Developing a methodology for assessing the risk of hostile takeover of a motor transport enterprise and measures to prevent it

Problem. Mergers and acquisitions are traditional processes of redistribution of property rights in a market economy. Mergers are often used by companies to gain control over larger market segments and increase performance efficiency. The acquisition process is not always desirable for the target company and is often used to establish control over its assets. Thus, the problems of assessing the risk of hostile takeover of the enterprise and its prevention are extremely relevant at the current stage, especially in the transport sector of Ukraine. Goal. The goal of the work is to develop the methodology for assessing the risk of hostile takeover of a motor transport enterprise and suggest methods for preventing its occurrence. Methodology. During the study, the following research methods have been used: analysis and synthesis, logical analysis. Information resources of the study are electronic information resources and periodic publications. Results. The risk of hostile takeover of an enterprise is the probability that the enterprise will become the takeover target through the legal actions and methods taken by the acquirer, but the acquisition procedure itself is against the wishes of the target’s board. The list of factors that determine the attractiveness of the potential acquisition target includes: the attractiveness of the enterprise in terms of its financial results and performance, the enterprise is not public, it occupies a considerable market segment, the enterprise operates as a joint-stock company, it is attractive in terms of further resale of its assets, the prospects of the industry in which the enterprise operates. According to the results of the studies assessing the risk level of hostile takeover of the group of motor transport enterprises, it has been revealed that 45% of enterprises are in the medium risk group. The following list of measures aimed at defending motor transport enterprises against hostile takeovers has been developed: the formation of optimal share capital structure; share consolidation when the majority shareholder holds the controlling interest; carrying out a sound dividend policy, the continuous monitoring of amounts and maturity dates of accounts payable, preventing the risk of arousing the counterparties’ interest in the resale of debt obligations of the enterprise to others. Originality. The methodology for assessing the risk of hostile takeover of a motor transport enterprise and reasonable measures to prevent its occurrence have been proposed. Practical value. The proposed recommendations can be used by the owners and management of motor transport enterprises to build an effective system for preventing potential hostile takeovers.

Hostile Takeovers: Desirable or Dangerous? A Survey Study into the Circumstances Under Which Hostile Takeovers in the Netherlands Are (Un)Permissible

A number of recent hostile takeover attempts in The Netherlands have triggered the discussion in the Netherlands on the circumstances under which protection of the target company against a hostile takeover should be justified or not be justified. To answer this question, 21 experts involved in mergers and acquisitions from various angels on the highest (management) level, were selected to participate in a survey investigation combining open questions and giving scores for submitted factors. The outcomes show that the participants advocate non-protection in case of relatively high performance of the bidding company, new value creating opportunities a non-responsive board of the Target with personal interest of the board, and cash payment for the target. They are in favor of protection in case of takeover attempts that incur personal board benefits of bidder or target, intended debt push down financing, and in case of considerable societal risks and consequences.

Quality evaluation for recommendations of the antitrust regulator in the development of the legal system of Ukraine

The formation of a competitive system in a country’s economy is always determined by the possibilities of using tools that stimulate development and form an independent picture for the external environment. In this regard, the study determines the efficiency of antimonopoly regulatory authorities in establishing the criteria and limits of regulation. At the same time, there are cases when antitrust regulation is understood primarily as a form of economic pressure on business entities. The novelty of the study lies in a new consideration of the limits of antitrust regulation. The authors demonstrate that antitrust regulation in its current capacity constitutes a form of limiting the growth of the company and is aimed primarily at reducing the dependence of the market on one stakeholder. The paper identifies the possibilities of additional consideration of the criteria for limiting antitrust regulation in the context of the formation of economic security of a business entity. The paper covers the aspects of determining the limits of state support of economic security of business entities. The practical significance of the study is determined by the need for a more practical harmonization of the legislation of the country with global business standards and a decrease in the level of regulation of the business environment, coupled with its protection from hostile takeovers. The study presents the structure of economic security assurance in the context of the economic system development

Does managerial entrenchment affect audit report lag?

We examine the association between audit report lag (ARL) and managerial entrenchment using data spanning 2008-2016. We use regression analysis and data obtained from publicly available sources to construct our sample consisting of 5,155 firm-year observations and 807 unique firms to investigate whether the behavior of entrenched managers influences the time it takes auditors to complete an audit. The length of the annual audit is the most critical determinant of the timeliness and relevance of the financial reports. Our proxy for managerial entrenchment is the entrenchment index (EINDEX) as constructed by Bebchuk, Cohen, and Farrell (2009). We find a negative relation between audit report lag and the entrenchment index. We stratify the entrenchment provisions in line with existing literature and find a negative association between the provisions that restrict shareholder rights and the provisions that discourage hostile takeovers. Overall, our findings suggest that management entrenchment curtails managerial opportunism and reduces the auditors’ efforts, and the time auditors spend to complete the audit.

Negotiate Clearly Defined Deal Terms

M&A negotiations are a process rather than an event and encompass much more than just price. Common negotiation areas beyond price include management decision-making and control, earn-out provisions, positions and roles, severance, organization structure, compensation and benefits, location, perks, and many others. This chapter covers common M&A negotiating terminology, integrative versus distributive negotiations, long- and short-form letters of intent (LOI), term sheets, key steps in M&A negotiations, and hostile takeovers. The tools, templates, best practices, potential pitfalls, and a case example of how to go about effective M&A negotiations are also addressed, along with the main participants, core activities, buyer’s and seller’s perspectives, and key cross-border considerations.

