Hostile Takeover and Ethics

Powerful Essays
Executive Summary

When one company (called the acquirer or bidder) acquires another company (called the target), then it is called takeover. Takeover can be of two types: Friendly Takeover and Hostile Takeover.

In Friendly Takeover, the bidder informs the target of their takeover plans. If the target feels that the takeover will help its shareholders, then it generally accepts the takeover offer.

A Hostile Takeover is an acquisition in which the company being purchased doesn't want to be purchased, or doesn't want to be purchased by the particular buyer that is making a bid. Members of management might want to avoid acquisition because they are often replaced in the aftermath of a buyout. They are simply protecting their jobs. The board of directors or the shareholders might feel that the deal would reduce the value of the company, or put it in danger of going out of business. Then, how can someone buy something that's not for sale? Hostile takeovers only work with publicly traded companies. That is, they have issued stock that can be bought and sold on public stock markets. A stock confers a share of ownership in the company that issued it. If a company issued 1,000 shares, and say Mr. X owns 100 of them, then he owns a tenth of that company. If he owns more than 500 shares, he owns a majority or controlling interest in that company. When the company makes major decisions, the shareholders must vote on them. The more shares you have, the more votes you get. If you own more than half of the shares, you always have a majority of the votes. In many respects, you can control the company. So a hostile takeover boils down to this: The buyer has to gain control of the target company and force them to agree to the sale.

The two primary methods of conducting a hostile takeover are the tender offer and the proxy fight.

A tender offer is a public bid for a large chunk of the target's stock at a fixed price, usually higher than the current market value of

You May Also Find These Documents Helpful

  • Powerful Essays

    Hostile Takeover

    • 1768 Words
    • 8 Pages

    Eddie Kramer Ethics – 568 Chapter 5 – Boatright December 4, 2012 Hostile Takeovers – A Case Study of InBev and Anheuser-Busch Co. In early June 2008, Belgian-based InBev NV launched an unsolicited $46.4 billion bid to acquire Anheuser-Busch Co. On June 26, 2008, Anheuser’s board formally rejected InBev’s original proposal of $65 a share, saying it substantially undervalued the company. In mid-July, InBev raised its offer to $70 a share, and the Anheuser board voted to accept the deal, recognizing…

    • 1768 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    Hostile Takeover

    • 917 Words
    • 4 Pages

    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…

    • 917 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    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…

    • 4939 Words
    • 20 Pages
    Powerful Essays
  • Good Essays

    Hostile Takeover And Defenses Acquisitions are ordinarily done through negotiations . Negotiations are always done with the maximum holder of shares , the effective owners say who are able to transfer over 50% shares . By this method not only ownership of the company is acquired but also smooth takeover of the Board of the company and employees is possible by way of agreement . But in the case of Hostile Takeover ( not negotiated or friendly takeover ) while attempting the takeover by the bidder…

    • 1696 Words
    • 7 Pages
    Good Essays
  • Good Essays

    Reflection Paper #1 Hostile vs. Friendly Takeovers In our first class, we reviewed merger, consolidation and acquisition. With these information in mind, I rethink about hostile and friendly takeovers. In my language, friendly takeover happens when a company (A) wants to buy another company (B). Company A firstly informs company B's board of directors, then company A offers a price. Hopefully, company B will consider this offer carefully and make a decision whether to be bought. Usually not…

    • 347 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Hostile take overs are when one company attempts to take over a company that doesn’t wished to be taken over, this is usually done by either the acquiring company attempting to buy out stakeholders or influence the management, or change, to get the deal approved. This can cause many problems for the business, such as contrasting cultures in the business which could lead to an unsuccessful business with multiple goals and the two companies could be heading in opposite directions. Also by acquiring…

    • 572 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    products of Cadbury are bars, drinks, ice-cream and desserts, cakes and biscuits. The major competitors are Nestle, Mars, and Philip Morris. The first offer for Kraft to takeover Cadbury on September 2009, and the offer price was 10.2 billion pounds (BCC News, 2009). On November 2009, Kraft offered 9.8 billion pounds to takeover Cadbury, but Cadbury’s director rejected it (BBC News, 2009). On 19 January 2010, Kraft offered the final offer to Cadbury and the valued the entire issued share capital…

    • 3344 Words
    • 14 Pages
    Powerful Essays
  • Best Essays

    Takeover

    • 861 Words
    • 5 Pages

    Xavier Perry 5/22/2015 Section B Takeover (2) In a globalized world, learning a foreign language has become increasingly important. Do you agree or disagree? Explain your answer, and use facts, statistics and studies to supplement your views. Learning a foreign language has become almost a necessity in today’s modern society.Technological advances have greatly increased our ability to being able to connect with a vast array of different people from different parts of the world. Millions…

    • 861 Words
    • 5 Pages
    Best Essays
  • Best Essays

    Cadbury Takeover

    • 2635 Words
    • 11 Pages

    Study: Cadbury Takeover Introduction: In the beginning of 2010 the US food giant took-over one of the most famous British confectionary companies, Cadbury, affectively making Kraft the largest food confectionary company in the world (Smith, 2010). According to Rigby and Masters (2010) the takeover “was one of the biggest – and most hotly contested – acquisitions in the UK”. The process was exhaustively followed by media, which criticized inability of British Government to limit takeovers of such famed…

    • 2635 Words
    • 11 Pages
    Best Essays
  • Powerful Essays

    Friendly Takeover

    • 991 Words
    • 4 Pages

    This is a research assignment regarding the analysis of a friendly takeover example and a hostile takeover example in the year 2010 to 2011. As for the friendly takeover acquisition, it is still in process with a vertical business combination of building materials supper and peat moss distributor. As for the hostile takeover acquisition, this is a Horizontal Business Combination of two mineral mining companies. Friendly Takeover Example –Vertical business combination IKO Enterprises Ltd. acquiring…

    • 991 Words
    • 4 Pages
    Powerful Essays