Key Takeaways
- A friendly takeover is a scenario in which a target company is willingly acquired by another company.
- Friendly takeovers are subject to approval by the target company's shareholders, who generally greenlight deals only if they believe the price per share offer is reasonable.
- Friendly takeover deals must achieve regulatory approval by the U.S. ...
What is a'friendly takeover'?
What is a 'Friendly Takeover'. A friendly takeover is a proposal in which a target company's management and board of directors agree to a merger or acquisition by another company that is subject to shareholder and U.S. Department of Justice (DOJ) approval.
What is a friendly takeover bid?
Friendly Takeover. What is a 'Friendly Takeover'. A friendly takeover is a proposal in which a target company's management and board of directors agree to a merger or acquisition by another company that is subject to shareholder and U.S. Department of Justice (DOJ) approval. Next Up. Takeover. Hostile Takeover Bid.
What is the difference between a friendly takeover and a merger?
In a friendly takeover, both shareholders and management are in agreement on both sides of the deal. In a merger, one company, known as the surviving company, acquires the shares and assets of another with the approval of said company's directors and shareholders.
What are the benefits of friendly takeover?
The Friendly Takeover has many benefits that it offers to the target company. When a target company sees that the benefit they will have after this takeover is enough to trade with their current business, they go for or agrees to the deal that an acquirer offer.
What is friendly and hostile takeover?
In a friendly takeover, the target company's management and board of directors approve the takeover proposal and help to implement it. However, in a hostile takeover, the management and board of directors of the targeted company oppose the intended takeover.
What are advantages of friendly takeover?
Advantages of a Friendly Takeover The involvement of both parties (bidder and target company) ensures better design of the deal and value delivery to the participating parties. The target company does not incur costs or erase its value due to employing defense mechanisms to prevent a hostile takeover.
What is a friendly transaction?
Friendly Transaction means any Merger Event or Tender Offer that is approved, agreed to or recommended by the Company or its board of directors, or negotiated by the Company or any authorized representative of the Company, including without limitation (i) any transaction involving the merger of the Company with or into ...
What are the types of takeover?
The four different types of takeover bids include:Friendly Takeover. A friendly takeover bid occurs when the board of directors from both companies (the target and acquirer) negotiate and approve the bid. ... Hostile Takeover. ... Reverse Takeover Bid. ... Backflip Takeover Bid.
What is hostile takeover?
Key Takeaways. A hostile takeover occurs when an acquiring company attempts to take over a target company against the wishes of the target company's management. An acquiring company can achieve a hostile takeover by going directly to the target company's shareholders or fighting to replace its management.
What is Backflip takeover?
A backflip takeover is a rare type of takeover that occurs when an acquirer becomes a subsidiary of the company it purchased. Upon completion of the deal, the two entities join forces and retain the name of the company that was bought.
Why is it called hostile takeover?
A hostile takeover happens when one company sets its sights on buying another company, despite objections from the target company's board of directors. A hostile takeover is the opposite of a friendly takeover, in which both parties to the transaction are agreeable and work cooperatively toward the result.
How do you avoid a hostile takeover?
Stocks With Differential Voting Rights A preemptive line of defense against a hostile corporate takeover would be to establish stock securities that have differential voting rights (DVRs). Stocks with this type of provision provide fewer voting rights to shareholders.
Why are hostile takeovers legal?
Hostile takeovers are perfectly legal. They are described as such because the board of directors, or those in control of the company, oppose being bought out and have typically rejected a more formal offer.
What is the difference between takeover and acquisition?
The major difference between acquisition and takeover is that a takeover is a special form of acquisition that occurs when a company takes control of another company without the acquired firm's agreement. Takeovers that occur without permission are commonly called hostile takeovers.
What is an example of a takeover in business?
When a firm buys another firm at a different stage of production, e.g. Tesco buying out a supplier of milk. When a firm buys out another firm in another industry, e.g. Google buying out ITV new.
What is a takeover called?
A takeover or acquisition is the purchase of one company by another. We call the purchaser the bidder or acquirer, while the company it wants to buy is the target. It is a type of merger, but not of equals. In the case of an acquisition, there is a predator and a prey.
What are the disadvantages of a takeover?
The Risks and Drawbacks of TakeoversHigh cost involved - with the takeover price often proving too high.Problems of valuation (see the price too high, above)Upset customers and suppliers, usually as a result of the disruption involved.Problems of integration (change management), including resistance from employees.More items...•
What is the main advantage of conglomerate integration?
Advantages. Despite its rarity, conglomerate mergers have several advantages: diversification, an expanded customer base, and increased efficiency.
How do you avoid a hostile takeover?
Stocks With Differential Voting Rights A preemptive line of defense against a hostile corporate takeover would be to establish stock securities that have differential voting rights (DVRs). Stocks with this type of provision provide fewer voting rights to shareholders.
Is a hostile takeover good for shareholders?
Hostile takeovers, even if unsuccessful, typically lead management to make shareholder-friendly proposals as an incentive for shareholders to reject the takeover bid. These proposals include special dividends, dividend increases, share buybacks, and spinoffs.
What are the components of a friendly takeover?
Components of a Friendly Takeover. 1. Public offer of cash or stock. Generally, a friendly takeover is a public offer of cash or stock made by a bidding company, that is given to the board of directors of the target company for approval. 2.
Why would the government disapprove of a friendly takeover?
The government regulator may disapprove of a friendly takeover if the deal violates competition (also known as antitrust or anti-monopoly) laws. Other buyout terms also play a crucial role since the offer is a comprehensive legal document that includes several provisions and clauses. For example, the buyout terms may include provisions regarding ...
