What is a Saturday Night Special?
A Saturday Night Special is now obsolete buyout strategy which involved one company attempting to acquire another by going public take-over bid, usually on weekends. The offer was only open for a short interval, usually a few days, forcing shareholders to make a quick decision and leaving management little time to mount an adequate defense and weigh its options.
Key points to remember
- A Saturday Night Special describes a company attempting to acquire another by making a sudden takeover bid, usually over the weekend.
- This technique was popular in the 1970s when the recipient only had seven days to respond to a takeover bid.
- This limited timeframe forced shareholders to make a quick decision and left management little time to mount an adequate defense.
- A Saturday Night Special became obsolete after the tender offer response deadline was later extended to at least 20 business days.
Understanding a Saturday Night Special
A takeover bid is a public solicitation of all shareholders asking them to sell their shares at a specific price – usually at a premium to their current price market value. If enough shareholders accept the proposal, the takeover is complete and the acquirer takes control of the target.
Saturday night special merger and acquisition (M&A) was popular and somewhat successful in the 1970s, when a minimum of seven calendar days had to pass between the time a tender was publicly announced and its deadline. This limited time allowed the buyer to catch the target company off guard, especially when the offer has been made over the weekend: a period when the markets are closed and the interested parties are busy with other things.
In short, a Saturday night special effectively reduced response time, putting the target in an uncomfortable and vulnerable position, which could make them easier prey for the acquiring company.
The term Saturday Night Special was reportedly introduced in 1975 as part of a public relations campaign against Colt Industries’ hostile takeover bid for mechanical packaging device maker Garlock.
What led to the Saturday night special decline?
The Saturday Night Special was effective when the Williams Law accepted a minimum of seven days as a reasonable time to respond to a takeover bid. When the deadline was later extended to 20 days – following complaints that executives and shareholders were being forced to make critical decisions under unreasonable time pressure – and a rule was implemented requiring acquisitions of 5% or more of the capital are disclosed to the Security and Exchange Commission (SEC), the Saturday Night Special’s fast-and-stealth strike method was rendered useless.
The Saturday night specials were rendered useless when lawmakers decided to extend the time required to respond to a public offer from seven to 20 days.
Over the years, it has become more and more difficult for acquirers to quickly swoop down on their target and surprise them. In addition to regulatory changes, advances in information technology have also contributed to eroding the effectiveness of the Saturday Night Special strategy.
A mark of Financial markets today it is the rapid exchange of information. In the current climate, buyout targets are often way ahead of potential unwanted advances.
In an interesting reversal of the logic behind a Saturday Night Special piece, takeover attempts today are generally well publicized. Using the media, the Internet, and many other options unavailable in the 60s and 70s, potential buyers regularly use public relations to sway public perceptions in their favor.