how to acquire a public company

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How to Acquire a Public Company By James Collins, eHow Contributor updated December 06, 2010

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There are two ways to purchase a public company, by friendly acquisition or hostile takeover. Theformer is accomplished with the help of management and the current board of directors, the latter isnot. In terms of funding this means with a friendly acquisition the company has agreed to a certainprice to acquire the company; this is usually more than the current stock price. Either way, bothdeals require the acquirer to purchase a 51 percent stake in the company's ownership. There aresome primary steps involved in acquiring these shares.

Difficulty:

Challenging

Instructions 1.

o 1

Obtain the most recent annual report published by the company. Most companies provide this as adownload on the company website. You can also call investor relations to request that an annualreport be sent to you.

o 2

Turn to the balance sheet in the annual report. This statement provides an overview of thecompany's stock position, including the number of shares in the hands of shareholders, also knownas shares outstanding. This can be found in the section titled, "Stockholders' Equity."

o 3

Calculate the number of shares you need to own in order to acquire the company. It takes 51percent ownership in order to acquire a company. Let's say the number of shares outstanding is100,000. Multiply the number of stock outstanding by .51 in order to calculate the number of sharesyou need to purchase. For instance, .51 multiplied by 100,000 equals 51,000.

o 4

Calculate the amount of capital you will need to acquire the company by multiplying the number of shares you need by the current stock price. Let's say the current stock price is $10. The calculationis $10 multiplied by 51,000 or $510,000.

o 5

Obtain capital. You can use your own funds or secure a loan from a bank based on the acquiringcompany's cash assets. Bank's use the acquiring company's cash as collateral to help fund a



for the operational failures of a corporation which is required to operate within globally agreed safety

standards. Some of the comments made on the forum include:

"If the United States had Exon off the coast of England dumping oil in the same amounts I think their

people and Prime minister would be raising all manners of heck too!" - nifty @50

"If this had happened off the coast of England, or any exotic locale of political interest, by now we'd

have sent a big bundle of money and manpower their way to help." - KFlippin"If not for BP fuel contracts with the Military they probably would have been bounced out of American

Waters years ago." - MikeNV

"I dont give a Good GD how OFFENDED the British People feel about the comments made by any

American Citizen. Until a part of your Country is killed by us; keep your feelings to yourself." -

Friendlyword

"And the UK better get ready... Obama and the dems ought to be siezing all the BP asssets in this

country and pullling a hugo chevez anytime now." - TMMason

"Maybe Britain should join us and help with this catastrophic problem that was created by a company

based in your country." - woolman60

I now hope to be able to clear up the obvious confusion, or just pure ignorance if you wish, about just

who 'owns' BP Plc. The below table shows ownership statistics as of 31st December 2009, as taken

from the BP official website. As you can see it shows that UK ownership of BP is only marginally

larger than US ownership. One large US investor could complete the swing. The simple fact is that

BP Plc is NOT a British company, at least no more than it is an American company. It has effectively

been Anglo-American since a 1998 merger with Amoco. Apparently BP employees some 96,000

permanent members of staff for the day-to-day operation of the business, of which 10000 are British

and 24000 of them are American.

Benefical Owners Of BP Plc

Holdings By

Principle Area

Institutions IndividualsTotal Percentage

SharesUnited Kingdom 33% 7% 40%

United States 25% 14% 39%

Rest of Europe 10% 0% 10%

Rest of World 7% 0% 7%

Miscellaneous 4% 0% 4%

Total 79% 21% 100%

Securities of a public company

Usually, the securities of a publicly traded company are owned by many

investors while the shares of a privately held company are owned by

relatively few shareholders. A company with many shareholders is not



necessarily a publicly traded company. In the United States, in someinstances, companies with over 500 shareholders may be required to

report under the Securities Exchange Act of 1934; companies that report

under the 1934 Act are generally deemed public companies. The first

company to issue shares is generally held to be the Dutch East IndiaCompany in 1601[citation needed ] , but quasi-corporate entities, often trading

or shipping concerns, are known to have existed as far back as Romantimes.

[edit]Advantages

Publicly traded companies are able to raise funds and capital through

the sale of its securities. This is the reason publicly traded corporations

are important: prior to their existence, it was very difficult to obtain large

amounts of capital for private enterprises.The financial media and city analysts will be able to access additional

information about the business.[clarification needed ]

[edit]Disadvantages

Privately held companies have several advantages over publicly traded

companies. A privately held company has no requirement to publicly

disclose much, if any financial information; such information could beuseful to competitors. For example, publicly traded companies in the

United States are required by the SEC to submit an annual Form 10-K containing a comprehensive detail of a company's performance.

