Now that Elon Musk has offered to acquire Twitter, what happens next?

Elon Musk has offered to buy Twitter at a valuation of about $43 billion. Here’s what will – or can – happen next:

The Board considers the proposal. The board will work with its advisers at Goldman Sachs to review Mr. Musk’s offer. They will have to consider, among other things, whether the deal evaluates the company fairly and whether Mr. Musk has the funds to put together a deal.

The board cannot simply decide that they don’t like Mr Musk as a suitor, but they can “give out reasons why they don’t like the bid”, such as the possibility of funding by Mr. him, says Steven Davidoff Solomon, a professor at the University of California, Berkeley School of Law.

The Board of Directors announces its decision. It may take up to a few days for the board to review the proposal. If it declines the offer, it could go a couple of ways: It could introduce a so-called poison defense mechanism that limits Mr. Musk’s ability to buy shares on the open market. other shareholders. .

Once it does, it could still decide to sell itself, but without pressure from Mr. Musk – or any other suitor – to threaten to buy it back by buying a substantial amount of the shares. open market.

There are reasons why Twitter might choose not to take a poison pill. It can be wary of potential criticism that a poison pill is deflecting the concerns of a highly vocal member of its community.

Likewise, Mr. Musk, whose last reported stake in Twitter was slightly more than 9%, has an incentive to keep his Twitter share below 10%. Once that threshold is reached, he is limited in how quickly he can sell out of the company.

Assuming Twitter declines the offer, Mr Musk could make it – despite saying it’s best and last. He can also bid directly to other shareholders, through what is known as a public tender, in which he will buy shares from other shareholders.

However, at least one shareholder Already said bid lower than the company.

The board has the ability to search for a white hand. “Twitter has basically been up for sale since they went public,” said Howard Berkenblit, head of the Capital Markets team at law firm Sullivan & Worcester.

Mr. Musk’s latest activity has most likely increased Twitter’s interest and likelihood of accepting a deal. Some private equity firms may be affected by Twitter’s limited cash flow, but some tech companies may consider it, given growing concern over the power and reach of Twitter. social media giant.

There may be large suitors. Recall that Microsoft, which owns LinkedIn, and Oracle are all vying for a deal with video-sharing company TikTok. However, potential antitrust considerations are likely to be a significant deterrent, given the Biden administration’s close supervision of major tech deals.