Material Adverse Change Clauses and Acquisition Dynamics

Material-Adverse-Change clauses (MACs) are present in over 90% of acquisition agreements. These clauses are the outcome of extensive negotiation and exhibit substantial cross-sectional variation in the number and types of events that are excluded from being ‘material adverse events’ (MAEs). MAEs are the underlying cause of more than 50% of acquisition terminations and 60% of acquisition renegotiations. Moreover, these renegotiations lead to substantial changes in the price offered to target shareholders (13-15%). We find that acquisitions with fewer MAE exclusions are characterized by wider arbitrage spreads (i.e., the difference between the price offered to target shareholders and the current market price of the target’s shares) during the acquisition period and are associated with higher offer premiums. We conclude that material adverse change clauses have an economically important impact on the dynamics of corporate acquisitions and stock prices during the acquisition period.Acquisitions, Contractual mechanisms, Material-Adverse-Change clause (MACs), Material-Adverse Event (MAE) exclusions, merger agreement, risk allocation, flexibility

Earnouts: A Study of Financial Contracting in Acquisition Agreements

We empirically examine earnout contracts, which provide for contingent payments in acquisition agreements. Our analysis reveals considerable heterogeneity in the terms of earnout contracts, i.e. the potential size of the earnout, the performance measure on which the contingent payment is based, the period over which performance is measured, the frequency with which performance is measured, and the form of payment for the earnout. Consistent with the costly contracting hypothesis, we find that the terms of earnout contracts are associated with measures of target valuation uncertainty, target growth opportunities, and the degree of post-acquisition integration between target and acquirer. We conclude that earnouts are structured to minimize the costs of adverse selection and moral hazard in acquisition negotiations.

Do Fairness Opinion Valuations Contain Useful Information?

We analyze target firm valuations disclosed in the fairness opinions of negotiated mergers between 1998 and 2005. On average, acquirer advisors exhibit a greater degree of valuation optimism than do target advisors. Top-tier advisors produce more accurate valuations than lower-tier advisors, but valuation accuracy is unrelated to the contingency structure of advisory fees. The stock price reactions to merger announcements and to the public disclosure of fairness opinions are positively related to the difference between target firm valuations contained in the fairness opinion and the merger offer price. We conclude that fairness opinions contain information not previously available to market participants.

Debt Financing and Financial Flexibility Evidence from Pro-active Leverage Increases

Firms that intentionally increase leverage through substantial debt issuances do so primarily as a response to operating needs rather than a desire to make a large equity payout. Subsequent debt reductions are neither rapid, nor the result of pro-active attempts to rebalance the firm’s capital structure towards a long-run target. Instead, the evolution of the firm’s leverage ratio depends primarily on whether or not the firm produces a financial surplus. In fact, firms that generate subsequent deficits tend to cover these deficits predominantly with more debt even though they exhibit leverage ratios that are well above estimated target levels. While many of our findings are difficult to reconcile with traditional capital structure models, they are broadly consistent with a capital structure theory in which financial flexibility, in the form of unused debt capacity, plays an important role in capital structure choices.

Effects of low incubation temperatures on the bactericidal activity of anti-tuberculosis drugs

OBJECTIVES: to explore the effect of low incubation temperatures and the consequent slowing of bacterial metabolism on the bactericidal action of anti-tuberculosis drugs against Mycobacterium tuberculosis. METHODS: counting of surviving bacteria during exposure of static cultures to 1 mg/L isoniazid, 2 mg/L rifampicin, 0.5 or 2 mg/L TMC207 and 40 or 160 mg/L pyrazinamide, usually for periods of 21 days at temperatures of 37, 25, 22, 19, 16 or 8°C. RESULTS: the bactericidal activities of isoniazid and rifampicin were progressively reduced at 25 and 22°C, and were minimal at lower temperatures. TMC207 was immediately bactericidal at 37°C, in contrast to the early static phase reported with log phase cultures, and showed less change in activity as incubation temperatures were reduced than did rifampicin or isoniazid. Pyrazinamide was more bactericidal when incubation temperatures were reduced below 37°C and when the static seed cultures were most dormant. CONCLUSIONS: these results can be explained by the surmise that at low temperatures bacterial energy is at a low level with only just sufficient ATP to maintain homeostasis, making the bacteria more susceptible to the blocking of ATP synthesis by TMC207. Insufficient ATP at low temperature would also hinder the export of pyrazinoic acid, the toxic product of the pro-drug pyrazinamide, from the mycobacterial cell by an inefficient efflux pump that requires energ

Maintenance & Repair in Science and Technology Studies

This essay contains an overview on worldwide researches on Maintenance and Repair topics in Science and Technology Studies

STM Studies of Synthetic Peptide Monolayers

We have used scanning probe microscopy to investigate self-assembled monolayers of chemically synthesized peptides. We find that the peptides form a dense uniform monolayer, above which is found a sparse additional layer. Using scanning tunneling microscopy, submolecular resolution can be obtained, revealing the alpha helices which constitute the peptide. The nature of the images is not significantly affected by the incorporation of redox cofactors (hemes) in the peptides.Comment: 4 pages, 3 figures (4 gifs); to appear in the Proceedings of the XIIth Int. Winterschool on Electronic Properties of Novel Materials "Molecular Nanostructures", Kirchberg/Tyrol, Febr. 199

The B -> pi K Puzzle and New Physics

The present B -> pi K data is studied in the context of the standard model (SM) and with new physics (NP). We confirm that the SM has difficulties explaining the B -> pi K measurements. By adopting an effective-lagrangian parametrization of NP effects, we are able to rule out several classes of NP. Our model-independent analysis shows that the B -> pi K data can be accommodated by NP in the electroweak penguin sector.Comment: 4 pages (revtex

Optimal estimates of the diffusion coefficient of a single Brownian trajectory

Modern developments in microscopy and image processing are revolutionizing areas of physics, chemistry and biology as nanoscale objects can be tracked with unprecedented accuracy. The goal of single particle tracking is to determine the interaction between the particle and its environment. The price paid for having a direct visualization of a single particle is a consequent lack of statistics. Here we address the optimal way of extracting diffusion constants from single trajectories for pure Brownian motion. It is shown that the maximum likelihood estimator is much more efficient than the commonly used least squares estimate. Furthermore we investigate the effect of disorder on the distribution of estimated diffusion constants and show that it increases the probability of observing estimates much smaller than the true (average) value.Comment: 8 pages, 5 figure