Posted: March 21st, 2018
By: Juliana S. Inman *| Staff WriterOn Thursday, February 8, 2018, Qualcomm Technologies, Inc., based in San Diego, California announced that its Board of Directors (“Board”) had unanimously rejected a 121 billion dollar buyout offer from Broadcom Limited. Broadcom’s 121 billion dollar offer was actually a revised offer, which increased the price per share from 70 dollars to 82 dollars. However, this increase was not enough to sway Qualcomm’s Board to accept the offer. The Board decided that Broadcom’s offer “materially undervalue[d]” Qualcomm and “fell short of the firm regulatory commitment the deal would demand, given the significant downside risk of a failed transaction.” Although Qualcomm adamantly rejected this offer, Broadcom remains committed to closing the deal and acquiring Qualcomm, as this acquisition of Qualcomm “would be the technology industry’s biggest-ever takeover, creating a tech giant whose products would be used in nearly all of the world’s smartphones.”
So, what exactly is this thing we call a “buyout”? As the name suggests, one company/corporation “buys out” or purchases some percentage of another company/corporation. When this type of purchase takes place, the acquired, or target company (i.e., the company being purchased) experiences a change of ownership and control. Often, the term “buyout” is used as a very general term to describe what is actually a merger, acquisition, or takeover. For example, in causal day-to-day conversation “buyout” may be used to describe what is actually a “merger”. Legally speaking, a merger occurs when two companies combine to form a single company. Mergers typically occur between “two business that are about the same size and which recognize advantages [that] the other offers in terms of increasing sales, efficiencies, and capabilities.” Furthermore, mergers are often a result of friendly negotiations and mutual agreement between the two companies, and sometimes the two companies become equal partners or stockholders in the “new” company.