When one company acquires another, without any deal or coming by an agreement to target the company’s management is called “Hostile Takeover”. The main characteristic of hostile takeover is to grab the company’s management, so that they could run the company and can generate more profits. Company uses two ways to hostile takeover that are: Tender offer and Proxy Fights. Hostile takeover have been a part of corporate world for many years. There has been a steady increase in the number of takeovers. Many factors lead to an increase in hostile takeovers such as: Leverage, Political conditions, high profits and etc. Takeover has significant negative effects on the human factors, targeted corporations, their employees, their families and the state economies.
History of Hostile Takeovers
There was a Rapid increase in 1980 in hostile takeovers. Nowadays, the annual transaction activity amounts to $2,000 billion representing over 30,000 deals worldwide. There are six merfger waves up till now. These merger waves occurred in 1900, 1920, 1960, 1980, 1990 and in 2000. The most recent takeover is of KPN by Mexican company of America Movil and Fairstar by Dockwise.
Reasons of Hostile Takeover:
There are many reasons that companies takeover other companies. Management of a company might avoid the acquisition because they might feel that that the deal would reduce the value of the company or put a company into such condition that it might go out of business. They might think that a company can generate more profits in the near future, so they pay more money than its actual worth. The buyer might take over a target company to have access of its distribution channels, its brand name, or to gain technology. The enticement of high profits have provided a large amount of funds to fuel takeovers.
Impact of Hostile Takeover:
A hostile takeover has negative impact on not only management but on employees, stockholders and customers. When a change in company control takes over the corporation who becomes in charge prefers to bring in their own management to integrate and become the decision makers of the...