Takeover

The term 'takeover' in commerce refers to one company (the acquirer) purchasing another (the target). Such events resemble mergers, but without the formation of a new company.

Table of contents

1 Occurrence 2 Forms of Takeover 3 Strategies

Occurrence

Corporate takeovers occur readily in the United States and in the United Kingdom. They do not happen often in Germany because of the dual board structure, in Japan because companies have interlocking sets of ownerships known as keiretsu and in the People's Republic of China because the state majority-owns most publicly listed companies there.

Forms of Takeover

• A friendly takeover consists of a straight buyout of a company, and happens all the time. The shareholders receive cash or (more commonly) an agreed number of shares of the aquirer's company stock.
• A hostile takeover occurs when a company attempts to buy out another whether they like it or not. A hostile takeover can eventuate only through publicly traded shares, as it requires the aquirer to bypass the board of directors and purchase the shares from other sources. This is difficult unless the shares of the target company are widely available and easily purchased (ie, they have high liquidity). A hostile takeover may presage a corporate raid.
• A reverse takeover can occur in different forms:
  • a smaller corporate entity takes over a larger one.
  • a private company purchases a public one.
  • a method of listing a private company while bypassing most securities regulations, whereby which a shell public company buys out a functioning private company whose management then controls the public company.

Strategies

The target company has several methods to avoid the buyout. These include legal actions, as in the case of the Hewlett-Packard purchase of Compaq, or the use of a poison pill, as set up by Transmeta.