Sunday, March 26, 2006

NYTimes Dealbook: We got a deal, but we'll shop it too

Interesting piece from the NYTimes Dealbook in Sunday's paper. Andrew Ross Sorkin sheds light on the new phenomenon - the "go shop" provision in M&A deals that allows the seller to announce a deal with Company A, but go shop itself to others at the same time. If a higher bid comes in, then great, if not, no harm done, because the original deal was announced anyway. Any higher bidder would have to cover the break-up fee imposed on the original transaction. A recent deal using the go shop provision was the announced sale of the Atlantis casino/hotel to an investor group.

"Instead of the typical "no shop" term that has long been standard issue in merger deals — to keep sellers from soliciting higher offers after reaching an agreement to be sold — some boards of directors are now taking the opposite tack. Sellers are cutting deals with buyers that allow them to actively seek higher offers after reaching agreement. So, in the case of this week's deal, Kerzner International, owner of the Atlantis resort, and its advisers literally began an auction for Kerzner the day it agreed to be sold."

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