Merger of Equals

An M&A transaction structured as a true merger

Even so, from the outset, one company is often
expected to be the dominant partner

While many MOEs have been successful,
particularly in the financial services sector,
several have been disastrous:

Paradigm terms for an MOE

Exchange ratio reflects pre-signing market prices
i.e. neither party receives an acquisition premium

Board seats are split, or nearly so
The two CEOs either split Chairman and CEO roles or have a plan for one to succeed the other as CEO after an agreed period of time
Name of new company / location of headquarters are a toss-up
Optics of acquisition structure can be a sticking point

e.g, which party legally survives the merger
Sometimes a new holding company is used in a
double dummy structure to avoid this issue

Developments

DaimlerChrysler Litigation

Tracinda Corp claimed to have been misled by characterization of 1998 Daimler / Chrysler combination as a merger of equals
After the merger a sharp decline in Chrysler's business led to management purge and relegation of Chrysler to division status
After the merger a sharp decline in Chrysler's business led to management purge and relegation of Chrysler to division status
Former 14% Chrysler shareholder (a Kirk Kerkorian vehicle) sought $3 billion over failure to receive a buyout premium
Claims were based in part on Daimler-Benz CEO's quotes in the Financial Times And Barron's
Which implied that MOE structure was only a subterfuge to acquire Chrysler without paying a premium
DaimlerChrysler settled similar class-action claims for $300 million in 2003

Lucent / Alcatel Networking Technology Cross-Border

Molson / Coors Beverages Cross-Border

Biogen / IDEC Pharmaceutical

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