In business, a is the purchase of one company (the target) by another (the acquirer, or bidder). Generally a company is a form of Business organization. The precise definition varies In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located The term privately held company refers to ownership of a business company in two different ways first referring to ownership by non-governmental organizations and second

Contents 1 Friendly takeovers 2 Hostile takeovers 3 Reverse takeovers 4 Financing a takeover 4.1 Funding 4.2 Loan note alternatives 4.3 All share deals 5 Mechanics 5.1 In the United Kingdom 6 Strategies 7 Perceived pros and cons of takeover 8 Occurrence 9 Tactics against hostile takeover 10 See also

Friendly takeovers

Before a bidder makes an offer for another company, it usually first informs that company's board of directors. Tender offer is a Corporate finance term denoting a type of takeover bid If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. A mutual shareholder or stockholder is an Individual or company (including a Corporation) that legally owns one or more shares of

In a private company, the shareholders and the board are usually the same people or closely connected with one another. So, private acquisitions are usually friendly, because if the shareholders agree to sell the company then the board is usually of the same mind or sufficiently under the orders of the shareholders to cooperate with the bidder. This point is not relevant to the UK concept of takeovers, which always involve the acquisition of a public company.

If management may not be acting in the best interest of the shareholders (or creditors, in cases of bankrupt firms), a hostile takeover allows a suitor to bypass intransigent management. In this case, this enables the shareholders to choose the option that may be best for them, rather than leaving approval solely with management. In this case, a hostile takeover may be beneficial to shareholders, which is contrary to the usual perception that a hostile takeover is "bad. "

Hostile takeovers

A takeover is considered "hostile" if:

• The board rejects the offer, but the bidder continues to pursue it, or
• The bidder makes the offer without informing the board beforehand

A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offer is a Corporate finance term denoting a type of takeover bid Tender offers are regulated with the Williams Act. The Williams Act (USA refers to amendments to the Securities Exchange Act of 1934 enacted in 1968 regarding Tender offers The legislation was proposed by Senator An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simple majority, to replace the management with a new one which will approve the takeover. A proxy fight or proxy battle is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance often focusing on directorial Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway.

The main consequence of a bid being considered hostile is practical rather than legal. If the board of the target cooperates, the bidder can conduct extensive due diligence into the affairs of the target company. Due Diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person or the performance of an act with a certain Standard It can find out exactly what it is taking on before it makes a commitment. But a hostile bidder knows about the target only the information that is publicly available, and so takes a greater risk. Also, banks are less willing to back hostile bids with the loans that are usually needed to finance the takeover. A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money

Reverse takeovers

Main article: Reverse takeover

A reverse takeover is a type of takeover where a private company acquires a public company. Reverse takeover (reverse IPO) is the acquisition of a Public company by a Private company to bypass the lengthy and complex process of going public Reverse takeover (reverse IPO) is the acquisition of a Public company by a Private company to bypass the lengthy and complex process of going public This is usually done at the instigation of the larger, private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. The free float of a Public company is an estimate of the proportion of shares that are not held by large owners and that are not stock with sales restrictions ( Initial public offering (IPO, also referred to simply as a "public offering" is when a company issues Common stock or shares to the public for the first However, under AIM rules, a reverse take-over is an acquisition or acquisitions in a twelve month period which for an AIM company would:

• exceed 100% in any of the class tests; or
• result in a fundamental change in its business, board or voting control; or
• in the case of an investing company, depart substantially from the investing strategy stated in its admission document or, where no admission document was produced on admission, depart substantially from the investing strategy stated in its pre-admission announcement or, depart substantially from the investing strategy

Financing a takeover

Funding

Often a company acquiring another pays a specified amount for it. The Alternative Investment Market (AIM is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a This money can be raised in a number of ways. The company may have sufficient funds available in its account, but this is unusual. More often, it will be borrowed from a bank, or raised by an issue of bonds. A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money In Finance, a bond is a Debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and Interest Acquisitions financed through debt are known as leveraged buyouts, and the debt will often be moved down onto the balance sheet of the acquired company. A leveraged buyout (or LBO, or highly-leveraged transaction (HLT or "bootstrap" transaction occurs when a Financial sponsor acquires a controlling interest In Financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances The acquired company then has to pay back the debt. This is a technique often used by private equity companies. The debt ratio of financing can go as high as 80% in some cases. In such a case, the acquiring company would only need to raise 20% of the purchase price.