What is hostile takeover?
Hostile Takeover A hostile takeover, in mergers and acquisitions (M&A), is the acquisition of a target company by another company (referred to as the acquirer) by going directly to the target company’s shareholders, either by making a tender offer or through a proxy vote. The difference between a hostile and a friendly. .
What is a tender offer?
The offer is to tender, or sell, their shares for a specific price at a predetermined time. In some cases, the tender offer may be made by more than one person, such as a group of investors or another business. Tender offers are a commonly used means of acquisition. Types of Mergers.
Why Friendly Takeover Occur?
When a target company sees that the benefit they will have after this takeover is enough to trade with their current business, they go for or agrees to the deal that an acquirer offer . The biggest benefit that is being offered to the target company by this takeover is the price per share, which is often better than the current market price.
What are the advantages of a friendly takeover?
There are many advantages associated with Friendly Takeover: In this takeover, both the acquirer and target company takes part in designing the structure of the deal to their mutual satisfaction. In this takeover, the target company doesn’t have to face or experience any annoying disputes or losses that may occur because ...
What is hostile takeover?
When the takeover is without the consent of the board of directors of the target company. It is hostile on the board of the directors of the target company; then, the takeover is called a “Hostile Takeover.”. This type of takeover, the acquirer will directly go to the shareholders of the company to acquire the shares of ...
What happens if the regulatory body doesn't approve the takeover terms?
In case the regulatory body doesn’t approve the takeover terms or feel that the takeover would be harmful in any circumstances, it would not happen even after both the acquirer and the target company is in agreement to the takeover.
What happens if ABC management accepts a deal?
If the company ABC management evaluates that the deal is beneficial to the company, they will accept the offer and recommend the deal to shareholders as well. After all the approvals from a board of directors, shareholders, and other regulatory authorities involved, the deal will be finalized.
Who does the acquirer go to?
This type of takeover, the acquirer will directly go to the shareholders of the company to acquire the shares of the target company without letting the management of the target company know about such actions.
Is there a regulatory body involved in a takeover?
It is very important to note that there is always a country’s regulatory body involved in takeover whose approval is mandatory for the takeover to happen.
What is a friendly takeover?
The friendly takeover is the opposite of a hostile takeover. In a hostile takeover, the target company’s board and management team does not want to sell and tries to prevent the buyout.
Why are takeovers considered friendly?
This is partly because companies are better equipped to protect themselves against hostile takeovers and can resist forced mergers.
What is the main determinant of a friendly takeover?
The biggest determinant behind a friendly takeover is often the price per share being offered to the target company. The price is often better than the current market price of the company’s shares. In some instances, the target company might receive other benefits such as further investment or a better opportunity to expand the company to new markets.
What is a takeover of a company?
A takeover takes place when one company, organisation or a group of investors decides to buy a controlling stake in another company. In a takeover, the attempt to gain control will take place by purchasing the stocks of the company. The company that is being pursued can take the different approach to the takeover. Depending on the company’s approach the takeover can be referred to as a friendly takeover or a hostile takeover.
Does a friendly takeover mean the deal will go through?
It is important to understand that a friendly takeover doesn’t necessarily mean the deal will go through. Even if the board and management approve the buyout term, all deals will be subject to regulatory approval.Each nation’s regulatory board may reject the deal, even if neither company is against it. For example, the country’s regulatory board might deem the deal to lead into a monopoly position. The merger or acquisition might also require shareholder approval. In rare instances, company’s shareholders might reject the board’s recommendation to sell.
Friendly Takeover (Company) - Explained
What is a Friendly Takeover? How does a Friendly Takeover Work? Academic Research on Friendly Takeovers
What is a Friendly Takeover?
A friendly takeover refers to a proposal where the managerial level and executives of a target organization confirm a merger or acquisition by some other firm that involves approval from the shareholder and U.S. Department of Justice (DOJ).
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Components of A Friendly Takeover
- 1. Public offer of cash or stock
Generally, a friendly takeover is a public offer of cash or stock made by a bidding company, that is given to the board of directors of the target company for approval. - 2. Premium per share
The per share stock price paid by the acquirer to the shareholders of the target company is often a key determinant of the success of the deal. In most cases, the acquirer must pay a significant premiumper share to secure the approval of the target company’s shareholders.
Advantages of A Friendly Takeover
- Generally, friendly takeover deals deliver substantial advantages to both bidders and target companies, as compared to a hostile takeover. Some of the advantages include the following: 1. The involvement of both parties (bidder and target company) ensures better design of the deal and value delivery to the participating parties. 2. The target company does not incur costs or era…
Example of A Friendly Takeover
- In 2014, Facebook Inc. announced the acquisition of the mobile messaging company, WhatsApp. According to the statement issued by Facebook, the deal was intended to “support Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core services efficiently and affordably.” The acquisition was executed in the form of a friendly takeo…
More Resources
- CFI offers the Financial Modeling & Valuation Analyst (FMVA)™certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful: 1. Definitive Purchase Agreement 2. M&A Considerations and Implications 3. Tender Offer 4. Types of Mergers
Example #1 – Friendly Takeover Examples
Example #2 – Johnson & Johnson Takeover of Crucell
Example #3 – Facebook & Whatsapp Deal
Why Friendly Takeover occur?
- The Friendly Takeover has many benefits that it offers to the target company. When a target company sees that their benefit after this takeover is enough to trade with their current business, they go for or agree to the deal that an acquirer offers. The biggest benefit offered to the target company by this takeover is the price per share, which is ...
Advantages
Friendly Takeover vs. Hostile Takeover
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