A hostile takeover allows a bidder to take over a target company whose management is unwilling to agree to a merger or takeover. Hostile takeover defenses that maximize shareholder wealth. Whether you are defending against a hostile takeover or launching an unsolicited proposal, our integrated, multidisciplinary team will provide you with the full range of strategies to steer you through these complex matters. Defence strategy in a hostile world the irish times. The evolution of hostile takeover regimes in developed and. This information usually includes plans, strategies, ideas, patents, and similar items that cannot be made public.
Defense strategies of listed companies under hostile. Kinds of takeover friendly or negotiated takeover hostile takeover 9232014 3 4. Hostile takeovers the use of attack and defence strategies. The golden parachute is a provision in a ceos contract. This paper examines hostile takeovers and defenses against them. The defensive strategies a company employs to thwart a hostile takeover can have a significant impact on its shareholders, including sometimes a decline in shareholder value. When being threatened by hostile takeover attempt from another company, defensive companies could employ some tactics to prevent or at least to discourage the hostile takeover. Hostile takeovers and its defense tactics by ayush yadav. The target firm has under performed other shares and the overall market in. Defenses against takeover bids anti takeover strategies a firm having all or any of the following features may provide a temptation to an acquiring firm to takeover the former. It is difficult to determine it priori whether takeover defenses are good or. Our knowledge spans the worlds major financial markets. A hostile takeover is the acquisition of one organization by another. Takeover defenses in the united kingdom international journal of.
During the last decade, there has been a wave of mergers and hostile takeovers throughout the corporate world. Emerging trends and developments of countryspecific. In the case of hostile takeover target company can take several measures in the case of defense against the unwanted merger. Pdf hostile takeover defenses that maximize shareholder wealth. Heres a detailed look at both sides of hostile takeovers. Hostile takeover strategies with analysis of case studies. In contrast, the defense strategies available to us companies are quite extensive. Hostile takeovers the use of attack and defence strategies grin. Hostile takeovers and defense strategies against them bachelor thesis, university of gothenburg. Pdf defensive measures against hostile takeovers zana govori. Companies play a new kind of defense against hostile bids. This interest can be seen in the enormous amount of literature on hostile takeovers and corresponding defenses. There are several ways to defend against a hostile takeover. This is the type of takeover we are seeing in todays merger market.
Financial advisor topics in hostile takeover defenses. A takeover is a form of an acquisition, wherein the company offers a bid for the purchase of a certain block of the equity of another company target to exercise complete control over its affairs. Finance teams provide the budgetary insights that the organizations decisionmakers reference when leading offensive and defensive strategies in these situations. In defending against a hostile takeover the strategy that. Schoenberg and thornton, 2006 therefore, to provide a competent analysis of.
In my thesis i would like to address the procedure of a hostile takeover, respectively, the defense strategies against it. Hostile takeover bids used to be a relative rarity. Hostile takeover meaning examples defense strategies. Dalal introduction a takeover bid is an acquisition of shares carrying voting rights in a company in a direct or indirect manner with a view to gaining control over the management of the company.
It was at that time that poison pills and other anti takeover strategies were conceptualized. Hostile takeover meaning, examples how this strategy work. The term hostile takeover refers to a takeover offer which is launched either without its prior communication to the targets management or without the latters consent to it. The crown jewel defense is a lastresort defense since the target company will be intentionally destroying part. A prime example has recently unfolded in the hostile offer for airgas by air products. A takeover is considered hostile if the target companys board rejects the offer, and if the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. Companies on the receiving end of a hostile takeover must employ the right defense strategies to avoid unwanted sales. Golden parachutes are provided by yahoo to its employees.
Inadequacy opinions are similar in form to fairness opinions but can reflect additional factors and considerations not. Th e added value of the selected examples is the fact that each of them presents the process of a hostile takeover and defensive strategies at three totally di. A company can put in place many types of responsive defense strategies to mitigate an attempted corporate takeover. Defense strategies against hostile takeovers thesis. In the united kingdom, the hostile takeover made its appearance in the 1950s. Takeover defenses a green mail 14 b golden parachutes 15. They act as both proactive and reactive defense measures against hostile takeovers. These efforts are generally not in the best interest of existing shareholders and can lead to litigation.
