Takeover Meaning
- A takeover is a strategic move of a business entity to purchase a large stake (usually more than 50%) of the target company and get control over the latter.
- The company that buys another firm is called the acquirer, while the newly acquired business is referred to as the target.
- Takeovers can be friendly if the target accepts the bid willingly. ...
What is a strategic takeover and how does it work?
Some companies may opt for a strategic takeover. This allows the acquirer to enter a new market without taking on any extra time, money, or risk. The acquirer may also be able to eliminate competition by going through a strategic takeover.
What do you need to know about a takeover?
Understanding Takeovers. Takeovers are fairly common in the business world. They are similar to mergers in that both processes combine two companies into one. Where they differ is that a merger involves two equal companies while a takeover generally involves unequals—a larger company that targets a smaller one.
What is a reverse takeover and how does it work?
A reverse takeover happens when a private company takes over a public one. The acquiring company must have enough capital to fund the takeover. Reverse takeovers happen in order for the private company to go public without having to take on the risk or added expense of going through an initial public offering (IPO).
What is a hostile takeover in mergers and acquisitions?
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.
What is takeover explain with example?
A Takeover is the buying of a target firm with or without the agreement of the target's management. The acquirer wins the bid and buys a major stake in the target firm. Typically, larger companies try to acquire smaller companies. Takeovers are common practice—disguised to look like friendly mergers.
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 is takeover and different types of takeover?
A takeover bid refers to the purchase of a company (the target) by another company (the acquirer). With a takeover bid, the acquirer typically offers cash, stock, or a mix of both, “bidding” a specific price to purchase the target company for.
What are the benefits of a takeover?
There are many reasons why a firm may decide to undertake a takeover as part of its strategy, including to:Increase market share.Acquire new skills.Access economies of scale.Secure better distribution.Acquire intangible assets (brands, patents, trade marks)Spread risks by diversifying.More items...
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 a takeover event?
Street takeover events are often staged by other drivers who use their cars to block roads, bridges, intersections, and other locations to create a venue for these activities. In addition, street takeovers often attract crowds that stand near the vehicles performing these dangerous maneuvers.
When companies take over another company?
When one company takes over another entity, and establishes itself as the new owner, the purchase is called an acquisition.
What is a takeover?
Takeover Definition. A takeover is a type of transaction where the bidder company acquires the target company with or without the mutual agreement between the management of the two companies. Typically, a larger company expresses an interest to acquire a smaller company. Takeovers are frequent events in the current competitive business world ...
How long did the Cadbury takeover battle last?
to start a takeover battle that lasted up to 3 months. However, in January 2010, Kraft Foods increased its offer up to $21.8 billion to which the management of Cadbury agreed, and eventually, the acquisition was realized. This is an example of a transaction that started as a hostile takeover and ended in a mutual agreement.
What is an acquirer?
The acquirer intends to enter a new market without investing any extra money or time. A larger company may be willing to eliminate competition via a strategic takeover of a smaller company. A shareholder may intend to gain a controlling stake to initiate some change (activist takeovers).
What is a shareholder in a company?
Shareholders A shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and , therefore, are the legal owners of the company . The ownership percentage depends on the number of shares they hold against the company's total shares. read more.
Is CVS Health a takeover?
Almost a year back in December 2017, CVS Health announced the takeover of Aetna as both the entities expected significant synergies from the merger. The merger resulted in the amalgamation of CVS Health’s pharmacies with Aetna’s insurance business, which in turn resulted in lower operating expenses.
What is hostile takeover?
A "hostile takeover" is an unfriendly takeover attempt by a company or raider that is strongly resisted by the management and the board of directors of the target firm. These types of takeovers are usually bad news, affecting employee morale at the targeted firm, which can quickly turn to animosity against the acquiring firm. Grumblings like, "Did you hear they are axing a few dozen people in our finance department…" can be heard by the water cooler. While there are examples of hostile takeovers working, they are generally tougher to pull off than a friendly merger .
What is the job of management in mergers and acquisitions?
Through mergers and acquisitions, a company can (at least in theory) develop a competitive advantage and ultimately increase shareholder value.
What is the spin off of blackmail?
A spin-off of the term "blackmail," " greenmail " occurs when a large block of stock is held by an unfriendly company or raider, who then forces the target company to repurchase the stock at a substantial premium to destroy any takeover attempt. This is also known as a " bon voyage bonus " or a "goodbye kiss."
What does it mean to have stock in a company?
Having stock in a company means you are part owner, and as we see more and more sector-wide consolidation, mergers and acquisitions are the resultant proceedings. So it is important to know what these terms mean for your holdings.
Can a company acquire another company?
They can partner on a project, mutually agree to join forces and merge, or one company can outright acquire another company, taking over all its operations, including its holdings and debt, and sometimes replacing management with its own representatives.
Can a hostile takeover result in management being fired?
On the other hand, hostile takeovers often result in the management being fired anyway, so the effectiveness of a people pills defense really depends on the situation.
