Hostile Takeovers vs. Friendly Takeovers

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Hostile takeovers vs. friendly takeovers
Emma Lilja, Adeniyi Ajayi, Andreas Thomasson, Mahfuj Khan, Nayeem Rahman and Mohammed Kalam

Andreas Stenius, Arcada - University of Applied Sciences 8.5.2012

Degree Programmes: International business and Financial Management. Course name: Corporate Structures

Executive Summary
This project report provides comprehensive information about corporate structures; focusing on friendly and hostile takeovers, introducing them through definitions and some witty examples and finally ending with intriguing discussion and conclusions. Why do companies embrace the idea of merger and acquisition in the first place? Reason is the creation of the value that enables companies to have a competitive advantage in the market. Conglomerates have usually better economies of scale and better use of resources – to mention a few, and all of which consequently result into higher probability of succeeding in the harsh markets of nowadays. Obvious con of mergers and acquisitions is the negative effect on the employees. Companies can also divide (partially) up, usually either for legal purposes or strategic reasons; such as becoming more globalized. However, the main reason for division is to diversify the risk of the company. Compared to hostile takeovers the process of a friendly takeover is much more straightforward. When it comes to friendly takeovers; an offer is made to the board of the target company which is followed by negations with the bidder, and finally a common ground is set. However, in hostile takeovers the bidder has to spend a fortune on inter alia advertisements and on the costs due to communications with shareholders. Still, a clear cut result is all but selfevident. Mergers and acquisitions happen for several reasons. In order to encapsulate it, figuratively speaking 1+1 equals to 3 instead of 2. When companies join their forces they tend to become stronger – knowledge among working force increases which usually have a positive effect on the result. The usage of mutual physical resources (such as laboratories) reduces costs and mergers in general might reduce market competition. Merger may give a possibility to entry entirely new markets or gain some special benefits such as patents. However, there are also several downsides that especially affect the internal businesses of those particular companies. ______________________________________________________

TABLE OF CONTENTS
EXECUTIVE SUMMARY
1 2 3 INTRODUCTION ................................................................................................... 4 PROCEDURE ....................................................................................................... 4 FINDINGS ............................................................................................................. 5 3.1 Definition of merges & acquisitions ............................................................................... 5 Mergers .................................................................................................................. 5 Acquisitions............................................................................................................ 5 Positive Impacts of Mergers and Acquisitions ....................................................... 5 Negative Impacts of Mergers and Acquisition ....................................................... 6 Types of Mergers ................................................................................................... 6 Corporate Merger Procedure................................................................................. 6 Why It Matters........................................................................................................ 6

3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.1.7 3.2

Why do companies divide or sell a part ......................................................................... 7 Example of case Aktia Oyj...
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