Google has been involved in many takeovers over the past decade. The huge loss occurred after the dotcom bubble burst. However, the new AOL Time Warner company lost over $200 billion in value in less than two years. In 2000, it was hailed the deal of the millennium. How can it convince the bank to lend the money if it cannot conduct extensive due diligence?Ī famous hostile takeover was AOL’s acquisition of Time Warner Time Warner was considerably bigger than AOL.

If the bidder requires loans in order to purchase the target company, it will have a serous problem. Due diligence refers to carrying out a thorough examination of the other party’s financial and operational status and history. Therefore, hostile takeovers generally carry more risk for the bidder than friendly ones. It is harder for the bidder to conduct extensive due diligence if the target is resisting the acquisition attempt.

In all successful hostile takeovers, the management tries to resist the acquisition, but eventually fails. We call this a creeping offer. Eventually, it has enough shares to effect a change in management. Put simply the hostile bidder tries to get more acquisition-friendly people on the board.Īlternatively, the hostile bidder may discreetly buy enough stocks of the company in the open market. In a proxy fight, it tries to persuade enough the majority of stockholders to replace the whole management. The bidder can also engage in a proxy fight. It must also reveal its cash source and offer terms. The filing must include data on the bidder’s plans for the company after it has acquired it. It must also provide the target company with details regarding its tender offer. SEC stands for the Securities and Exchange Commission. In the United States, bidders must include comprehensive details of a tender offer in their filing to the SEC. In other words, it offers more per share than its current stock market value. The bidder may make a public offer at a fixed price above the current market price. There are five different ways that a hostile takeover situation can play out. If the bidder can divide board and or shareholder opinion, it has a better chance of succeeding. Sometimes there may also be a hostile takeover situation if the bidder announces its firm intention to make an offer, and then immediately makes the offer directly – thus, not giving the board time to get organized. If the bidder still pursues the acquisition, it becomes a hostile takeover situation. The bidder does not back always off if the board of a publicly-listed company rejects the offer. This can only really happen in a publicly-listed company because the directors are not typically majority shareholders. In a hostile takeover situation, the target company does not want the bidder to acquire it. This is because the board members are usually the main shareholders.

In the majority of private companies, takeovers tend to be friendly. Subsequently, the friendly takeover goes ahead.Ī friendly takeover is an acquisition where the owners of both companies agree to the terms of the transaction. The bidder tells the target’s board of directors about its intention and makes an offer.The board then advises its shareholders to accept the offer. In other words, its directors and shareholders have approved the offer. There are also reverse ones.Īs the name suggests, a friendly takeover occurs when the target company is happy about the arrangement. There are different types of takeovers, including friendly, hostile, and backflip ones. This article focuses on the word’s meaning in the world of business. In the case of an acquisition, there is a predator and a prey.Ī takeover may also refer to the acquisition or colonization of a country. It is a type of merger, but not of equals. We call the purchaser the bidder or acquirer, while the company it wants to buy is the target. A takeover or acquisition is the purchase of one company by another.

2022.09