A hostile takeover is an acquisition made against the wishes of the target company’s board of directors. It can be risky for the acquiring company as they may not have access to all relevant information about the target company. Publicly traded companies are at risk of hostile takeover, and it can be difficult to obtain financing for such takeovers.
A hostile takeover is a type of corporate takeover that is carried out against the wishes of the target company’s board of directors. This unique type of acquisition does not occur as frequently as amicable acquisitions, where the two companies work together because the acquisition is perceived to be beneficial. Hostile takeovers can be traumatic for the target company and can also be risky for the other party, as the acquiring company may not be able to obtain certain relevant information about the target company.
Businesses are bought and sold on a daily basis. There are two types of sales agreements. In the former, a merger, two companies come together, merging their assets, personnel, facilities, and so on. After a merger, the original companies cease to exist and a new company arises in its place. In a takeover, one company is bought by another company. The acquiring company owns all assets of the target company, including company patents, trademarks, and so on. The original company can be swallowed up entirely or it can operate semi-independently under the aegis of the acquiring company.
Typically, a company looking to acquire another company approaches the target company’s board of directors with an offer. Board members consider the offer, then choose to accept or decline it. The offer will be accepted if the board believes it will promote the long-term welfare of the company and will be rejected if the board does not like the terms or believes an acquisition would not be beneficial. When a company pursues a takeover after a board rejects it, it is a hostile takeover. If a company completely ignores the board of directors, it is also referred to as a hostile takeover.
Publicly traded companies are at risk of hostile takeover because opposing companies can buy large quantities of stock to get a controlling stake. In this case, the company doesn’t have to respect the sentiments of the board of directors because it essentially owns and controls the company. A hostile takeover can also involve tactics like trying to sweeten the deal for individual board members to get them to agree.
An acquiring firm takes a risk by attempting a hostile takeover. Because the receiving company does not cooperate, the acquiring company may involuntarily take on debt or serious problems, as it does not have access to all information about the company. Many companies also have difficulty obtaining financing for hostile takeovers, as some banks are reluctant to lend in these situations.
Protect your devices with Threat Protection by NordVPN
