Purpose of merger and acquisition
In the face of fierce competition in the computer industry, CA, which was established only 20 years ago, is among the best in the software industry in the United States. In addition to developing its own technology, it has also continuously acquired other enterprises to expand its service projects and increase product categories, which has played a very important role in its rapid development. In just 20 years, CA has acquired more than 50 enterprises. CA hopes CSC can provide support for CA software by purchasing CSC, so that CA can become like IBM, providing customers with a more comprehensive set of services from hardware to software, and promoting its system software products to CSC customers, pushing the customer level of CA from large companies to government departments.
Merger and acquisition process
CA began to contact CSC in the middle of 1997 12 to discuss mergers and acquisitions. After more than two months of "friendly" negotiations, the two sides failed to reach an agreement on the purchase price and terms. 1In mid-February, 1998, CA decided to take action and publicly issued an offer to acquire CSC at the price of 108 USD per share, which is 30% higher than the current market price of CSC. The total acquisition involved is $9 billion (if the acquisition is successful, it will become the third largest M&A transaction in the contemporary high-tech field). Mr. Kumar, President and CEO of CA, wrote in a formal written letter to Hannibal Carter, Chairman of CSC: It is regrettable that the two companies have not reached an agreement so far, but CA is determined to spare no effort to use all appropriate methods to promote the success of the M&A transaction. In the tender offer of CA, CA put forward the following acquisition conditions: ① retain the main managers and employees of CSC company; (2) Providing employee stock options to the main managers and employees of CSC company: ensuring CSC and CA have equal organizational status in the merged company; (4) Unless absolutely necessary, the original CSC organizational structure remains unchanged; (5) After the merger, CA and CSC can help each other in technology and market development and develop together; ⑥ There is no layoff plan.
This practice of CA is very hostile. First, CA originally intended that if CSC agreed to merge with CA in a "friendly" way, CA would be willing to buy CSC shares from CSC shareholders at a price of $65,438+065,438+04 per share. But lowering the purchase price now is obviously a punishment for CSC's non-cooperation. Second, the change from a "friendly" agreement to a formal tender offer forced CITIC Jiantou to respond within ten days. In addition, CA also made a request to the Nevada District Court: I hope that the court will decide CSC to give CA's takeover offer to shareholders for discussion in advance before the August general meeting of 1998. The M&A negotiation changed from "friendly" to "hostile", which changed the position of CITIC Jiantou, which was originally interested in finding a merger partner, in the whole merger activity. The board of directors and senior management of CITIC Construction Investment decided to spare no effort to carry out anti-takeover. CITIC Jiantou's response to CA's hostile takeover is as follows: ① Amend the company's articles of association, and cancel the right of shareholders holding 20% of shares to propose an early shareholders' meeting; (2) Set generous rewards for the top 17 managers of the company; Increase the resolution passing rate of shareholders' meeting from 50% to 90%; (4) Threatening to distribute dividends of common stock options to preferred shareholders, paving the way for the company's poison pill defense plan, because in the event of merger, preferred shares can be converted into common stock of the acquirer to increase the acquisition cost; ⑤ A lawsuit of $0 million was filed with the Supreme Court of Los Angeles, and the CA acquisition violated California unfair business competition law; ⑥ Sue CA and its M&A consultant Bell to the U.S. District Court of Los Angeles for controlling the defendant to illegally obtain CSC confidential information through CSC's former business partner, the credit rating agency.
On March 2, CITIC Jiantou formally rejected CA's offer. On March 6th, after many efforts, CA finally announced that it would not consider extending the offer period after the end of the offer period in March 16, which also meant that CA completely abandoned the acquisition of CSC, thus ending the third largest merger case in American high-tech history.
Anti-merger
CA didn't go deep into the target company before the merger. Based on a comprehensive understanding, CA believes that the purchase price issued to CSC shareholders is 30% higher than its market price, and the purchase price should be reasonable. But this is actually an ignorance of the psychology of shareholders of CITIC Jiantou. CSC is a fast-growing company. More than half of the shareholders of CITIC Jiantou are long-term investors and have held shares of CITIC Jiantou for at least five years. CSC is the most important part of their portfolio, with a share of 65,438+008 yuan, that is, the purchase price 30% higher than the market price may be reasonable for other merged companies, but it is low for CSC shareholders. An analyst in a high-tech industry thinks that 130 yuan per share is a reasonable price to attract shareholders to give up their shares. CA and its M&A consultant Bell, because they didn't fully understand the shareholders of the target company, made mistakes in the most critical issue of acquisition.
CA chose the wrong merger plan without considering the industry characteristics of the merged enterprise.
For high-tech enterprises, the most important asset is talent. If the talents of the merged enterprise are dissatisfied with the merged company and leave after the merger, it will lose the meaning of the merger. Therefore, hostile takeover of high-tech enterprises is very discouraged, because it often leads to hostile feelings among the management and employees of the acquired party, thus making the merger result unable to achieve the expected results. In this merger war, CA ignored CSC's opposition and went its own way. Merrill Lynch analysts believe that the hostile takeover of CITIC Jiantou was a mistake from the beginning, because even if the hostile takeover is successful, it will inevitably lead to the loss of employees and loyal customers of CITIC Jiantou, and it is impossible to have good business.