Today battles are not fought on the battleground but in the boardroom. In such a time hostile takeover is seen as an attack. Yes, we live in an era of TRADE WAR where so many Chinese companies are trying to acquire US-based companies, and the US is scared that its lead in technology will be lost to China. Yes. 5G technology is at our doorstep, which will be a big game-changer. So what are some ways to Defend yourself?
A poison pill is tactic companies use to prevent or discourage hostile takeovers. For example, a company targeted for a takeover uses a poison pill strategy to make shares of the company’s stock look unattractive or less desirable to the acquiring firm.
The Pac-Man defense is a defensive business strategy used to stave off a hostile takeover, in which a company threatened with a hostile takeover “turns the tables” by attempting to acquire its would-be buyer.
In business, a white knight is a friendly investor that acquires a corporation at a fair consideration with the support of the corporation’s board of directors and management. The first type, the white knight, refers to the friendly acquirer of a target firm in a hostile takeover attempt by another firm.
A white squire is an investor who buys stakes in a company in the best interest of that company, usually with the intent to prevent a hostile takeover of that company. White squires only acquire a partial share of the company, which does not give them complete controlling power. A grey knight is a second unsolicited bidder in a public merger or acquisition, taking advantage of any problems that might arise between the target company and the first bidder. For example, it may outbid the first bidder or offer a better alternative to a black knight attempting a hostile takeover.
Greenmail or Greenmailing is the practice of purchasing enough shares in a firm to challenge a firm’s management or leadership and even threaten a corporate takeover, thereby forcing the target firm to repurchase those shares at a premium to suspend the potential takeover or to take other actions.
DEFINITION of ‘Self-Tender Defense‘ A takeover defense against a hostile bid, in which the target company undertakes a tender offer for its shares, i.e., a “self-tender.”
A bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually caused when there is a doubt that the target company’s management is willing to sell.
The name “bear hug” reflects the persuasiveness of the offering company’s overly generous offer to the target company.
Leveraged recapitalization is a corporate strategy in which a company takes on significant additional debt to pay a large cash dividend to shareholders and/or repurchase its stock shares.
This common poison pill ( Flip in) is a provision that allows current shareholders to buy more stocks at a steep discount in the event of a takeover attempt. The requirement is often triggered whenever anyone shareholder reaches a certain percentage of total shares (usually 20 to 40 percent). The flow of additional cheap shares into the entire pool of shares for the company makes all previously existing claims worth lesser. The shareholders are also less potent in voting because now, each share is a smaller percentage of the total. A “flip-over” enables stockholders to purchase the acquirer’s shares after the merger at a discounted rate. For example, a shareholder may gain the right to buy the stock of its acquirer, in subsequent mergers, at a two-for-one rate.
A proxy fight is when a group of shareholders join forces and gather enough shareholder proxies to win a corporate vote. This is also referred to as a proxy battle. Used mainly in the context of takeovers, this term implies that an acquirer will persuade existing shareholders to vote out company management so that the company will be easier to take over.
A Saturday Night Special is now an obsolete takeover strategy where one company attempted a takeover of another company by making a sudden public tender offer, usually over the weekend. This merger and acquisition (M&A) technique were popular in the early 1970s when in the US, the Williams Act required only seven calendar days between the time that a tender was publicly announced and its deadline. Catching the target company off guard over the weekend, effectively reducing its time for a response, often afforded the acquiring company an advantage.
Takeover defense is unethical.
What is takeover defense? When the management of one company defends itself from someone else. Why? Because there is a possibility of losing their jobs.
Why is someone else considering making a tender offer for a hostile takeover? Because he believes that he knows how to run the company better than the current management.
If this hostile takeover will make wealth for shareholders, then there is no need to make a defensive strategy.
History of the Hostile takeover.
Before the dot-com bubble, AOL tried to take over Time Warner. $164 billion. Then the Dotcom bubble hit the world. The company split and finally lost $200 billion in value. Isn’t lousy deal?
Sanofi – Aventis ( Yes. parent of soframycin ) 2010. Genzyme. They make more than their calculation of the Genzyme valuation. Even after that, the Genzyme board send a Unanimous NO to Sanofi.
In the largest hostile takeover history, Vodafone acquired German firm Mannesmann AG for $202.8 billion in 1999. This was before Vodafone reverted to its original name, ‘Vodafone Group,’ in 2001, and the agreement finally came after Mannesmann’s largest investor pleaded with the board to accept Vodafone’s offer. It eventually concluded amicably, with millions going to members of the Mannesmann board in the form of bonuses. However, there were legal issues in the aftermath.
While I am writing this, there is a fight between Disney and Comcast for 21st Century Fox. and then its stake in sky plc. It might be fascinating to see where it went.