Loan note alternatives

Cash offers for public companies often include a "loan note alternative" that allows shareholders to take part or all of their consideration in loan notes rather than cash. A public company usually refers to a company that is permitted to offer its registered securities ( Stock, bonds, etc Consideration is a central concept in the Common law of Contracts and Contract theory: it is value paid for a promise This is done primarily to make the offer more attractive in terms of taxation. A conversion of shares into cash is counted a disposal that triggers a payment of capital gains tax, whereas if the shares are converted into other securities, such as loan notes, the tax is rolled over. A capital gains tax (abbreviated CGT) is a Tax charged on Capital gains the profit realized on the sale of a non-inventory Asset that was purchased A security is a Fungible, Negotiable instrument representing financial value

All share deals

A takeover, particularly a reverse takeover, may be financed by an all share deal. Reverse takeover (reverse IPO) is the acquisition of a Public company by a Private company to bypass the lengthy and complex process of going public The bidder does not pay money, but instead issues new shares in itself to the shareholders of the company being acquired. In financial markets, a share is a Unit of account for various financial instruments including Stocks Mutual funds Limited partnerships In a reverse takeover the shareholders of the company being acquired end up with a majority of the shares in, and so control of, the company making the bid. The company has managemental rights.

Mechanics

In the United Kingdom

Takeovers in the UK (meaning acquisitions of public companies only) are governed by the City Code on Takeovers and Mergers, also known as the "City Code" or "Takeover Code". The rules for a takeover, can be found what is primarily known as 'The Blue Book'. The Code used to be a non-statutory set of rules that was controlled by City institutions on a theoretically voluntary basis. However, as a breach of the Code brought such reputational damage and the possibility of exclusion from City services run by those institutions, it was regarded as binding. In 2006 the Code was put onto a statutory footing as part of the UK's compliance with the European Directive on Takeovers (2004/25/EC).

The Code requires that all shareholders in a company should be treated equally, regulates when and what information companies must and cannot release publicly in relation to the bid, sets timetables for certain aspects of the bid, and sets minimum bid levels following a previous purchase of shares.

In particular:

• a shareholder must make an offer when its shareholding, including that of parties acting in concert (a "concert party"), reaches 30% of the target;
• information relating to the bid must not be released except by announcements regulated by the Code;
• the bidder must make an announcement if rumour or speculation have affected a company's share price;
• the level of the offer must not be less than any price paid by the bidder in the three months before the announcement of a firm intention to make an offer;
• if shares are bought during the offer period at a price higher than the offer price, the offer must be increased to that price;

The Rules Governing the Substantial Acquisition of Shares, which used to accompany the Code and which regulated the announcement of certain levels of shareholdings, have now been abolished, though similar provisions still exist in the Companies Act 1985. The Companies Act 1985 (1985 c 6 is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985 which enables companies

Strategies

There are a variety of reasons why an acquiring company may wish to purchase another company. Some takeovers are opportunistic - the target company may simply be very reasonably priced for one reason or another and the acquiring company may decide that in the long run, it will end up making money by purchasing the target company. The large holding company Berkshire Hathaway has profited well over time by purchasing many companies opportunistically in this manner. A holding company is a company that owns part all or a majority of other companies' outstanding Stock. Berkshire Hathaway ( for supervoting shares and for nonvoting shares is a conglomerate Holding company headquartered in Omaha, Nebraska

Other takeovers are strategic in that they are thought to have secondary effects beyond the simple effect of the profitability of the target company being added to the acquiring company's profitability. For example, an acquiring company may decide to purchase a company that is profitable and has good distribution capabilities in new areas which the acquiring company can use for its own products as well. Distribution (or place) is one of the four elements of Marketing mix. A target company might be attractive because it allows the acquiring company to enter a new market without having to take on the risk, time and expense of starting a new division. An acquiring company could decide to take over a competitor not only because the competitor is profitable, but in order to eliminate competition in its field and make it easier, in the long term, to raise prices. Also a takeover could fulfill the belief that the combined company can be more profitable than the two companies would be separately due to a reduction of redundant functions.

Perceived pros and cons of takeover

Perceived pros and cons of a takeover differ from case to case but still there are a few worth mentioning.

Pros:

1. Increase in sales/revenues (e. g. Procter & Gamble takeover of Gillette)
2. Venture into new businesses and markets
3. Profitability of target company
4. Increase market share
5. Decrease competition (from the perspective of the acquiring company)
6. Reduction of overcapacity in the industry
7. Enlarge brand portfolio (e. Procter & Gamble Co ( P&G,) is a Fortune 500, American global corporation based in Cincinnati Ohio, that manufactures a wide g. L'Oréal's takeover of Bodyshop)
8. Increase in economies of scale

Cons:

1. Reduced competition and choice for consumers in oligopoly markets. An oligopoly is a Market form in which a Market or Industry is dominated by a small number of sellers (oligopolists (Bad for consumers, although this is good for the companies involved in the takeover)
2. Likelihood of job cuts.
3. Cultural integration/conflict with new management
4. Hidden liabilities of target entity.
5. The monetary cost to the company.

