What do we mean when we use the acronym OPA?
La OPA is the takeover bid. It is a type of trading method in which one company takes control of another company that is usually smaller than the first. This is commonly known as takeover of a company and it is constantly happening in the market.
What is
Very simple, it is that a company (usually the large or more economically powerful company) wants to buy shares in smaller companies at a price slightly higher than what is on the market. Is company is called the "opante" company and normally this kind of operations are very profitable for people who have the options of the company that absorbs the smaller company, since the largest company is paying a higher amount than is in the market for the shares of this company.
What is OPA: a more in-depth analysis
As we have already said, OPA is always a company that aims to take control of another company that is smaller or with less purchasing power.
How opaque companies can achieve their goal
One of the ways (and the most common) is acquiring all the shares of the smallest company, which makes it become a fully part of the first.
The second is to move on to buying a large stock package that gives you control of the company without having to buy the whole of it.
Can a small company launch a takeover bid over a larger one?
In practice, a much smaller company could never carry out a takeover bid for a company larger than it. The reason is simple, a well-placed company already has a high share price, so it would be unprofitable for a much smaller company to offer to buy the shares at an even higher price.
However, when a company is larger, it is more reasonable for it to offer a greater amount of money than those shares are traded on the market to a lower company.
What is the reason why opaque companies pay a higher amount
In the event that a larger company decides to buy the shares of a smaller company little by little, the company that buys would end up paying different prices for the shares, since they are changing due to the daily price, which can make them pay more one day. and another day less.
What a large company should do
In the event that a large company wants to capture small companies, the first thing it has to do is launch a takeover bid and this has been approved by the CNMV, the shareholders of small companies can decide whether or not to sell the shares for the price offered to them. said company. Once the sale is successful, the larger company takes over the shares of the small company and takes control of it.
It is the case that many companies buy the shares of smaller companies but do not absorb them, rather, they let the company continue working as it has always done; however, the new company has full control of that company.
Types of consideration
OPA processes are not always paid in cash. There are some companies that launch Opa to smaller companies but instead of paying them with money, what they offer them is a% of the shares of the largest company (obviously they will always be less because they are much more expensive). In addition, normally the smaller company remains operational but under the control of the larger one.
What kind of benefits are there
Since 1991, several types of consideration for takeover bids.
In most cases of OPA, the most common payment is made with money and is what most companies accept. However, consideration has also been admitted in issued securities or securities that are still pending issuance.
What are the benefits of OPA
Undoubtedly, OPA is a profitable type of business for shareholders of companies and the directors of the company.
The OPA allows companies to expand and also the capital of the company to be more diversified, which means that in case of problems in the company the risk is divided. In addition, for small companies it is a great contribution whether the company is going to continue in operation or if it is going to be absorbed, because it is won anyway.
On one hand, the takeover bid allows the expansion of companies, the diversification of its capitals or the merger into financial groups. On the other hand, the existence of this mechanism is also profitable for shareholders.
The directors and shareholders of the company are usually different people. This makes the managers strive to keep the company and especially its accounting very high and good, since in the event of a takeover bid, the shareholders can respond positively to it and give the shares of the company to other hands. The aim is to keep current investors loyal to the company.
What are the drawbacks
The OPA has some drawbacks, always aimed at shareholders and that can cause problems with the future strategies of companies or other projects they may have.
Because when you buy a smaller company for a takeover bid, you pay more
OPA is not a type of operation that can be carried out like any movement that is made in the market. One of the main reasons why it is not, is that in this case, the purpose of the process is not the investment or financing of a company, but to take control of it although it continues operating as if it were the previous company.
Company shares are not traded at market price, so the amount with which it is played is much higher. At the amount that could be traded in the market on a normal day.
This is one of the reasons why the law gives special treatment to this type of action is that taking control over another company It requires that said company have legal tools that market purchases do not currently offer. Many of the processes must be supported by law.
In case a company wants to buy a very large package of shares of a small company, what it must do is compare the value of the shares day after day. In this way you could see which is the progressive increase of the company and to be able to see what the real demand of the company is and therefore the value of said shares.
This is an exhausting process for the company that wants to buy the shares of an inferior company and in addition, it would have to plan a strategy with a great forecast about what the total cost of the operation would be to buy those shares. This can lead to the company you want to buy to run out of funds to make the payment to be able to buy the share package that I wanted in the beginning.
In case of doing the non-takeover transactionsAll the companies that want to merge or that are looking to expand run with the possibility of making only a partial purchase of the company or not being able to take any action due to the changes that occur in the market.
How long do companies that receive OPAS have to decline or accept the offer
This time must not be less than 15 days and must have a maximum period of 60 days. The acceptance order can be revoked before the last day of acceptance of said offer.
In the event that a company receives several OPAs; said company can accept all of them, as long as it indicates the order of preference of the same and that the declarations are made known to all competitors.
Purchase forced sale of OPA
There is some purchases forced sale within the Opa released to companies. These occur when an offer has been launched on 100% of the company, but only 90% of the investors have accepted. If the offer has been accepted for less than 90%, the offer may be invalidated or declined.
In the event that 90% has already been sold, the buying company may demand that the remaining investors sell the shares to it at the initial takeover price. In the event that extra expenses are generated due to not wanting to sell on time, the investor will be the one who has to pay the expenses.
Exclusion in OPAS
In case the investor decides to keep his shares anyway, he should be aware that it can bring him serious liquidity problems and, above all, almost no information about the company and its management.