There is also a risk of material adverse change of the target. Just an email from the chairman of DOW explained that it would be better to wait till June in order to finish the deal. Stock prices of chemical companies increased immense and the shareholder of Rohm and Haas expect a large profit from their shares especially in the ongoing global downturn, pressing the stock values to the bare bone.
This provision covers the risk of non-payment and it is borne by Dow Company. How to Write a Summary of an Article? Both companies would bear this risk. Under this legal provision, where acquirer can refuse to complete the deal, if there have been adverse material changes at the target, which make it less attractive as a company.
Rohm and Haas forced DOW to finish the promised acquisition but DOW never got a specific plan how to handle this complex and significantly changed situation. This provision includes the details of the consideration, which would be paid by Dow Company to Rohm shareholders. Therefore, in this way, this risk has been allocated to both the parties.
For example, in paragraph 5. Other Risks There are also other risks inherent in this proposed merger but due to lack of information in the case, these are not significant. Material Adverse Effect Clause: Risk of Improper Transaction Valuation The valuation involves a range of assumptions and therefore, it is subjective.
With this situation, the dilemma of DOW was perfect, a global economic meltdown and a promise which DOW was not able to finish because of a deal break. This clause is in the favor of Dow, which restricts that Rohm is responsible for not talking to other parties and this will in turn drive the price up.
This fairness opinion is in the best interests of both Dow and Rohm. Rohm and Haas and DOW conducted several meeting to find a way to resolve the situation, but without any success and to the great disappointment of Rohm and Haas as their expectations were not met at all.
Therefore, this favors Rohm and holds Dow responsible to act according to this clause. Therefore, these are all the main risks that are inherent in this merger transaction. This risk of delay has been allocated to Dow. This provision sets the closing date of the merger deal.
The whole economy changed after the pronouncement in July that the second largest chemical company would like to by Rohm and Haas. This mitigates the improper valuation risk of Rohm. This controls the risk of delay in the transaction. This risk of delay has been allocated to Dow Company.
Therefore, this favors Rohm and holds Dow responsible to act in accordance with this clause. The integration of the pre merger operations and business activities is a complex task, which needs to be skillfully handled.
After they heard that Dow invested in different other projects it was simply too much for Rohm and Haas, as they could not understand why other deals were made but the acquisition was still delayed, so they started a litigation to enforce the merger.
A fairness opinion has also been made in paragraph 3. Therefore, a fairness opinion has also been made in paragraph 3. Thus, it covers the risk of not closing the deal at the right time. Question 3 The analysis for each of the provision of the agreement shown in Exhibit 4 is performed below: This fairness opinion is in the best interests of both Dow and Rohm…………………… This is just a sample partial work.
Under this legal provision, acquirer can refuse to complete the deal if there have been adverse material changes at the target, which make it less attractive as a company. If the valuation of Rohm is performed incorrectly, this would have a significantly negative impact on the shareholders of both the companies.
Please place the order on the website to get your own originally done case solution Related Case Solutions:This case analyzes Dow Chemical Company’s proposed acquisition of Rohm and Haas in July Dow's Bid for Rohm and Haas.
Harvard Business School Finance Case No. Posted: 12 Mar (cash bid price minus the target's current trading price) and the pricing of credit default swap (CDS) spreads as ways to understand the. Dow’s Bid for Rohm and Haas. Case Analysis by Nithin Geereddy.
Investment Banking – Harvard University – Fall Dow’s Bid for Rohm and Haas. Dow Acquires Rohm & Haas Presentation 1.
Transaction Summary Dow to acquire Rohm and Haas for $78 per share Dow to acquire Rohm and Haas for $78 per share Price % premium to Rohm and Haas day average price % premium to Rohm and Haas day average price Premium % premium to its closing high.
Dow’s bid for Rohm and Haas Questions 1: Why does Dow want to buy Rohm and Haas? Was the 78 USD a share bid reasonable?
Question 2: What are the major deals risks inherent in this deal transaction? We will write a custom essay sample on Rohm and Haas Company specifically for you for only $ $/page. all the sensitivity analyses are above $78, reflecting that this bid is reasonable Dow would acquire Rohm at a lower value considering the synergies effect.
However, synergies are quite an important factor to the value of this. dows bid for rohm and haas Words | 20 Pages Introduction The case presents an American company Dow, producer of commodity chemicals, who is in the final stages of acquiring another company Rohm and Haas.Download