First Stage

A merger or acquisition is put into motion by a tender offer. A tender offer is an offer to purchase some or all of a company’s shares. It can be of a friendly or unfriendly nature while Securities and Exchange Commission (SEC) laws require any corporation or individual acquiring five percent or more of a company to disclose information to the SEC regarding the target company and the exchange. When filing with the SEC, the company must submit how many shares that they own and whether or not the intention is to buy the target company or to invest in it.

Second Stage

Using financial advisors, investment bankers, and profitability predictors, the company that intends to acquire the other company formulates a price that it is willing to pay its target. This price is then publicized to the press along with a deadline by which the target company must either reject or accept the proposal.

Third Stage

This stage is made up of the target’s various actions that could be taken in response to the proposal. The target company could outright accept the terms of the proposal with no modifications or negations. This is a rare occurrence as many details are usually required to be ironed out or compromised on in order to complete an acquisition or merger. In this case, the target company attempts to negotiate. Many times, the jobs of the people in the target company are on the line. This translates into the higher management of the target company trying to negotiate clauses and stipulations in the deal that will guarantee them a job once the transaction has occurred. Other times, the CEO of the target company prefers to cut and run after the merger as they attempt to negotiate terms of the deal that would give them a large compensation package for when they leave the company after the merger or acquisition is finalized. After all negotiating is completed and terms of the deal are finalized, the deal is either accepted or rejected by the target company’s shareholders. This process can be long and daunting for CEO’s but can provide them with much reward, financially, if they are able to complete a merger or acquisition successfully.