The bear hug is a hostile takeover attempt where investors try to acquire a company that is not for sale. It requires shareholder support and can lead to the dismantling of the company. Companies can take steps to minimize the raider’s influence and avoid a hostile takeover.
In the business world, there are several methods of taking control of a company. One method is popularly known as the bear hug. In essence, this is a hostile takeover attempt that is done in such a way that the company’s board of directors deems it impossible not to accept the offer.
The basic bear hug strategy generally involves attempting a takeover of a company that is not currently for sale. Investors take note of a company that is consistently performing well and decide to take steps to acquire that company. In many cases, an initial offer may have been rejected. This leads to the implementation of more aggressive methods that are designed to lead to the eventual takeover of the company, whether the company’s board of directors likes it or not.
To pull off this kind of hostile takeover, bear hug requires the support of the company’s shareholders. Gaining shareholder support usually involves convincing shareholders that their investment will appreciate in value following the acquisition. In some cases, a bear hug requires the acquisition of a controlling number of shares as a means of lobbying the sale on the board of directors. Once the investor or a group of investors hold the majority of the shares, it becomes very, very difficult for the board to do anything other than subject to the sale of the company.
Corporate raiders have long used the bear-hug strategy as a means to acquire a company and then systematically dismantle the operation. By acquiring a company and selling its assets, equipment and properties, the predator can often make a staggering profit on the venture. Acquiring a controlling stake in the company allows the raider to convince other shareholders that a failure to match the sale could lead to their shares being devalued, meaning they ultimately lose money on the deal. This is usually enough to take care of any resistance from shareholders and pave the way for the bear hug to finally happen.
While the bear hug is often successful, companies have managed to avoid this type of situation. When a corporate raider is acquiring an excessive amount of stock, steps can be taken to minimize the amount of influence the raider can exert over the board of directors and other shareholders. In some countries, raiders are required to submit documents to the local government upon acquiring a certain percentage of available stock. These documents outline the raider’s intent to acquire the company and are made available to the current owner. When steps are taken early in the process, a hostile takeover can be avoided and thus defused the bear hug before it ever has a chance to damage the company’s operations or reputation.
Protect your devices with Threat Protection by NordVPN
