‘Hostile takeover’ : A forcible purchase! Are you shocked to read the words ‘forcible purchase’. Does it really happens? Did you ever hear about the forcible purchase and hostile acquisition? Did you ever feel that a company can acquire another forcibly? If not then this article is for you.
In this article you would aware of the hostile takeover of a company with some examples. And How does a company forcibly acquires another company?
Hello everyone, QuitOffer offers you a warm welcome. Before knowing the hostile acquisition, first we should be aware of acquisition. So, what does acquisition means?
The acquisition is, when one company purchases most or all of another company’s shares to gain control of that company.
Read more about Acquisition…
And if it comes to the Hostile takeover “The acquisition in which the board of directors is unwilling to the takeover, usually known as the hostile takeover of the target company.”
In a hostile takeover, the management personnel does not want to go with the takeover. The management wants to protect themselves from the control of the proxy acquirers.
The acquirers wants to gain control over the company without the consent of its executives.
A company who is looking for owning the voting rights of a company, usually used these strategies >>
When the acquirer company wants to gain control over an organization, the acquirer company approaches the existing shareholders of the target company and try to persuade them to vote against the management of the target company to replace the executives.
This is the offer in which the acquirer company offers to buy the shares of the target company at the premium price to the market price.
Creeping tender offer
Creeping tender offer is the offer in which the acquirer company gradually owns the share of the target company to gain sufficient control over the voting right of the company.
In Creeping tender offer the acquirer company owns the shares of the target company in an open market.
But if a company wants to acquire a company forcibly it doesn’t eliminate the target company from the scenario. Target company also has several strategies to defense itself from the hostile takeover.
To keep themselves away from the hostile acquisition there are various strategies are used by the companies.
These are >>
Poison pill is the strategy used by the target company that makes the target company’s share less attractive. Through this strategy the target company offers new shares to the existing shareholders at a discount.
Pac-Man defense strategy
In this strategy the target company attempts to buy the shares of acquirer company in order to protect itself from the hostile takeover. And from which the acquirer company leaves the hope of target company as the acquirer company feels it own business in danger.
Golden parachute strategy
According to the golden parachute strategy, the target company makes an agreement with its top executives. This agreement states that some key executives of the company would be paid even after the termination of his/her employment if they are removed after the takeover. And that makes the acquisition more expensive for the acquirer company.
Crown jewel technique
In order to defense the company from hostile takeover the company sells its most valuable and expensive asset. That makes the target company less attractive and force the acquirer company to leave the hope of hostile takeover. Usually the company sells the assets to the firm that is friendly towards him. After some time when the issue of hostile takeover ends, the company repurchases the asset.
GreenMail is the strategy under which the target company repurchases its shares from the acquirer company at a premium price to protect the company from hostile takeover.
Some examples of hostile acquisitions in india
Takeover of Zandu by Emami in 2008. Read more…
Acquisition between Essel Group’s Iragavarapu Venkata Reddy Construction Limited (IVRCL), an infrastructure company in 2012. Many times it is known as the hostile takeover. Read more…
Takeover of Raasi Cements Limited (“RCL”) by India Cements Limited (“ICL”) in 1998.Read more…
So, that is all about the hostile takeover. QuitOffer is expecting that you got all the necessary information about the hostile quitoffer.
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