Example of a Hostile Takeover
For example, Company A is looking to pursue a corporate-level strategy and expand into a new geographical market.
Hostile Takeover Strategies
There are two commonly-used hostile takeover strategies: a tender offer or a proxy vote.
Defenses against a Hostile Takeover
There are several defenses that the management of the target company can employ to deter a hostile takeover. They include the following:
Real-life Examples of Hostile Takeovers
There are several examples of hostile takeovers in real-life, such as the following:
Related Readings
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Understanding Strategic Management
The strategic management model deals with the planning, analyzing, and assessing different factors and inputs critical for production. It also entails the evaluation, allocation, and exploitation of available resources to achieve specified business objectives.
Process Of Strategic Management
An organization must follow a set of processes for strategic planning to be effective and fruitful. The following are the steps in the strategic management process:
Examples
Let us understand the concept better with the below-mentioned strategic management examples:
Importance of Strategic Management
Besides preparing organizations for market competition, strategic management helps them identify opportunities that arise from time to time. In addition, businesses get a clue of threats that might hurt them in the long run.
Recommended Articles
This has been a guide to strategic management and its definition. Here we discuss a model of strategic management work along with process, examples, and importance. You may also have a look at the following articles to learn more –
What was the biggest merger of 2013?
One of the biggest mergers of 2013 is of Microsoft Corporationwith Nokia Handsets andServices Business. Microsoft purchased Nokia for $ 7,200,000,000. [19] Microsoft is attemptingto bail out one of the first makers of smart phones but at the same time, strategists say that itcould also be the other way round in the long run. According to Nokia’s CEO Steve Ballmer,Microsoft bought Nokia only in an attempt to strengthen its fight against Apple Inc. and GoogleInc. so that it could be able to capture a portion of the lucrative mobile computing market.
What is the role of integration in merger?
Other than different levels and forms of integrations, the timeof these integrations play a verymajor role in the success of the merger or acquisition. This is related to the ongoing processes inthe acquired company. The exploitation and exploration of processes require different types ofintegration therefore theirtiming of integration will also be different. [13]
Why is strategic rationale important?
To achieve a set of strategic objectives, the strategic rationale plays an important role. Mergersand acquisitions are usually not central to achieve strategic objectives, as usuallythere are otheralternatives available. A merger to secure control of capacity in the chosen sector is an example.
What Is A Takeover?
Understanding Takeovers
- Takeovers are fairly common in the business world. However, they may be structured in a multitude of ways. Whether both parties are in agreement or not, will often influence the structuring of a takeover. Keep in mind, if a company owns more than 50% of the shares of a company, it is considered controlling interest. Controlling interest requires a company to accoun…
Types of Takeovers
- Takeovers can take many different forms. A welcome or friendly takeoverwill usually be structured as a merger or acquisition. These generally go smoothly because the boards of directors for both companies usually consider it a positive situation. Voting must still take place in a friendly takeover. However, when the board of directors and key shareholders are in favor of th…
Reasons For A Takeover
- There are many reasons why companies may initiate a takeover. An acquiring company may pursue an opportunistic takeover, where it believes the target is well priced. By buying the target, the acquirer may feel there is long-term value. With these takeovers, the acquiring company usually increases its market share, achieves economies of scale, reduces costs, and increases p…
Funding Takeovers
- Financing takeovers can come in many different forms. When the target is a publicly-traded company, the acquiring company can buy shares of the business in the secondary market. In a friendly merger or acquisition, the acquirer makes an offer for all of the target’s outstanding shares. A friendly merger or acquisition will usually be funded through cash, debt, or new stock i…
Example of A Takeover
- ConAgra initially attempted a friendly acquisition of Ralcorp in 2011. When initial advances were rebuffed, ConAgra intended to work a hostile takeover. Ralcorp responded by using the poison pill strategy. ConAgra responded by offering $94 per share, which was significantly higher than the $65 per share Ralcorp was trading at when the takeover attempt began. Ralcorp denied the atte…
Takeover Explained
Types of Takeovers
How to Takeover A Company?
- The systematic procedure for buyouts are as follows: You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked For eg: Source: Takeover(wallstreetmojo.com) 1. Set an Objective: The foremost step is to ascertain the reason for buying and the business goal. 2. Evaluate Market Op…
Advantages and Disadvantages
- Who benefits from a buyoutBuyoutA buyout is a process of acquiring a controlling interest in a company, either via out-and-out purchase or through the purchase of controlling equity interest. The underlying principle is that the acquirer believes that the target company’s assets are undervalued.read more, and how? By purchasing another firm, the acquirer can gain a significan…
Difference Between Takeover and Acquisition
- There is a slight difference between the two. Takeovers or buyouts may or may not be welcomed by target firms. In contrast, acquisitions are always friendly. In a hostile takeover, the target firm’s management may not cooperate with the acquirer. The old management does not guide the new owners in administration and internal affairs. In contrast, acquisitions are met with the complet…
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