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Hostile Takeover
Definition:
A hostile takeover is a corporate action in which a company acquires a majority of the shares of another company without the target company’s management’s consent. It is a type of acquisition in which the acquirer makes an unsolicited offer to purchase a company without the target company’s management’s approval.
Process:
- Identify a target: The acquirer identifies a company that is vulnerable to a takeover or that has strategic value.
- Gather support: The acquirer acquires a large block of shares, often through a tender offer or a private placement.
- Make an offer: The acquirer makes an unsolicited offer to acquire the target company at a premium to its current market price.
- Unseat the target’s management: If the offer is accepted, the acquirer’s management takes control of the target company.
- Restructure the target: The acquirer may restructure the target company’s operations or management.
- Integrate the companies: The acquirer and the target company are combined into a single entity.
Types of Hostile Takeovers:
- Tender offer: An unsolicited offer to purchase a company’s shares publicly through a tender offer.
- Proxy battle: A contest to gain control of a company’s board of directors through a proxy solicitation.
- Poison pill: A defensive strategy used by a target company to deter an acquirer.
Advantages for the acquirer:
- Gaining control of a target company without its management’s consent.
- Accessing the target company’s assets and technologies.
- Expanding market share and market reach.
- Increasing profitability.
Disadvantages for the acquirer:
- High cost of acquisition.
- Integration challenges.
- Potential for resistance from the target company’s management.
- Damage to the acquirer’s reputation.
Examples:
- Microsoft’s acquisition of Nokia in 2014.
- Oracle’s acquisition of Sun Microsystems in 2006.
Note: Hostile takeovers can be complex and contentious events, and the specific circumstances of each case will vary.
