CLASS / COURSE: Ethics
ETHICS OF A LEVERAGED BUYOUT:
ANATOMY OF A HOSTILE TAKEOVER
(GUIDE TO THE VIDEO TAPE)
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In this video you will observe a discussion among a group of prominent people in the mergers and acquisitions business, and some of their adversaries. Peachtree Corporation, a fictitious company undergoing a significant management change and a hostile takeover, is under discussion. Each participant reacts, in a role-playing context, to the events as they unfold, as he/she would react in everyday life. It is a fascinating and compelling look at the thinking of some of the best-known people in the investment world:
Warren Buffet, investor
Sir James Goldsmith, corporate raider
Jane Bryant Quinn, syndicated journalist, Newsweek magazine
Boone Pickens, corporate raider
Rudolph Giuliani, US District Attorney in New York
Mr. Wirth, US Senator from Colorado
Lester Thurow, Dean, MIT school of business
Mr. Epstein, philosopher/writer
Fred Joseph, investment banker, Drexel Burnham Lambert
Mr. Bere, CEO, Borg Warner
Mr. Mercer, CEO, Goodyear Tire
John Gutfriend, investment banker, Salomon Brothers
Harrison Goldin, comptroller, City of New York
Joseph Flom, corporate attorney
Arthur Liman, corporate attorney
If you don’t know who these people are, Google some of them, especially Goldsmith, Pickens, Joseph, and Gutfriend, before you watch the video. See especially these links to inform yourself about the prior relationship between Sir James Goldsmith and Mr. Mercer of Goodyear – Goldsmith made a hostile takeover run against Goodyear Tire:
The focus of this discussion is the takeover of the Peachtree Corporation. Harry Oldman, founder of the corporation and currently chairman. Harry has what appears to be a serious stroke. The CEO is scheduled to have a discussion with Ms. Quinn in a few minutes to talk about the future plans of Peachtree. Should the CEO mention anything about Harry’s condition since Harry has been the brains behind the long-term, hyper- sonic airplane on which the corporation is currently working?
The participants discuss the nature of insider information, the laws regarding insider information, who the laws are to protect, who has what duties with regard to protecting insider information and why, and the penalties for violating insider information laws.
The participants discuss the purposes of raiding corporations, the economic rationale for such activities, why investors might engage in such raiding, and how an initial meeting between the CEO and a raider might play out. Included also is mention of some of the SEC requirements which must he followed during these activities.
The participants discuss the duties and responsibilities of the Board of Directors in a takeover situation. The focus is upon who has what duties, to whom are the duties owed, what is the source of these duties, who really are the stakeholders, and how might all this relate both to the long and the short run interests of the firm.
The participants discuss how Peachtree might he able to fight the raiders if the so chose. Harry comes back and wants to convince the shareholders to fight the takeover. Notice what happens to Harry. Notice the strategies and tactics suggested by the participants to fight this takeover. Notice Goldsmith’s comments about the implications of these strategies and tactics.
Ethics Questions for Consideration
1. What are the values, beliefs and morals reflected by these various participants?
2. From where did the participants derive the values and beliefs that guide them as they reason their way through this corporate takeover?
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SUBJECTS / CATEGORIES:
1. Business and Finance Case Studies
2. Strategic Business Management