The term "hostile takeover" begets images of "raiders" dawning two-toned collared shirt & suspender combos, screaming into phones in a cigar-smoke-clouded mahogany rooms filled with dot matrix printer tear-sheets...
But, $EMR showed that companies too can also "go hostile"🧵
So yesterday, $EMR announced *a proposal* to acquire $NATI for $53.00 a share (~$7.6bn and 32% premium to last close)
$NATI is a $1.7bn electronic T&M business with 70% GMS, 35K customers across diverse end markets
Deal would advance $EMR's global automation focus & strategy
Why go "hostile"?
Well, in short, if as a buyer you're getting stonewalled by management & their Board, you can put the target "in play" by going directly to shareholders
$EMR made many attempts to engage with $NATI in private dating to 5/22 with no constructive engagement
$EMR does a good job cataloging their history of interactions with $NATI
"Hostile" actions are always carefully planned
With 2023 "proxy season" looming, my sense is that "going hostile" was in the cards in the event of no substantive path to a deal following the 11/3 offer
All painting a narrative of delay tactics by $NATI voiding shareholders the opportunity to participate in the deal's value creation
Several tactics a buyer can utilize in order to effect a "hostile takeover" include:
1⃣ Proxy contest
(i.e. shareholders "vote by proxy")
2⃣ Tender offer
(i.e. shareholders "vote with their wallets")
3⃣ Open market purchases
$EMR is going with Door #1: Proxy context
How do targets play "defense"? There are 2 buckets:
"Generate More Votes"
1⃣ Dual-class structure (i.e. high & low votes)
2⃣ ESOP plan
"Become Less Attractive"
3⃣ Divest a "crown jewel"
4⃣ Shareholder rights plan (i.e. "poison pill")
5⃣ Golden parachutes
On 1/13 $NATI did #4
TLDR on $NATI's "flip-in" "poison💊"
"If anyone (e.g. a hostile buyer) acquires 10%+ of $NATI's stock, other shareholders can purchase newly issued $NATI stock at a 50% discount"
Intent (via dilution) is to make an accumulation of a control stake economically "self-defeating"
My thoughts...
Not $EMR's 1st rodeo (hostile on $ROK in '17) & they can sign a deal by $NATI's earnings (1/31)
$NATI's "reactive guide pump" (below) & poison💊denote standalone path conviction but the strategic review signals appetite to get to *a* deal beyond fiduciary CYA
"Fugayzi, fugazi. It's a whazy. It's a woozie. It's fairy dust. It doesn't exist. It's never landed. It is no matter. It's not on the elemental chart. It's not f*cking real”
The origin story of UKG offers a rare opportunity to unpack various interesting dynamics to me both as an ex-M&A deal practitioner & HR industry participant:
✅ Public company M&A deal dynamics
✅ Public company M&A deal dynamics
✅ #HR & #HCM strategy/trends
Let's dive in!🧵
This🧵will include the following components to help guide how this "all-in-one" HCM was formed & the go-forward path
1⃣ Ultimate Software Refresher
2⃣ Kronos Refresher
3⃣ H&F Combo Mechanics
4⃣ UKG: The Combined Company
5⃣ What a Public UKG cloud look like
6⃣ Summary takeaways
From an M&A practitioner perspective, I can't help but to think there will be a newfound appreciation for the level of complexity involved in consummating these specific types of transactions in today's environment
Let me explain...🧵
Talks of a wave of "VC-backed consolidation" over the next 12-18 months have been pervasive in various Valley circles recently, and manifesting in the form of:
🤝 Buyers using '21 valuations opportunistically as "M&A currency"
🤝 "Roll-ups of last resort" for subscale players
There have been a number of "private-to-private" all-stock (or majority stock) combinations that have been consummated before
Two "success stories" that come to mind are 1) Seamless + Grubhub and 2) Elance + oDesk (now $UPWK)
But these deals have enormous underlying complexity
Takeaways:
🤔Focus on "how it works" (rationale + mechanics)
🤔Ask yourself: "what do I get or give here?"
Example: how the $10bn $ADBE stock part of Figma deal *technically* works
Takeaway #2: "Read Between the Lines"
🤔Stop and ask "why did they do this?"
🤔Stop and ask "where's the risk?"
Examples (all co-dependent variables)
1⃣Deal Closing (i.e. why close on X date)
2⃣Termination (i.e. who's at risk of not closing)
3⃣Others (i.e. "go shop" in PE deals)