Hostile takeover: Difference between revisions
From CEOpedia | Management online
m (Infobox update) |
m (Infobox5 upgrade) |
||
| (One intermediate revision by one other user not shown) | |||
| Line 1: | Line 1: | ||
'''Hostile takeover''' occurs, when one [[company]] purchase other against the wishes of the target company's [[management]] and [[board]] of directors. It is the opposite of [[friendly takeover]]. | '''Hostile takeover''' occurs, when one [[company]] purchase other against the wishes of the target company's [[management]] and [[board]] of directors. It is the opposite of [[friendly takeover]]. | ||
| Line 30: | Line 14: | ||
==Hostile takeover threats== | ==Hostile takeover threats== | ||
Threats of a hostile takeover include the following: | Threats of a hostile takeover include the following: | ||
* Loss of control: The target company's management and board of directors may lose control of the company to the acquiring company. | * Loss of control: The target company's management and [[board of directors]] may lose control of the company to the acquiring company. | ||
* Job Losses: Hostile takeovers can lead to job losses, as the acquiring company may look to cut costs by consolidating operations or downsizing. | * Job Losses: Hostile takeovers can lead to job losses, as the acquiring company may look to cut costs by consolidating operations or [[downsizing]]. | ||
* Decrease in Employee Morale: Employees may become disengaged or demotivated due to the uncertainty and potential changes brought on by a hostile takeover. | * Decrease in [[Employee]] Morale: Employees may become disengaged or demotivated due to the uncertainty and potential changes brought on by a hostile takeover. | ||
* Damage to company's reputation: Hostile takeovers can damage the company's reputation and relationships with customers, suppliers and other stakeholders. | * Damage to company's reputation: Hostile takeovers can damage the company's reputation and [[relationships with customers]], suppliers and other [[stakeholders]]. | ||
* Financial Loss: Shareholders of the target company may see a decline in the value of their investment, and the company may take on significant debt to fend off the hostile takeover attempt. | * Financial Loss: Shareholders of the target company may see a decline in the value of their [[investment]], and the company may take on significant debt to fend off the hostile takeover attempt. | ||
* Legal Challenges: Hostile takeovers can be complex and time-consuming, and may face legal challenges from the target company, shareholders, or regulatory bodies. | * Legal Challenges: Hostile takeovers can be complex and time-consuming, and may face legal challenges from the target company, shareholders, or regulatory bodies. | ||
'''See also:''' | '''See also:''' | ||
* [[Friendly takeover]] | * [[Friendly takeover]] | ||
{{infobox5|list1={{i5link|a=[[Uninsurable risk]]}} — {{i5link|a=[[Friendly takeover]]}} — {{i5link|a=[[Operational impact]]}} — {{i5link|a=[[Emergence plan]]}} — {{i5link|a=[[Poison pill]]}} — {{i5link|a=[[Noncovered security]]}} — {{i5link|a=[[Selling Group]]}} — {{i5link|a=[[Risk]]}} — {{i5link|a=[[Credit management]]}} }} | |||
==References== | ==References== | ||
Latest revision as of 20:11, 17 November 2023
Hostile takeover occurs, when one company purchase other against the wishes of the target company's management and board of directors. It is the opposite of friendly takeover.
Strategies of hostile takeover
When the purchaser is planning to carry out the hostile takeover it is highly recommended to draw the information from external sources such as:
- merchant banks (that have the required experience in these transactions),
- lawyers,
- public relations specialists,
- stockbrokers.
There are two main strategies for carrying out the hostile takeover:
- When the company is publicly-traded then the purchaser may buy-out the assets by using the stock-exchange. However, according to the law when a certain threshold of owning the company assets is exceeded then acquiring company needs to announce it, which often make it impossible to buy-out more of the stocks.
- The second strategy lies in sending the offer directly to shareholders of target company. Such tender offer (or takeover bid) defines the terms of takeover. This method is used when there is no possibility to reach an agreement with the management of purchased company.
Hostile takeover threats
Threats of a hostile takeover include the following:
- Loss of control: The target company's management and board of directors may lose control of the company to the acquiring company.
- Job Losses: Hostile takeovers can lead to job losses, as the acquiring company may look to cut costs by consolidating operations or downsizing.
- Decrease in Employee Morale: Employees may become disengaged or demotivated due to the uncertainty and potential changes brought on by a hostile takeover.
- Damage to company's reputation: Hostile takeovers can damage the company's reputation and relationships with customers, suppliers and other stakeholders.
- Financial Loss: Shareholders of the target company may see a decline in the value of their investment, and the company may take on significant debt to fend off the hostile takeover attempt.
- Legal Challenges: Hostile takeovers can be complex and time-consuming, and may face legal challenges from the target company, shareholders, or regulatory bodies.
See also:
| Hostile takeover — recommended articles |
| Uninsurable risk — Friendly takeover — Operational impact — Emergence plan — Poison pill — Noncovered security — Selling Group — Risk — Credit management |
References
- Caves, R. E. (1989). Mergers, takeovers, and economic efficiency: foresight vs. hindsight. International Journal of Industrial Organization, 7(1), 151-174.
- Morck, R., Shleifer, A., & Vishny, R. W. (1987). Characteristics of hostile and friendly takeover targets.
- Shankar G., Trends, Merger & Acquisition, approved by AICTE, New Delhi 2007-2008, p. 8
Author: Piotr Lusiński
