Hostile takeovers and defense strategies against them bachelor thesis, university of gothenburg. Takeover defences and strategies flashcards quizlet. The below analysis enabled to assess the defensive strategies in the context of. 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.
The power of takeover defenses lucian arye bebchuk, john c. Constant fear of takeover can hinder growth and stifle innovation, as well as generating fears among employees about job security. Question 3 analyze the synergies of oraclepeoplesoft merger deal. Based on our researches and analyzes, we believe and argue that the most easiest and. Such an offer is usually made when there is doubt that the target companys management will be willing to. This shift in strategic alliances is done with a desire to have. Often the corporation will attempt to provide benefits to the acquirer that will incentivize it to give up its efforts. In this article, we will continue discussing the remaining strategies for defense against hostile takeover.
Stock repurchase as a defense against hostile takeovers hee jeu kang. Takeover defenses in the united kingdom international journal of. Hostile takeovers and takeover defense 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. Pdf defensive measures against hostile takeovers zana govori.
Description of the main tactics employed to achieve, discourage, or thwart a takeover. The target company lives in constant fear of hostile takeover which creates a sense of insecurity amongst them and hinders its progressive functioning. Sean wee a discussion of fee arrangements, potential conflicts and inadequacy opinions. Emerging trends and developments of countryspecific. It is difficult to determine it priori whether takeover defenses are good or. This paper examines hostile takeovers and defenses against them. Scope or scale extension e motivation for this strategy varies and.
Hostile takeover defense strategies share in case of a hostile takeover bid, we are prepared together with an experienced legal advisor and investor relations firm. In a hostile takeover, both the target company and the acquiring company incurs a heavy cost at all levels. Hostile takeovers and takeover defense hogan lovells. A firm having all or any of the following features may provide a temptation to an acquiring firm to takeover the former. Definition 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 informing the target companys board beforehand. There are several ways to defend against a hostile takeover. Restructuring usually means major changes and modifications in the corporate strategies and beliefs. As a takeover defense, it virtuallyretreating from an area. 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. The greenmail is the antitakeover tactic undertaken when the target firm buys back its own shares at an inflated price from the unfriendly firm which possesses a large stock of the target company and is threatening a hostile takeover. This wave has been accompanied by various defensive strategies of managers to defend target firms from these takeovers.
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. Resistance also includes actions that occur before a takeover offer is made which make the firm more difficult to acquire. In some cases, it may be in the shareholders best interest to allow a hostile takeover to occur. As a result, the target companies put in a lot of costs in undertaking defense strategies. Defenses against hostile takeovers defenses against hostile takeovers include the golden parachute, supermajority or dualclass stock. Topics definition some concepts types preventive defense types of preventive takeover defense active defense types of active defense 3. The supermajority is a defense that requires 70 or 80 percent of shareholders to approve of any acquisition. Takeover strategies, competitive bidding and defensive tactics. Mergers and acquisitions in its basic terminology means that merger is a combination of two companies to form a new company, while an acquisition or takeover is the purchase of one company by another in which no new company is formed. The most effective methods are builtin defensive measures that make a company difficult to take over. These industries include the commercial banking sector, radio and.
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 makes it much more difficult for someone to conduct a takeover by buying enough stock for a controlling interest. Finally, in some cases a hostile takeover that may have ultimately improved the company by ousting poor managers and executives is ultimately thwarted due to this type of defense. Takeover strategies, competitive bidding, and defensive tactics.
A poison put is a takeover defense strategy in which the target. 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. A hostile takeover allows a bidder to take over a target company whose management is unwilling to agree to a merger or takeover. Mergers and acquisitions is a way for companies to grow, establish and gain entry to new markets. What can be done to try and stop a hostile takeover.
