Even among the Corporate Raiders, Elon Musk is a hacker

The history of mergers and acquisitions is filled with ruthless corporate thieves, murderous wars of words, and people trying to stiffen...

The history of mergers and acquisitions is filled with ruthless corporate thieves, murderous wars of words, and people trying to stiffen each other.

T. Boone Pickens, the oil magnate who ran amok in the 1980s, took small stakes in energy companies, management under attack and forced sales of businesses. Carl Icahn, the activist investor, amassed stocks of companies and threatened to oust their boards of directors if they didn’t agree on a deal. And Robert Campeau, the Canadian real estate investor known for his engineering buyouts, wasn’t afraid to take legal action against companies that sought to embezzle his advances.

Yet, even with all these ruthless tactics, the trading world has never seen a buyer like Elon Musk.

In the weeks since Mr Musk, the world’s richest man, has struck a $44 billion deal to buy the social media service Twitter, it shook up the transaction landscape. Usually, when two parties agree to negotiate an acquisition, they spend weeks going over the finances and ironing out the details. The action mostly takes place behind closed doors, in boardrooms and at prestigious law firms and investment banks.

But Mr. Musk waived due diligence to make the Twitter deal, according to the legal documents. Since then, he has publicly criticized Twitter’s service – on Twitter, of course – attacked some of its senior leaders and raging tweets taunting the company’s board of directors. And with memes and a poo emojihe appeared to attempt to renegotiate the price of the deal down on social media.

Essentially, Mr. Musk, 50, turned what was largely a friendly deal into a hostile takeover after the fact. His actions have left Twitter, regulators, bankers and lawyers puzzled as to what he might do next and whether the blockbuster deal will go through. And Mr. Musk has made past corporate raiders look positively quaint by comparison.

“Elon Musk is playing in his own gray area – you could almost say by his own rules,” said Robert Wolf, the former president of the Americas at Swiss bank UBS. “It’s definitely a new way” of making deals, he said.

Mr. Musk did not respond to a request for comment.

Twitter executives told a company meeting on Thursday that the purchase of Mr Musk was going ahead and that they would not renegotiate, according to two participants who spoke on condition of anonymity. . Earlier this week, the company’s board also said, “We intend to complete the transaction and implement the merger agreement.”

Twitter’s board claimed it had the legal advantage over the deal. In addition to one $1 billion severance feethe deal with Mr Musk includes a ‘specific performance clause’, which gives Twitter the right to sue him and force him to close or pay for the deal, as long as the debt funding he secured remains intact.

“He signed a binding agreement,” Edward Rock, professor of corporate governance at New York University School of Law, said of Mr. Musk. “If these agreements aren’t enforceable, that’s a bit of a problem for all the other agreements.”

Twitter did not respond to a request for comment.

Mr. Musk has already pushed some legal boundaries. The Federal Trade Commission is investigating whether the billionaire violated disclosure requirements by failing to tell the agency that he had amassed a significant stake in Twitter earlier this year, a person familiar with the investigation said. Investors generally must notify antitrust regulators of large stock purchases to give government officials 30 days to review the transaction for antitrust violations.

The FTC declined to comment. L’Information, a tech news site, Previously reported on the FTC’s interest in Mr. Musk.

The mercenary trade buyer archetype has been around for decades. Jay Gould, a late 19th century robber baron who helped build America’s railroad system, funded deals in part with wealth accumulated from his bets on Wall Street. He consolidated the dying railroads and was known to sow rumors in the press.

Mr Gould, writes one of his biographers, Edward Renehan Jr., was a “margin maestro” who was “able to create capital out of thin air and take control of businesses using just a few dollars reflected in a gallery of financial mirrors: funny houses of convertible bonds, proxies and leveraged cash.

During the same decade, Mr. Campeau used buyouts to build a retail empire which included Bloomingdale’s and Abraham & Straus, which ended up veil under the debt he imposed on them. A new kind of hostile raider also emerged – private equity firms – who deployed takeover tactics without prisoners that were memorably chronicled in “Barbarians at the doora 1989 book about private equity firm KKR and its acquisition of RJR Nabisco.

In recent years, deals that have failed or been renegotiated have not been uncommon. After Sally Maethe student loan giant, was sold in 2007 to a consortium of financial firms for $25 billion, a credit crunch hit and new legislation threatened its finance. The buyers tried to cut the case, the insults flew and the effort collapsed.

That same year, a $6.5 billion deal by Apollo Global Management—combining a chemical company it owned, Hexion, with a rival, Huntsman—cratered when Huntsman’s profits plummeted and each party sued. In 2016, telecommunications giant Verizon slashed its $4.5 billion price tag for Yahoo’s internet business after Yahoo leaked it had suffered a massive security breach.

Yet in many of these transactions, “significant adverse changes” – whether a financial crisis or a security breach – were the cause of a change in price or the end of an acquisition. This is no longer the case now with Twitter and Mr. Musk, where no obvious factor has emerged to try to alter the contours of the deal. (Mr. Musk, who has taken up the issue of the number of bots on Twitter, said he doubts the veracity of the company’s public records.)

Mr. Musk seems free to do as he pleases with the deals in part because of his extraordinary personal wealth, with a net worth that stands at about 210 billion dollars and this allows him ignore the economy of a deal. And unlike a private equity firm, it doesn’t buy multiple public companies a year, making it less important to portray itself as a closer cohesive.

Although Mr. Musk is accountable to the shareholders of other companies he runs — including the publicly traded automaker Tesla — those shareholders generally invest in his efforts because he is an inventor, not because he is a trader.

Ann Lipton, professor of corporate governance at Tulane Law School, said a big part of what keeps the world of mergers and acquisitions within its bounds are “reputational sanctions.” But Mr. Musk, she noted, “doesn’t care about reputational sanctions.”

And that leaves just about anyone guessing.

Michael Isaac and Cecilia Kang contributed report.

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Newsrust - US Top News: Even among the Corporate Raiders, Elon Musk is a hacker
Even among the Corporate Raiders, Elon Musk is a hacker
Newsrust - US Top News
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