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Hostile Takeover

A hostile takeover occurs when a company attempts to acquire another company without the consent of its board of directors.

Example

A large technology company launches a hostile takeover bid for a smaller competitor by offering shareholders a premium price for their shares, despite the smaller company’s board rejecting the offer.

Key points

• Acquisition of a company without the consent of its board of directors.

• Typically involves a tender offer to shareholders or a proxy fight to replace management.

• Often resisted by the target company’s management, leading to potential legal battles.

Quick Answers to Curious Questions

Acquiring companies may believe they can improve the target company’s performance or unlock value through strategic changes that current management opposes.

Risks include legal challenges, resistance from the target company, and potential reputational damage if the takeover is perceived as overly aggressive.

Defenses include adopting poison pills, seeking a white knight (friendly buyer), or taking legal action to prevent the acquisition.