Question 5 study the benefits to oracle and peoplesoft from the takeover deal. Mergers and acquisitions is a way for companies to grow, establish and gain. Hostile takeover defenses that maximize shareholder wealth article pdf available in business horizons 475. One of the largest hostile takeovers is the 200 billion takeover of german co. These efforts are generally not in the best interest of existing shareholders and can lead to litigation. Practically, the acquirer must buy at least 51% or more paid up equity of the acquired company to enjoy full control over its operations. The evolution of hostile takeover regimes in developed and. Hostile takeovers and its defence tactics ssrn papers. A hostile takeover occurs when a company gains control over a targeted company without the consent from either the board of directors or the management of the target company. 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. Pdf hostile takeover defenses that maximize shareholder. A hostile takeover is a kind of acquisition by the target company by another company referred to as an acquiring company, where even though the target companys management is not in the favor of the acquisition but still the bidder uses other channels to acquire the company such as acquiring the company through tender offer by directly make offer to the public to buy the shares of target company at the prespecified price which is more than the prevailing market prices. Sometimes a companys management will defend against unwanted hostile takeovers by using several controversial strategies, such as the poison pill, the crownjewel defense, a golden parachute, or. In this part, the thesis focuses on proposals for achieving the initial goal of the directive, the creation of a unified european system on the field of takeover bids.
Jensen and ruback 1983 eckbo agency view of hostility successful hostile takeovers resolve a costlysuccessful hostile takeovers resolve a costly agency conflict between corporate officers and shareholders they respond to a breakdown of the companys internal governance system. Kamikaze defense involves reshaping the target company either by divesting substantial assets or by making unappealing acquisitions so that its attraction to a corporate raider is greatly reduced. There are some colorful names for takeover defenses. Kumar sumeet 5th year student, symbiosis law school. The analysis of takeover defenses in cases of hostile takeovers in the uk. Hostile takeovers and its defense tactics by ayush yadav. The disadvantages are as followsduring a merger agreement, all the relevant information is disclosed by the target company. A type of takeover defense mechanism sometimes resorted to by a company that is the target of a hostile bid. Financial advisor topics in hostile takeover defenses. Such takeovers either take place through friendly negotiations or in a hostile manner. It was at that time that poison pills and other anti takeover strategies were conceptualized. Last, third subproblem is to describe which of above mentioned defense methods or their combination are most effective against takeover. Stock repurchase as a defense against hostile takeovers. This helps the bidder or acquirer in making viable decisions that will prove beneficial.
Ultimately, we must measure the costs of mergers and acquisitions on a casebycase basis. Hostile takeovers the use of attack and defence strategies. Defenses against takeover bids anti takeover strategies. Poison pill this type of defense is designed to make the target. Second, the value could increase as man agers stop wasting time and corporate resources worrying about a hostile takeover. During the last decade, there has been a wave of mergers and hostile takeovers throughout the corporate world. Hostile takeover meaning examples defense strategies. It is considered to be a hostile takeover strategy.
Another cost of hostile takeovers is the effort and money that companies put into their takeover defense strategies. This pdf is a selection from an outofprint volume from the national bureau. A hostile takeover bid is not always an advantageous proposition for the acquirer. The presentation explains the different kinds of takeoveracquisition strategies used by corporates with examples. Question 4 analyze the role of peoplesofts board in the takeover battle. Using the url or doi link below will ensure access to this page indefinitely.
Pdf defensive strategies against hostile takeovers. An offer made by one company to buy the shares of another for a much higher pershare price than what that company is worth. Attempts by target managers to defeat outstanding takeover proposals are overt forms of take over 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. Takeover defenses include all actions by managers to resist having their firms acquired. As a takeover defense, it virtually destroys a company while it is being taken over or when it isdestroys a company while it is being taken over or when it is likely to face a takeover threat. 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. They can be categorized as either friendly or hostile. Indeed, in some cases they may be morevulnerable than their nonreit counterparts because of excessive and misguided reliance on reitspecific, taxbased defenses thatwhile helpful. Strategies to avert a hostile takeover with this in mind, some basic defense strategies can be used by the management of potential target companies to deter unwanted acquisition advances. 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. A killer bee uses defensive strategies to keep an attempted hostile takeover from occurring.
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