Privately held companies do not file form 10-Ks; they leak less

information to competitors, and they tend to be under less pressure tomeet quarterly projections for sales and profits.

Publicly traded companies are also required to spend more for certified

public accountants and other bureaucratic paperwork required of all

publicly traded companies under government regulations. For example,

the Sarbanes-Oxley Act in the United States does not apply to privatelyheld companies. The money and income of the owners remains

relatively unknown by the public.

[edit]Stockholders

In the United States, the Securities and Exchange Commission requires

that firms whose stock is traded publicly report their



major stockholders each year.[1] The reports identify all institutionalshareholders (primarily, firms owning stock in other companies), all

company officials who own shares in their firm, and any individual or

institution owning more than 5% of the firm¶s stock.[1]

[edit]General Trend

The norm is for new companies, which are typically small, to be privately

held. After a number of years, if a company has grown significantly andis profitable, or has promising prospects, there is often an initial public

offering which converts the privately held company into a publicly tradedcompany or an acquisition of a company by publicly traded company.

However, some companies choose to remain privately held for a long

period of time after maturity into a profitable company. Investmentbanking firm Goldman Sachs and shipping services provider United

Parcel Service (UPS) are examples of companies which remained

privately held for many years after maturing into profitable companies.

[edit]Privatization

Less common, but not unknown, is for a public company to buy out its

shareholders and become private. This is typically done througha leveraged buyout and occurs when the buyers believe the securities

have been undervalued by investors. Publicly held companies can alsobecome privately held by having all of their shares purchased by anindividual or small group of investors, or by another company that is

privately held.

In addition, one publicly traded company may be purchased by one or

more publicly traded company(ies), with the bought-out company either becoming a subsidiary or joint venture of the purchaser(s) or ceasing to

exist as a separate entity, its former shareholders receiving either cash,

shares in the purchasing company or a combination of both. When thecompensation in question is primarily shares then the deal is often

considered a merger . Subsidiaries and joint ventures can also becreated de novo - this often happens in the financial sector. Subsidiaries

and joint ventures of publicly traded companies are not generally

considered to be privately held companies (even though they



themselves are not publicly traded) and are generally subject to thesame reporting requirements as publicly traded companies. Finally,

shares in subsidiaries and joint ventures can be (re)-offered to the public

at any time - firms that are sold in this manner are called spin-outs.

Most industrialized jurisdictions have enacted laws and regulations thatdetail the steps that prospective owners (public or private) must

undertake if they wish to take over a publicly traded corporation. This

often entails the would-be buyer(s) making a formal offer for each shareof the company to shareholders. Normally some form of supermajority is

required for this sort of the offer to be approved, but once it happensthen usually all shareholders are compelled to sell at the agreed-upon

price and the company either becomes a subsidiary, ceases to exist or

becomes privately held.[edit]Trading and valuation

The shares of a publicly traded company are often traded on a stock

exchange. The value or "size" of a publicly traded company is calledits market capitalization, a term which is often shortened to "market cap".

This is calculated as the number of shares outstanding (as opposed to

authorized but not necessarily issued) times the price per share. For example, a company with two million shares outstanding and a price per

share of US$40 would have a market capitalization of US$80 million.However, a company's market capitalization should not be confused with

the fair market value of the company as a whole since the price per

share are influenced by other factors such as the volume of sharestraded. Low trading volume can cause artificially low prices for securities,

due to investors being apprehensive of investing in a company they

perceive as possibly lacking liquidity.

For example, if all shareholders were to simultaneously try to sell their

shares in the open market, this would immediately create downwardpressure on the price for which the share is traded unless there were an

equal number of buyers willing to purchase the security at the price thesellers demand. So, sellers would have to either reduce their price or

choose not to sell. Thus, the number of trades in a given period of time,commonly referred to as the "volume" is important when determining



how well a company's market capitalization reflects true fair market valueof the company as a whole. The higher the volume, the more the fair

market value of the company is likely to be reflected by its market

capitalization.

Another example of the impact of volume on the accuracy of marketcapitalization is when a company has little or no trading activity and the

market price is simply the price at which the most recent trade took

place, which could be days or weeks ago. This occurs when there are nobuyers willing to purchase the securities at the price being offered by the

sellers and there are no sellers willing to sell at the price the buyers arewilling to pay. While this is rare when the company is traded on a major

stock exchange, it is not uncommon when shares are traded over-the-

counter (OTC). Since individual buyers and sellers need to incorporatenews about the company into their purchasing decisions, a security with

an imbalance of buyers or sellers may not feel the full effects of recent

news.

[edit]

how to acquire a public company

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