Glossary

A public-to-private transaction refers to the process of taking a publicly traded company private, usually by acquiring its outstanding shares and delisting it from stock exchanges. This involves significant financial restructuring and often requires substantial capital investment. In simpler terms, it’s when a public company is purchased and converted into a private entity, thereby eliminating the pressure of public markets and increasing operational flexibility.

A Section 363 sale is a special type of sale used under the U.S. Bankruptcy Code, enabling companies in Chapter 11 bankruptcy to sell their assets free and clear of liens and other encumbrances. We want to emphasize that this legal provision is crucial for distressed companies seeking to maximize asset value and facilitate a smoother exit from bankruptcy while ensuring that buyers can acquire these assets without inheriting any legal baggage.

A reverse takeover, often called a reverse merger, is when a private company acquires a public company to bypass the traditional initial public offering (IPO) process. In this scenario, the private company’s owners often gain control of the public entity, allowing them to access capital markets without the lengthy and costly process of going public. Essentially, it’s a strategic move that can provide the private company with liquidity and greater visibility in the market.

A hostile offer defense is a strategy employed by a company to protect itself against an unsolicited takeover bid that it deems unwelcome. This can include various tactics from implementing poison pills to seeking alternative buyers, all aiming to thwart unwanted advances. The essence of this defense is to maintain control over the company and protect shareholder interests; it reflects a firm’s desire to stay independent amidst external pressures.

A lock-up release refers to the period following a company’s initial public offering (IPO) during which insiders and major shareholders are restricted from selling their shares. Typically lasting from 90 to 180 days, this timeframe is designed to stabilize a company’s stock price by preventing a flood of shares hitting the market too soon. Once the lock-up period expires, these stakeholders can sell their shares without any restrictions, which can lead to significant changes in the stock’s performance.

Return on investment (ROI) is a financial metric that helps us measure the profitability of an investment. It is expressed as a percentage and calculated by dividing the net profit from an investment by the initial cost of the investment, then multiplying by 100. Essentially, ROI gives us a clear picture of how effectively our capital is being utilized and whether we are achieving a positive return.

Vendor due diligence is the process of assessing potential suppliers or partners to ensure they meet specific standards, requirements, and compliance obligations before engaging in business with them. This evaluation encompasses various factors including financial stability, operational capabilities, legal compliance, and reputational risks. It’s a critical step in the broader context of mergers and acquisitions, helping to mitigate risks that could impact our business decisions.

When we talk about board fiduciary duty, we refer to the legal obligation that board members have to act in the best interests of the company and its shareholders. This responsibility encompasses aspects such as loyalty, care, and disclosure. In essence, board fiduciary duty ensures that the decisions made by board members are done thoughtfully and with the company’s future in mind, preventing conflicts of interest and self-dealing.

The survival period is a term we use to describe the length of time during which a business must remain operational after a merger or acquisition to ensure stability and success. This period is critical for integrating systems, aligning company cultures, and retaining clients and employees. It is during this time that companies strive to create value from the merger, allowing us to evaluate the effectiveness of the transition.