The Beatles memorably advised money can’t buy you love. But can Twitter buy you the least?

Elon Musk, from Forbes ranks As the richest person in the world, They reached an agreement on Monday With Twitter’s board of directors to buy all social networking shares 44 billion dollars and turn it into a private company.

Not surprisingly, buying a publicly traded company is more complicated than buying a loaf of bread or even a house. It’s not just about getting the right amount of cash, although this is an important prerequisite. It’s also about convincing the current owners to take the money.

Musk won the Twitter executives, but the majority of shareholders still had to agree to his offer. Then, depending on the terms of the deal and how big a stake he got in the first round, he may have to take further steps to offload the rest of Twitter stock.

There are also federal laws that must be obeyed. Among them are the requirements for disclosure of potential buyers and the fiduciary obligations of the directors of the target company, whose duty is to the shareholders who elect them.

Here’s a look at some of the basics of corporate takeovers, as explained by experts in securities law and corporate governance.

Become a major shareholder

Publicly traded companies are owned by their shareholders, who are often institutional investors such as pension funds and mutual fund companies. Shareholders elect board members who are legally obligated to act in the interests of shareholders—even if they are not required to be shareholders. Board members, in turn, appoint executive directors to run the company and define its strategy.

A potential buyer usually talks to a company’s top executives before playing on a controlling stake; Having management support would help win over the board of directors, making it easier to convince shareholders to sell. Musk has taken a different path, quietly becoming the path of Twitter Largest non-institutional shareholder Before negotiating briefly with Twitter management, and then announcing his intention to buy the rest of the company’s shares.

So why didn’t he keep buying stock in QT until he actually owned the company? Because if investors get more than 5% of the voting shares in a company, the federal government requires them to Submit a form With the US Securities and Exchange Commission within 10 days revealing how much of the company’s shares they own, how they paid for the shares – and this is the most important part – whether they plan to take control of the company.

Once this disclosure is made, any “material change” in their holdings must be disclosed – for example, the purchase or sale of at least 1% of the company’s stock in two days.

The goal, the lawyer said, is not only to protect companies from being taken over in secret, but also to limit the advantage for those who learned about a potential buyer’s plans before news reached the rest of the market. David C Mahaffey, a securities law expert at Sullivan & Worcester. “It is almost impossible to buy a large stake in a public company without anyone knowing about it,” he said.

The public learned of Musk’s interest in Twitter on April 4, when he submitted a file 13G schedule He states that he has acquired more than 9% of the company. In fact, the model indicated that it had earned more than 5% of the voting shares on Twitter by March 14 (yes, that’s more than 10 days before the model was submitted, and yes, Someone sued.)

Disclosure requirements are more stringent for shareholders who own 10% or more of a company’s stock, and there are more Rules against taking quick profits. According to the Securities and Exchange Commission, a company can recoup any profits made by shareholders (or senior company executives) if they sell shares within six months of purchasing them.

the control

After revealing Musk’s purchases, Twitter hastened reached an agreement to give him a seat on the board until 2024 in exchange for keeping his stake below 15%. But on April 13, Musk told the Securities and Exchange Commission That he was no longer interested in a seat on the board of directors and instead wanted to buy all the shares of the company and turn it into a private company.

Musk didn’t need to buy every share to be able to impose his will on Twitter. He could have done so by taking a majority share, then using his votes to oust directors and CEOs who didn’t share his view that Twitter should be a “platform for free speech around the world,” he told the Securities and Exchange Commission. .

But to make the company private, Musk will have to buy out the rest of the shareholders — albeit with the support of Twitter’s board of directors. If the majority of shareholders vote in favor of the deal, Mahafy said, that would seal the deal.

Mahafi said shareholders who don’t like Musk’s offer have two options at this point. They can hope that the investors who own the majority of the shares will vote on the deal, or they can file a suit in the Delaware Judicial Court to try to block the deal as unfair to the shareholders. And if they vote against the deal only to see you agree to it, they can assert “valuation rights” and say their shares are worth more than Musk’s offer. But Mahafi said that in the latest trial, these claims did not yield higher profits than the original offer.

Given the size of the deal, federal antitrust enforcement is likely to review it. But the Securities and Exchange Commission won’t – it will only require its rules number of disclosures About the deal, including whether an outside analyst provided a “fair opinion” on the deal and, if so, what the basis for that opinion was.

Musk told the Securities and Exchange Commission that Twitter “will not thrive and will not serve this societal duty [to be a platform for free speech] In its current form,” he said, adding that it “needs to go private.” One advantage of going private: Musk said it could reshape Twitter without having to respond to any other contributors. David F. larkerD., director of the Corporate Governance Research Initiative at Stanford University’s Graduate School of Business.

“If you get private, you can do whatever you want,” Larker said.