Takeover

In business, takeover is defined as the acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly. A takeover refers to a corporate action whereby an acquiring company makes a bid for an acquiree. In a case where the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. Takeover leads to the assuming control or management of or responsibility to take up the power of the target company. Takeover takes place in a nation, political organization, or corporation.

Takeovers are of various kinds. There are friendly, hostile and reverse takeover. Under a friendly takeover before a bidder makes an offer for another company, the company's board of directors are first informed. If the board feels that the decision of accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. Under this type of takeover the bidding company will also have an opportunity to look at the accounts of the business they want to buy. This process is known as due diligence.

A Hostile takeover is type of corporate takeover which is carried out against the wishes of the board of the target company. It allows a suitor to take over a target company's management unwilling to agree to a merger or takeover. A hostile takeover does not have access to private information about the company. This leads to an increase in the risk of the takeover. Hence the banks are usually more cautious about lending money for hostile takeovers.

A Reverse takeover refers to a corporate takeover where a private company acquires a public company. The reverse takeover takes place when a private company buys a publicly-traded company as a means of acquiring public status without having to list itself.

Questions:

• What is a takeover?
• What are the types of takeovers?