Takeover

Takeover refers to the acquisition of one company (the target) by another (the acquirer, or bidder). In a takeover, the acquirer secures the majority of the target company's share capital to gain control of it.

Types of Takeovers

There are two main types of takeovers: friendly and hostile.

Friendly Takeover

A Friendly Takeover occurs when the management and board of directors of the target company approve the takeover proposal from the acquiring company. The two companies cooperate in negotiations and the due diligence process.

Hostile Takeover

A Hostile Takeover is a type of takeover that is strongly resisted by the target company's management and board of directors. The acquiring company may use various tactics to gain control, such as a tender offer, proxy fight, or purchasing shares on the open market.

Methods of Takeover

There are several methods an acquiring company can use to execute a takeover, including:

• Tender Offer: The acquiring company offers to purchase the target company's shares at a premium to the current market price.
• Proxy Fight: The acquiring company attempts to persuade other shareholders to vote out the current management or board of directors.
• Purchase of Assets: The acquiring company buys the assets of the target company.
• Management Acquisition: The management of the target company purchases the company, often with the help of outside financiers. This is also known as a management buyout.

Regulation of Takeovers

In many jurisdictions, takeovers are regulated to protect the interests of shareholders and to prevent anti-competitive practices. Regulatory bodies such as the Securities and Exchange Commission in the United States and the Takeover Panel in the United Kingdom oversee takeover activity and enforce regulations.

Effects of Takeovers

Takeovers can have significant effects on the target company and its stakeholders. These can include changes in management, layoffs, changes in company culture, and impacts on the local economy. The acquiring company may also realize synergies, which can lead to increased profitability.