing such information.

We should also not forget that the use of a specialized registrar for the main owner of a joint-stock company is an additional way to regulate transactions with the company's most liquid asset - its shares and a way to reasonably narrow the uncontrolled powers of top management.

When choosing a registrar, a cautious owner will definitely check:

• whether it is a well-known company with a good reputation in the securities market;
• whether the registrar will provide an opportunity to obtain operational information on the movement of the company's shares;
• whether it is independent of potentially hostile structures.

Monitoring the current state

When buying up the most interesting assets, many aggressors act according to the principle: "Why buy an enterprise if you can buy its management?" Indeed, if an effective system of independent monitoring of its financial and economic activities (in other words, a system of business economic security) has not been built at an enterprise, it will not be so difficult for an aggressor to implement this principle.

The monitoring system is traditionally implemented through the creation of the current monitoring service itself (economic security service) and the control and audit service, whose tasks include conducting comprehensive audits of compliance with the management procedures established at the enterprise.

Managers Motivation

When creating a defense system, one should not get too carried away by the principle "Drag and don't let go", widely known in Russia. The system of total bureaucratization of management procedures and strict control over their observance cannot by itself provide effective business protection. Excessive complication of procedures can reduce the manageability of the business by reducing the efficiency of decision-making, and will irritate top managers and key specialists.

At the heart of any team management system is the correct motivation of managers and leading specialists. It is they who make up the core of the company and largely determine the success of this business. Therefore, one of the effective mechanisms for protecting business is the creation of a motivation system that orients the company's management towards the growth of the value and efficiency of the business. In the Western business community, partnership schemes for top managers and key business specialists (options, deferred income mechanisms, "parachutes") are widespread. In modern Russia, these mechanisms are almost never used, which, in our opinion, indicates rather an insufficient development of the culture of corporate governance than the fundamental impossibility of using these schemes on domestic soil.

Ways of active counteraction

Any method of active counteraction must be built on the basis of the aggressor's strategy of action. Therefore, all actions of society aimed at repelling aggression can be conditionally divided into:

• Emergency share buyback from minority shareholders;
• Additional placement of shares by closed subscription;
• Emergency restructuring, asset withdrawal;
• Target redemption of their shares from the aggressor;
• Buying shares or other assets of the aggressor for the purpose of subsequent exchange;
• "White Knight" - leaving under the protection of a stronger player than the aggressor;
• "Reincorporation" - re-registration of a company in another region;
• Litigation (or disputes for any reason).

We plan to cover in detail these and other practical methods of active countermeasures used in domestic conditions in the next publications. We hope that the approach to the organization of complex protection against hostile takeovers proposed in this article has helped you put all the most common methods of protection into a system. With the next adjustment of the business strategy, you will not forget to take into account the issues of its effective protection. When forming a protection system, we suggest that you use the age-old rule "He who is forewarned is armed."

L.L. Nikitin,
Director of Consulting Department, ACF "Modern Business Technologies"
D.V. Nurzhinsky,
Head of Legal Expertise Department, ACF "Modern Business Technologies"