anyone else notice that the definition of tag along drag along is wrong in schweser? not sure if it is wrong in cfai docs too: not read those. not sure if i should answer according to schweser or according to actual truth.
Yes, it’s a mistake.
In Schweser, not in CFAI
The schweser def. wasn’t very clear. What’s it actually mean?
right - they seem to have confused tag along -drag along and ratchets good to know cfai is right and only schweser is wrong
schweser says it gives mgmt the right to buy shares if PE company sells the stake in the company. CFAI says: these are contractual provisions that ensure that any potential acquirer of the company cannot acquire control without extending the acquisition offer to all shareholders including mgmt of the company.
bucephalus - not seeing where you are reading this definition… ratchet is talked of in Schweser very clearly as allocation of equity between the mgmt and stockholders of the portfolio firm and allows mgmt to increase allocation depending on firm performance. clearly very different from the TADA definition above.
I googled TADA cpk and found CFAI’s answer consistent with my search results.
but schweser is also saying the same thing, probably not the same language.
I asked this a few days ago: --------- Tag along, as I read it, it referred to teh right of management team to stay with the company should someone else acquire it…its a stipulation for protecting the management team. But I like the definitions I’m hearing here better. http://www.analystforum.com/phorums/read.php?12,969897,970151#msg-970151 -------------- Good to know which definition is correct.
I thought the Schweser defiinition was wrong too. From my EXPERIENCE (not CFAI crap), tag along rights allow the minority shareholder to sell their share IF there is a sale by another party (usually the majority shareholder). This is valuable because it allows the minority holder to “tag along” and not have to hire another investment bank, etc - which reduces transaction fees. Drag along - allows the majority shareholder to FORCE the minority shareholder to sell, should they want to sell their share. This is obviously not great for the minority holdres, but is valuable for the group with this right.