Occurrence

Corporate takeovers occur frequently in the United States, Canada, United Kingdom, France and Spain. The United States of America —commonly referred to as the Country to "Dominion of Canada" or "Canadian Federation" or anything else please read the Talk Page The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located This article is about the country For a topic outline on this subject see List of basic France topics. Spain () or the Kingdom of Spain (Reino de España is a country located mostly in southwestern Europe on the Iberian Peninsula. They happen only occasionally in Italy because larger shareholders (typically controlling families) often have special board voting privileges designed to keep them in control. Italy (Italia officially the Italian Republic, (Repubblica Italiana is located on the Italian Peninsula in Southern Europe, and on the two largest They do not happen often in Germany because of the dual board structure, nor in Japan because companies have interlocking sets of ownerships known as keiretsu, nor in the People's Republic of China because the state majority-owns most publicly listed companies. Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. Dual board structure common in Germany and also used in other European countries is a structure of Corporate governance in which Shareholders For a topic outline on this subject see List of basic Japan topics. A is a set of companies with interlocking Business relationships and shareholdings. Talk People's Republic of China) PEOPLE'S REPUBLIC OF CHINA ARTICLE GUIDELINES A state is a political association with effective Sovereignty over a geographic Area and representing a Population.

Tactics against hostile takeover

Back-end Bankmail Crown Jewel Defense Flip-in Flip-over Golden Parachute Gray Knight Greenmail Jonestown Defense Killer bees Leveraged recapitalization Lobster trap Lock-up provision Macaroni Defense Nancy Reagan Defense Non-voting stock Pac-Man Defense Pension parachute

People Pill Poison pill Poison Put Safe Harbor Scorched earth defense Shark Repellent Staggered board of directors Standstill agreement Suicide pill Targeted repurchase Top-ups Treasury stock Trigger Voting plans White knight White squire Whitemail

See also

• Control premium

Front-end and back-end are generalized terms that refer to the initial and the end stages of a process In a bankmail engagement the bank of a target firm refuses financing options to firms with Takeover bids In business when a company is threatened with Takeover, the crown jewel defense is a strategy in which the target company sells off its most attractive Assets The flip-in is one of five main types of Poison pills and is a common part of many modern Flip-over poison pills A flip-over is one of five types of Poison pills in which current Shareholders of a targeted firm will have the option to purchase discounted Stock A golden parachute is a non-contractual agreement between a company and an employee (usually upper executive specifying that the employee will receive certain significant benefits Greenmail or greenmailing refers to a legal business practice in a public Stock market where one firm takes advantage of another firm by means of a falsely construed The Jonestown defense is an extreme Corporation defense against hostile Takeovers In this strategy the target firm engages in tactics that might threaten Killer bees are firms or individuals that are employed by a target company to fend off a Takeover bid these include Investment bankers (primary accountants In corporate finance a leveraged recapitalization is a change of the Capital structure of the company—usually to substitute debt for equity A lobster trap is an anti- Takeover strategy used by target firms Lock-up provision is a term used in corporate finance which refers to the option granted by a seller to a buyer to purchase a target company’s stock as a prelude to a Takeover Poison pill is a term referring to any strategy generally in Business or Politics, to increase the likelihood of negative results over positive ones The Nancy Reagan Defense is a tactic in Corporate finance used to counter a Takeover or merger bidder who has made a formal bid to shareholders to buy their shares Non-voting stock is Stock that provides the shareholder very little or no vote on corporate matters such as election of the Board of directors or Mergers The Pac-Man defense is a defensive option to stave off a hostile takeover in which a company that is threatened with a hostile takeover acquires its would-be buyer A pension parachute is a form of Poison pill that prevents the raiding firm of a hostile Takeover from utilizing the pension Assets to finance the acquisition As a variation of the Poison pill defense the people pill is an anti- Takeover defense under which the current management team of the target company threatens Poison pill is a term referring to any strategy generally in Business or Politics, to increase the likelihood of negative results over positive ones Poison pill is a term referring to any strategy generally in Business or Politics, to increase the likelihood of negative results over positive ones The term safe harbor ( safe harbour) has several special usages in an Analogy with its literal meaning that of a Harbor or haven which provides Safety A scorched earth policy is a military strategy or operational method (possibly more often referred to as a tactic but this is not entirely correct as there is a difference between Poison pill is a term referring to any strategy generally in Business or Politics, to increase the likelihood of negative results over positive ones A staggered board of directors occurs when a Corporation elects its directors a few at a time with different groups of directors having overlapping multi-year terms instead A suicide pill (also known as an L-pill or lethal pill) is a pill capsule Ampoule or Tablet containing a fatally poisonous A targeted repurchase is a technique used to thwart a hostile Takeover in which the target firm purchases back its own Stock from an unfriendly bidder In Business, a top-up is a variation of a company’s Stock repurchase program for common shareholders A treasury stock or reacquired stock is Stock which is bought back by the issuing Company, reducing the amount of Outstanding stock on the In Business, a white knight may be a Corporation, a private company or a person that intends to help another firm Whitemail, coined as an opposite to Blackmail, has several meanings explained below Control premium is an amount that a buyer is usually willing to pay over the current market price of a company

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