Pandemic-Resistant Corporate Law: How to Help Companies Cope with Existential Threats and Extreme Uncertainty During the Covid-19 Crisis

This essay argues that, to address the Covid-19 crisis, in addition to creating a special temporary insolvency regime, relaxing provisions for companies in the vicinity of insolvency, and enabling companies to hold virtual meetings, policymakers should tweak company law to facilitate equity and debt injections and address the consequences of the extreme uncertainty firms are facing. After some general reflections upon the type of rules that are needed in these exceptional times, examples of temporary corporate law interventions for the emergency are provided. Specifically, rules to facilitate injections of equity capital and shareholder loans are suggested, together with relaxations of directors’ liability rules and measures to protect firms against hostile takeovers. All of these measures should apply merely by default and only for so long as the emergency lasts. The essay concludes with some thoughts about how to make normal-times corporate law ready for similar emergencies in the future. The goal is both to reduce the risk that the temporary extreme measures enacted for this crisis are made permanent under the pretence that another crisis may hit again and to have quick adaptation mechanisms already in place to respond to such a crisis.

The political economics of news making in Russian media: Ownership, clickbait and censorship

This article explores the dual influence of market and political pressures on journalists and the resulting character of censorship and self-censorship in Russia. In particular, it focuses on how these pressures affect the work environment journalists have to engage with and the quality of news they produce. It also explains the economic and political context of commercialised news aggregation and its impact on the media industry and its workers. A cut-throat media market makes it almost impossible for any outlet to not have to sacrifice some aspects of quality journalism in order to increase its audience. As a journalist with almost 20 years of experience in the media industry, I explore the conditions in Russia’s media market. Even private media owners are often deeply beholden to the state and are as susceptible to pressure from state agents and censorship as are outlets that are directly owned by the government. This can partly be explained by the fact that many outlets which used to be privately-owned and independent have undergone hostile takeovers, including new editorial teams loyal to the state.

Larsen & Toubro Infotech’s Hostile Bid for Mindtree Ltd.: Much Ado About Nothing! A Teaching Case

This article tries to understand and analyse the recent acquisition of Mindtree Ltd. by the corporate conglomerate giant Larsen & Toubro (L&T). L&T Infotech (LTI), which looks after the information technology (IT) business of the L&T group made a hostile bid for Mindtree Ltd., one of India’s leading and fastest growing infotech companies in March 2019. The case goes on to analyse the deal and delves into the reasons for the deal turning hostile. The objective of the case study is to understand the concept of hostile takeovers and the business environment that augur acquisitions. The second part of the article tries to focus on anti-takeover tactics, which the company adopts to avoid the takeover attempt. Here, Mindtree’s decision of share buyback, immediately after L&T’s bid, has been examined. Two perspectives have been studied here—one from the point of view of the promoters of Mindtree, and the other from the point of view of investors. There have been certain very interesting and jocular exchanges of words between the promoters of Mindtree and LTI1 during the whole phase of takeover, which put the focus on the human element in acquisitions. The business environment and industry analysis have been conducted to understand the nature and circumstances of the deal. Legalities of the acquisition and dominant player misuse have also been examined. LTI’s take on the acquisition was very clear. For them, it was a pure business deal. They were on the path for fast growth, which Mindtree would help them achieve. Certain sectors such as Retail, Consumer Packaged goods, Media and Technology are underachieved for LTI where Mindtree has a formidable presence. Mindtree would help LTI explore geographies in Europe that so far were unexplored. However, for the promoters of Mindtree, this bid for takeover became an emotional issue. It all started when one of the non-executive directors of Mindtree itself—V. G. Siddharth—came up to LTI and offered his shareholding of 21 per cent in Mindtree. LTI grabbed this offer and went on to announce that it would acquire a total of about 60 per cent in the company, which made the other promoters very uncomfortable. There was a lot of resistance from some of the Mindtree promoters, and certain hasty announcements and statements in the media were also made. This interesting interlude between the two companies brought a lot of attention to the acquisition and left the investors in a state of confusion. The main objective of the case will be to analyse and teach the different corporate actions which took place and the strategic decisions that were taken during the entire interaction between the two companies. This case would address teaching objectives for the topics such as hostile takeovers; share buybacks as a new approach to anti-takeover defence; political, legal and industrial analysis relevant to corporate restructuring decisions; and Hubris and Managerialism. A separate teaching perspective on Corporate Business Communication has also been explored.

‘Are we losing touch?’ Mainstream parties' failure to represent their voters on immigration and its electoral consequences

In many advanced democracies, mainstream political parties have been disrupted either by the rise of new (populist) parties or by hostile takeovers. In this article we argue that immigration attitudes have had a powerful impact on the strategic environment of political parties and leaders. We show, based on evidence from a comparative study conducted by YouGov in spring of 2015, that immigration attitudes had, by that time, driven a wedge between mainstream parties – those that regularly play a role in government – and their partisans. This ‘immigration gap’ opened up enormous space for new political movements to form, either inside existing parties or outside. Furthermore, we show that the representation gap on immigration issues is a relevant predictor of vote choice, so that parties are particularly likely to lose votes when they are more distant from their supporters on immigration.