“ Oracle chairman Larry Ellison, once a vocal critic of the new era of cloud computing, is set to make a personal profit of $3.5 billion from his company’s takeover of cloud company NetSuite. The software group’s all-cash acquisition for $9.3 billion, which was announced on Thursday, marks Mr Ellison’s biggest deal since he bought PeopleSoft 11 years ago. The billionaire Oracle co-founder will increase his fortune as he is also the largest shareholder [with a 40% ownership] in NetSuite.

Oracle’s $109 a share offer represents a near 30% premium to NetSuite’s closing price on Tuesday, before rumours of a bid approach started to circulate. [Upon the deal announcement,] Oracle shares were down 15 cents at $40.78 per share in midday trading in New York, while NetSuite jumped 18% to $108.”
Financial Times, 28 July 2016

Answer should be elaborated using examples and empirical evidence.

a) Discuss the potential conflicts of interest in the evaluation, negotiation, and approval of the takeover in the Oracle takeover of NetSuite. What would Oracle and NetSuite do to minimise such conflicts of interest?
b) Discuss the empirical evidence on deal announcement returns of the target and of the acquirer in corporate takeovers with regards to the public status of acquirer and the target, respectively, and the method of payment. Are the market reactions in the Oracle-NetSuite case consistent with such empirical evidence?

Answer rating: 100% (QA)

a There could be potential conflicts of interest in the evaluation negotiati... View the full answer