CFAI says this means that nobody can extend an acquisition offer w/o offering it to all shareholders (including management) schweser says tag along drag along gives management the right to buy an equity stake upon sale by the private equity owners… WTF!!!
CFAI all the way.
Just to confirm: http://www.investopedia.com/terms/t/tagalongrights.asp http://www.investopedia.com/terms/d/dragalongrights.asp
Wow… fricken schweser had a question in the practice exam that used a wrong definition of tag/drag along. Of course, I got it wrong since the question didn’t make any damn sense to me
Schweser Errata has this already: (a little bit late by them!) Page: 361, 376 - Correction Tag along rights: Stipulate that if the majority shareholder sells their stake in the venture, the acquirer must extend the same offer to all shareholders (including management). The idea is to protect minority shareholders. Drag-along rights: Permit the acquirer to force the minority shareholders to accept the same terms as those accepted by the majority shareholders in a takeover transaction. The idea is to allow acquirer to obtain complete control over the acquired firm. ( Posted: 2009-05-19)