Response
Hostile takeover when it comes to mergers and acquisitions is when one company a target company is acquired by another company which is the acquirer by going directly to the shareholders of the company it acquires through a tender offer or through proxy notes. In hostile takeovers, the target company’s board of directors does not approve of the transaction. During a hostile takeover, the acquirer is seeking to pursue action taken to gain a competitive advantage by expanding into a new geographical market (Pearce 2004). The acquirer approaches the target company with an offer to purchase it, and the target companies board of directors concludes that this won’t be in the best interest of the shareholder of the target company and rejects the offer. Yet, even though the offer is denied the acquiring companies continue to pursue the target company with an attempt to acquire it. In a hostile takeover, the acquirer wants the target company to be run by the acquirer’s management the way they prefer.
In hostile take over the acquiring company gets the stocks at a premium price this leads to shareholders experiencing instant benefit when the target company is acquired. As a result, a lot of acquiring companies end up acquiring debts because they tend to pay more than the market price for the target company stocks (Gupta 2010). This action tends to eventually decrease the lower the share value of stockholders of that company.
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The definition of a hostile takeover is when a corporate acquisition/merger is done against what the board of directors wants as well as the management of the company. This usually happens when a companies board of directors denies an offer but the bidder decides that they are going to continue the process of the acquisition. Some ways this is done is by the bidder placing an offer to buy the companies stock at a fixed price which is usually above the market value. The bidder also has an option to start a proxy fight which basically means they will get the management changed to someone who will approve the deal.
A lot of times this takeover is seen as a negative process but some people tend to disagree. In today’s world money talks, and people are always willing to listen when it comes to making money. Some companies have some kind of heart-felt background of how they were created from the ground up but that only affects some people and most shareholders will go with whatever is the right financial option. Depending on the deal made, it can be both beneficial or detrimental to the shareholder but most of the time it will be beneficial financially for them.
Earlier this year Lucid Motors completed a merger with SPAC Churchill Capital to become a publicly-traded company on the Nasdaq. This merger came to mind as I bought some shares in Churchill Capital prior to the Merger with Lucid motors. This was a great deal for both companies and looks as if Lucid Motors will be very successful in the coming years.
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