Posted in Finance, Accounting and Economics Terms, Total Reads: 384
Definition: Gun Jumping
There are two primary forms of gun-jumping. First, the practice of taking orders from clients before the IPO and second, trading on material non-public information. It is a term used by the federal anti-trust agencies to refer to kind of activities that the two parties might enter into before a merger and acquisition.
A clear example is the practice of agreeing on a price before the actual merger takes place. Companies conducting a merger need to be therefore aware of the law that is applied by the anti-trust agencies. Sherman Act 1 in US prohibits anti-competitive practices such as a hard-core price fixing where the parties fix price at which sales to be allocated to customers.
Similarly, the Hart-Scott-Rodino act requires the merging parties to abide by the waiting period time required before entering into a merger. Also, the companies should maintain their relations with the customers even after the merger has happened and the deal is closed.
Other issues in gun jumping include, disclosing pre-planned products to a select few, distribution to employees or customers.