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News Sun admits breaking anti-bribery laws

Discussion in 'Article Discussion' started by CardJoe, 12 May 2009.

  1. CardJoe

    CardJoe Freelance Journalist

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  2. liratheal

    liratheal Sharing is Caring

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    ...rofl.

    If they did know about these things, why the hell would they buy them?

    I'll piss myself if this sinks Oracle.
     
  3. mclean007

    mclean007 Officious Bystander

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    It's called due diligence - the process of identifying the risks associated with a corporate acquisition before going ahead with the purchase. You identify risks, and make an assessment of them. This is a biggie, and if Oracle didn't know about it before the purchase, they'd be suing either their lawyers (for negligently failing to identify the risk) or Sun's previous owners (if they tried to cover it up or didn't make fair disclosure against their warranties). Maybe Oracle used this liability as a bartering chip to reduce the purchase price. In any event, I'm sure they knew what they were getting into and have made provisions.
     
  4. liratheal

    liratheal Sharing is Caring

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    I'd have thought that the entire process would be very well detailed, but I find it very weird that Oracle would pay 7.4bn for a company that would end up under investigation for something that could end up with a fine in the hundreds of millions (See reference to Siemens in the article). Seems very unusual to me, admittedly with a less than basic knowledge of big business take-overs.
     
  5. JyX

    JyX New Member

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    If we knew how much IBM was going to pay for Sun... we might have had an idea.
     
  6. MajestiX

    MajestiX New Member

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    sometimes taking a fine is less than what it costs to comply to the law, There was a case here where ISP would break laws because they failed to deliver regulatory standard of service, their excuse was it cost them less to pay the fines then fix the problem.

    so there was probably more to gain the what the fine would be worth, eg market stake which would mean more capital in the future.
     
  7. perplekks45

    perplekks45 LIKE AN ANIMAL!

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    IBM offered $8 billion first, then lowered it to $7 billion.
    If they knew they should be punished. End of story.
     
  8. Otto69

    Otto69 New Member

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    Bribery was probably either in India, where they outsourced a bunch of US jobs, or in the Mideast where they wanted to sell servers.
     
  9. mclean007

    mclean007 Officious Bystander

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    Yeah, I can see that it does seem weird, but it's called "price chipping" - a common buyer's negotiation strategy in a corporate acquisition is to get things rolling with a fair offer based on the target being as good as it looks from the outside (before due diligence), then chipping away at that price for each significant liability (potential or actual) that they uncover during the due diligence process. So it may be that Oracle's original offer was (say) $8bn, but the risk of fines associated with the bribery issue, together with other issues, brought the final price down to $7.4bn.

    Almost every company of any size will have some kind of potential liability lying in wait, whether it be some ex-employees who might sue for unfair dismissal, claims for intellectual property infringement, issues with existing contracts (e.g. potential default on bank loans), major customers or suppliers at risk of insolvency or in disputes with the target... the list is endless. The buyer's job is always to uncover as much as possible and to make an assessment as to what they are willing to pay, based on the state of the company in light of the risks. In some cases, that is enough to sink the deal, because the buyer pulls out or reduces his offer to below the price at which the seller is willing to sell, or because the buyer's financial backers refuse to finance the purchase on the basis that the risks are too great. In other cases, it results in a price adjustment. Or the buyer may ask for indemnities against identified risks from the seller. Or, if the buyer wants to buy more than the seller wants to sell, the seller's negotiating position is stronger and he may be able to stand his ground and force the buyer to go ahead at the original price, notwithstanding any nasties that have come up in due diligence.

    And that concludes M&A 101 ;-)
     
  10. liratheal

    liratheal Sharing is Caring

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    Ahh, I see.

    I'm now wondering what the fine will be..
     
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