PROJECT ON strategies to defence takeover targets
Submitted TO- Submitted BY- PROF.SAMSON MOHARANA PRAGYNA DASH(11MFC013) RITU LALA(11MFC018)
MASTER OF FINANCE AND CONTROL UTKAL UNIVERSITY, VANIVIHAR, BHUBANESWAR INTRODUCTION
Takeovers are taking place all over the world. Those companies whose shares are underquoted on the stock market are under a constant threat of takeover. The takeover strategy has been conceived to improve corporate value, achieve better productivity and profitability by making optimum use of the available resources in the form of men, materials and machines. MEANING AND THE CONCEPT
Takeover is an acquisition of shares carrying voting rights in a company with a view to gaining control over the management of the company. It takes place when an individual or a group of individuals or a company acquires control over the assets of a company either by acquiring majority of its shares or by obtaining control of the management of the business and affairs of the company. On the other hand, in a reverse takeover, a smaller company acquires control over a larger company. DEFINITION
(a) Takeover is an acquisition, by one company of controlling interest of the other, usually by buying all or majority of shares. (b) A takeover may be defined as series of transactions whereby a person, individual, group of individuals or a company acquires control over the assets of a company, either directly by becoming owner of those assets or indirectly by obtaining the control of management of the company. KINDS OF TAKEOVER
1) Friendly Takeover: In this type of takeover the company bidding will approach the directors of the company to discuss and agree an offer before proposing it to the shareholders of that company. The bidding company will also have an opportunity to look at the accounts of the business they want to buy –a process known as due diligence.
2) Hostile Takeover: A hostile takeover occurs when the acquirer makes a direct offer to shareholders of a company, without the prior consent of the existing promoter and/or management. The best known example is Mittal’s bid for Arcelor, where the existing management is opposing the bid. In such a case, the shareholders get to decide whether the incumbent management stays or the new owner gets to run the company.
3) Bail Out Takeover: Takeover of a financially sick company by a financially rich company as per the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 to bail out the former from losses. 4) Reverse Takeover: The final common type of takeover is the reverse takeover. This happens when a private (not traded on the stock market) company buys a publicly-traded company as a means of acquiring public status without having to list itself. Why Should Firms Takeover?
* To gain opportunities of market growth more quickly than through internal means * To gain benefits from economies of scale
* To gain a more dominant position in a national or global market * To acquire the skills or strengths of another firm to complement the existing business * To acquire a speedy access to revenue streams that it would be difficult to build through normal internal growth * To diversify its product or service range to protect itself against downturns in its core markets DIFFERENCE BETWEEN A MERGER AND A TAKEOVER
A merger involves the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "equals". The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting shareholder values for both groups of shareholders. A typical merger, in other words, involves two relatively equal...
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