In a sluggish economy, few chief executives appear willing to risk a gamechanging transaction. This pdf is a selection from an outofprint volume from the national bureau. The most effective methods are builtin defensive measures that make a company difficult to take over. Pdf defensive strategies against hostile takeovers. Preventive measures of defense against the unwanted merger 2. These methods are collectively referred to as shark repellent. Hostile takeovers and defense strategies against them, erik yang and samim zarin, 2011. Postoffer defense definition a postoffer defense occurs when a target company receives a hostile takeover threat, and it involves taking the. The below analysis enabled to assess the defensive strategies in the context of.
Hostile takeover learn about hostile takeover strategies. This honors thesisopen access is brought to you for free and open access. Takeover strategies, competitive bidding, and defensive tactics. The analysis of takeover defenses in cases of hostile takeovers in the uk. Hostile takeovers and takeover defense hogan lovells. Hostile takeovers were particularly existent in the mid 1980s in great britain and the us appendix b, especially when investors detected a big enough discrepancy between specific company assets and the correspondent stock. Takeover defenses are designed either to slow the takeover process and give the target firm a chance to strengthen its existing defense or put new ones in place, or raise the total cost to the acquirers of taking over the target. Th is part of the article is a basis for the choice of examples from real economy, which constitute the second basic part of the article.
Second, the value could increase as man agers stop wasting time and corporate resources worrying about a hostile takeover. Topics definition some concepts types preventive defense types of preventive takeover defense active defense types of active defense 3. Pdf hostile takeover defenses that maximize shareholder. In a hostile takeover, the target companys management does not wish the takeover to go through. Hostile corporate takeovers and defenses against them have long been of great interest to legal scholars, attorneys, and other professionals all over the world. Defense strategies against hostile takeovers thesis example. Often the corporation will attempt to provide benefits to the acquirer that will incentivize it to give up its efforts. Hostile take over a takeover is considered hostile if the target companys board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer without. This wave has been accompanied by various defensive strategies of managers to defend target firms from these takeovers. What can be done to try and stop a hostile takeover.
The purpose of this thesis is to describe and explain which defense strategies are the most effective and easiest to implement when facing a hostile takeover. A company aiming at a hostile takeover can approach this in two major ways, namelytender offer, and proxy fight. Hostile takeover takes place by approaching a companys shareholders directly or fighting to substitute the management and get the acquisition approved. We decided to choose worldwide known hostile takeover bid cases which were more or less successful and in which different strategies were used. Pdf companies enact defenses against hostile takeovers to protect their independence and current management initiatives, or to help. Having most common hostile takeovers scheme established it is possible to pursue the second subproblem which is identifying already wellknown antihostile takeover defense methods used in russia.
Hostile takeovers are seen as an important external disciplinary mechanism by advocates of the market of corporate control. Defenses against takeover bids anti takeover strategies. Poison pill this type of defense is designed to make the target. We will try to clarify the use of some of the defense strategies by. These strategies could be either proactive, such as the poison pill and staggered board defense strategy or reactive, such as the crown jewel and white knight defense strategy. Tender offer happens when a company or group of investors offer to purchase the majority shares of the target company at a premium to market price and this offer is made to the board of directors who may reject it. Such takeovers either take place through friendly negotiations or in a hostile manner. Practically, the acquirer must buy at least 51% or more paid up equity of the acquired company to enjoy full control over its operations. Defense strategies of listed companies under hostile takeover. Last, third subproblem is to describe which of above mentioned defense methods or their combination are most effective against takeover. Hostile takeover means the acquisition of one company called the target company by another called the acquirer that is accomplished not by coming to an agreement with the target companys management, but by going directly to the companys shareholders or fighting to replace management in order to get the acquisition approved.
Further work will be analyzed measures and tactics of defense against hostile takeovers, financing mergers and acquisitions and the mutual influence of funding and selected defense tactics on the value of the target company. Hostile takeovers the use of attack and defence strategies a literature. The power of takeover defenses lucian arye bebchuk, john c. There are some colorful names for takeover defenses. Mergers, acquisitions and hostile takeovers, richard e murphy, 2006. Kumar sumeet 5th year student, symbiosis law school. In sum, the inadequacy opinion is a close relative of the fairness opinion that is delivered by the targets financial advisor in a hostile takeover defense.
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