Abstract

IBM's 1995 hostile bid for Lotus remains a classic example of dynamics of a modern takeover fight, particularly in combination with the related case, Hilton's Hostile Bid for ITT (A). Utilizing the counsel of premier investment banks and law firms, Lotus and its management is faced with an all-out, high-premium all-cash bid from IBM, along with litigation, a consent solicitation, a public relations war, and an employee-relations' war. IBM is bidding from a position of strength, but Lotus has key resources, including its star programmer, Ray Ozzie. The case presents Lotus's advisors with the task of quickly analyzing IBM's bid, Lotus's current defenses and possible options, and making a recommendation on how to respond.

Learning Objectives

Particularly in combination with the related case, Hilton's Hostile Bid for ITT (A), this case provides a detailed look at the situation commonly faced by outside lawyers brought in to work for a takeover target that had been taken public with few "structural" defenses. Hostile bid tactics are illustrated, and students are tasked with analyzing the target's charter and bylaws to arrive at some basic conclusions about the target's options. The case also illustrate the motives for hostile bids, the role of law in making them more or less feasible, and the fact that such bids can succeed even in high-tech industries where they might not seem to be feasible.

Subjects Covered

Mergers & Acquisitions, Hostile Takeovers, Corporate Restructuring, Corporate and Securities Law

Setting

Geographic: United States

Industry: Tech

Event Year Begin: 1995