Hostile Takeover

Topics: Takeover, Mergers and acquisitions, Corporation Pages: 3 (917 words) Published: April 9, 2008
Hostile takeover
Hostile takeover is a takeover of a company, which goes against the wishes of the company's management and board of directors. It is the opposite of friendly takeover

A hostile takeover is a type of corporate takeover which is carried out against the wishes of the board of the target company. This unique type of acquisition does not occur nearly as frequently as friendly takeovers, in which the two companies work together because the takeover is perceived as beneficial. Hostile takeovers can be traumatic for the target company, and they can also be risky for the other side, as the acquiring company may not be able to obtain certain relevant information about the target company.

Companies are bought and sold on a daily basis. There are two types of sale agreements. In the first, a merger, two companies come together, blending their assets, staff, facilities, and so forth. After a merger, the original companies cease to exist, and a new company arises instead. In a takeover, a company is purchased by another company. The purchasing company owns all of the target company's assets including company patents, trademarks, and so forth. The original company may be entirely swallowed up, or may operate semi-independently under the umbrella of the acquiring company.

Typically, a company which wishes to acquire another company approaches the target company's board with an offer. The board members consider the offer, and then choose to accept or reject it. The offer will be accepted if the board believes that it will promote the long term welfare of the company, and it will be rejected if the board dislikes the terms or it feels that a takeover would not be beneficial. When a company pursues takeover after rejection by a board, it is a hostile takeover. If a company bypasses the board entirely, it is also termed a hostile takeover.

Publicly traded companies are at risk of hostile takeover because opposing companies can purchase large amounts of...
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