1. Home
  2. MikesBikes Advanced
  3. Takeovers (Optional)
  4. Takeover Rules and Regulations in MikesBikes Advanced

Takeover Rules and Regulations in MikesBikes Advanced

Minimum Bids & Takeover Premiums and Expenses

The Minimum Bid for a Firm is the current Market Value plus 40%, So if a company is worth $100m, then the Minimum Bid will be $140m. Bids lower than this will not be accepted by the market.

Every dollar you bid above the current Market Value will be booked as a one-off Expense Item in your Income Statement under Takeover Premiums and Expenses. So if you bid say $150m for a Firm valued at $100m, then you will take a one-off charge of $50m. This may result in short term depression of your share price.

Share Price of Parent Firm

  1. Subsidiaries are treated as non-operating assets for the purposes of valuing a Parent Firm. We value the underlying Share Price of each Firm in a group in isolation, then combine the individual valuations to get the Share Price of the Parent Firm.
  2. The Underlying Share Price is based on the operational and financial performance of a given company and excludes any dividends received from Subsidiaries.
  3. Subsidiary Contribution to Parent Share Price = Subsidiary Market Capitalization / Parent Number of Shares Issued.

For example, if Firm A owns Firm B and:
– Firm A has 100 shares with an underlying Share Price of $50
– Firm B has 50 shares with an underlying Share Price of $40

Firm B’s contribution to Firm A’s Share Price is:
50 Firm B Shares * $40 per share / 100 Firm A Shares = $20

Firm A’s Share Price = Underlying Share Price + Subsidiary Contribution = $50 + $20 = $70

Securities Commission Rules

  1. Firms may only have a single owner at any time
  2. Circular ownership is not allowed (A -> B -> C -> A)
  3. Long Ownership Chains

    A Firm may have at most a Parent and a Grandparent Firm.
    A Group of Firms may only be 3 Firms deep.
    eg. you can have A -> B -> C, but NOT A -> B -> C -> D
    It is possible to have both A -> B AND A -> C -> D as the longest chain is still only 3
    even though there are 4 Firms in the Group (A, B, C, D).
  4. Anti-trust Limits (Multi-Player Only)

    No group of firms may control more than 50.0% of the Wholesale sales for the Industry at the time of the Takeover.

    However a group of firms may subsequently control more than 50.0% of the market as there is no on-going monitoring after purchase.

Note: The Market Share Chart report shows Retail market share, not Wholesale.

  1. Competing Bids

    Bids with the highest Bid Ratio are always accepted and settled first. As each bid is settled, some or all of the remaining bids may no longer be viable.

Bid Ratio = Takeover Bid / Minimum Bid

Bid X = $25 million, Minimum Bid for Firm is $10 million, so Bid Ratio = 2.5
Bid Y = $50 million, Minimum Bid for Firm is $25 million, so Bid Ratio = 2.0
In this case, Bid X would be accepted and settled first.
Bid Y would then be settled ONLY if it still complies with the above Securities Commission Rules now that Bid X has been completed.

Note: If two or more firms make an identical bid for another firm, then the bid from the firm with the highest Market Capitalization will be accepted.

Firm A bids $25m for Firm C, Minimum Bid is $10m. Firm A has Market Capitalization of $50m
Firm B bids $25m for Firm C, Minimum Bid is $10m. Firm B has Market Capitalization of $100m

The two bids have an identical Bid Ratio of 2.5. In this case, the bid from Firm B would be accepted and settled as Firm B has a higher Market Capitalization than Firm A. The bid from Firm A would be rejected.

Was this article helpful?

Related Articles

Need Support?
Can't find the answer you're looking for?
Contact Support