Take Over Strategies and Defenses.pdf - Take Over Strategies and Defenses Factors Determining Vulnerability of Companies to Takeover Bids • Low stock

Take Over Strategies and Defenses.pdf - Take Over...

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Take Over Strategies and Defenses
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Factors Determining Vulnerability of Companies to Takeover Bids Low stock price with relation to the replacement cost of assets or their potential earning power; A highly liquid balance sheet with large amounts of excess cash, a valuable securities portfolio, and significantly unused debt capacity Good cash flow in relation to current stock prices Subsidiaries and properties which could be sold off without significantly impairing cash flow Relatively small stockholdings under the control of an incumbent management. A combination of these factors can simultaneously make a company an attractive proposition or investment opportunity and facilitate its financing. The company’s assets may act as collateral for an acquirer’s borrowings, and the target’s cash flows from operations and divestitures can be used to repay the loans.
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Friendly or Hostile Takeovers Takeovers, or acquisitions, are when one company (“ Acquirer ”) acquires a controlling stake in another company (“ Target Company ”). This process can either be friendly or hostile. Friendly takeovers are when the management of the Target Company is on board with the transaction and both the Acquirer and the Target Company consider it beneficial. Hostile takeovers, on the other hand, involve a situation where the Target Company is an unwilling participant, or simply, shark-bait. Hostile takeovers can be effected by the Acquirer directly approaching the shareholders of the Target Company by making an open offer or by fighting to replace the management to get the approval for the acquisition.
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A corporate takeover refers to a transfer of control from one investor group to another. Friendly deals (Target board supports bid) Hostile deals (Target board contests bid). Rare due to Target board flexibility in setting up defenses Impact on bid premiums Impact on post closing integration The threat of hostile bids often moves target boards toward negotiated settlements. Why Hostile Takeovers are Rare?
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Bear Hug Open Market Purchase Proxy contests Tender offer Litigation Using multiple tactics concurrently Market for Corporate Control: Hostile Takeover Tactics
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Take over Strategies Tender Offer: Take over arises when the Board of Directors of the acquiring company decide to approach the shareholders of the target company directly through a Public Announcement (Tender Offer) to buy their shares consequent to the rejection of the offer by the Board of Directors of the target company Street Sweep: By this technique the acquiring company accumulates larger number of shares in a target before making an open offer. The advantage is that the target company
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  • Spring '18
  • Nidhi Malhotra

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