Posted in Finance, Accounting and Economics Terms, Total Reads: 391
Definition: Hostile Takeover Bid
This kind of a takeover involves the acquirer and the management of the company not agreeing to a particular takeover bid and the acquirer directly goes to shareholders of the company in such a scenario. The acquirer generally builds his stake in the company by acquiring shares over a period of time and once the cap of 5% is reached then the disclosure to the securities commission is required.
Such kind of takeover methodology has been acquired by the investors like Carl Icahn who became famous as corporate raiders and took over the management to turnaround the companies in distress. The price demanded in the hostile bid often the point of disagreement between the management and the potential acquirer however sometimes, it may also be the bid to stop an activist shareholder from getting a seat on the board.
There are many defense strategies like poison pill, crown-jewel defense, golden parachute, pac-man defense which are used by the management to prevent itself from such a scenario and such strategies often result in either finding a white knight or taking a poison pill in form of reduction in share value.