M&A Go-Shop Provision and Breakup Fees
Say that we have AcquirerCo. submitting an initial bid of $100mm to acquire TargetCo., and TargetCo. is given a 2-months go-shop provision to seek higher bids. If TargetCo. ends up receiving a higher bid and decides to take that higher bid, it would have to pay a 3% breakup fee ($3mm) to AcquirerCo.
In this case, does it mean that rival bidders would have to bid at least $100mm + $3mm = $103mm in order to have a chance? And if a rival bidder bids $103mm, then AcquirerCo. could technically "match" the higher offer by keeping the initial bid of $100mm and not moving it up?
Sources like this always seem to mention that "go-shop provisions grant the original bidder the ability to match any competing offers". In this context, does "matching" a bid for AcquirerCo. means submitting an updated bid that's $3mm less than the rival bid?
For example, if a rival bidder emerged with a $107mm bid, can AcquirerCo. "match" that with a $107mm - $3mm = $104mm bid? They would mean technically the same due to the $3mm breakup fee, correct?
This is the way I understand these examples:
I think TargetCo would go to AcquirerCo before accepting the higher bid, asking for it to be matched. Then, if the bid is matched, there is no breakup fee paid out as TargetCo did not accept the second bid.
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