Editing Takeover (section)

== Takeover types ==

=== Friendly takeover ===
{{Further|White knight (business)}}
A ''friendly takeover'' is an acquisition which is approved by the management of the target company. Before a bidder makes an [[tender offer|offer]] for another company, it usually first informs the company's [[board of directors]].

In a private company, because the shareholders and the board are usually the same people or closely connected with one another, private acquisitions are usually friendly. If the shareholders agree to sell the company, then the board is usually of the same mind or sufficiently under the orders of the equity 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.{{citation needed||date=May 2024}}

A "bear hug" is an unsolicited takeover bid which is so generous that the shareholders of the target company are very likely to submit, accepting the offer.<ref>{{cite book |last=Wasserstein |first=Bruce |author-link=Bruce Wasserstein |title=Big Deal: Mergers and Acquisitions in the Digital Age |publisher=Warner Books |year=2000 |page=691-694 |chapter=Bear Hug |chapter-url=https://archive.org/details/bigdealmergersac00wass/page/690/mode/2up?q=%22bear+hug%22 }}</ref>

=== Hostile takeover ===
{{Main|Corporate raid}}
A ''hostile takeover'' allows a bidder to take over a target company whose [[management]] is unwilling to agree to a [[merger]] or takeover. The party who initiates a hostile takeover bid approaches the [[shareholders]] directly, as opposed to seeking approval from officers or directors of the company.<ref name="west2015">{{Cite book |last1=West |first1=Lindy Lou |title=The SAGE Encyclopedia of Economics and Society |publisher=SAGE Publishing |year=2015 |isbn=9781452217970 |editor-last1=Wherry |editor-first1=Frederick F. |pages=882–885 |oclc=936331906 |editor-last2=Schor |editor-first2=Juliet }}</ref> A takeover is considered ''hostile'' if the target company's board rejects the offer, and if the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. Development of the hostile takeover is attributed to [[Louis Wolfson]].<ref>{{Cite news |last=Manne |first=Henry G. |date=2008-01-18 |title=The Original Corporate Raider |publisher=The Wall Street Journal |url=https://www.wsj.com/articles/SB120062429680899679 |access-date=2022-02-04 |issn=0099-9660}}</ref> Hostile takeovers are relatively rare; by one estimate, only 40 takeovers (out of 3,300) in 1986 were hostile.<ref>{{Cite journal |last=Jensen |first=Michael C. |date=1988 |title=Takeovers: Their Causes and Consequences |url=https://www.aeaweb.org/articles?id=10.1257/jep.2.1.21 |journal=Journal of Economic Perspectives |language=en |volume=2 |issue=1 |pages=21–48 |doi=10.1257/jep.2.1.21 |issn=0895-3309}}</ref>

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]].<ref name=":0">{{Cite web |title=What Is a Hostile Takeover? |url=https://www.thebalance.com/what-is-a-hostile-takeover-5185686|access-date=2022-02-04 |publisher=The Balance |first=Erin |last=Gobler |editor-first1=Anthony |editor-last1=Battle |editor-first2=David |editor-last2=Rubin |date=April 17, 2022 |archive-url=https://web.archive.org/web/20220824015154/https://www.thebalance.com/what-is-a-hostile-takeover-5185686 |archive-date=August 24, 2022 |url-status=dead}}</ref> An acquiring company can also engage in a [[proxy fight]], whereby it tries to persuade enough shareholders, usually a [[majority|simple majority]], to replace the management with a new one which will approve the takeover.<ref name=":0" /> Another method involves quietly purchasing enough stock on the open market, known as a ''creeping tender offer'' or ''dawn raid'',{{Sfn|Picot|2002|p=99}} to effect a change in management. In all of these ways, management resists the acquisition, but it is carried out anyway.<ref name=":0" />

In the United States, a common defense tactic against hostile takeovers is to use section 16 of the [[Clayton Antitrust Act|Clayton Act]] to seek an injunction, arguing that section 7 of the act, which prohibits acquisitions where the effect may be substantially to lessen competition or to tend to create a monopoly, would be violated if the offeror acquired the target's stock.<ref>{{cite web |author=Joseph Gregory Sidak |title= Antitrust Preliminary Injunctions in Hostile Tender Offers, 30 KAN. L. REV. 491, 492 |year=1982 |url=https://www.criterioneconomics.com/docs/antitrust_preliminary_injunctions_in_hostile_tender_offers1.pdf |url-status=live |archive-url=https://web.archive.org/web/20150717054131/https://www.criterioneconomics.com/docs/antitrust_preliminary_injunctions_in_hostile_tender_offers1.pdf |archive-date=2015-07-17 |publisher=criterioneconomics.com}}</ref>

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, providing the bidder with a comprehensive analysis of the target company's finances. In contrast, a hostile bidder will only have more limited, publicly available information about the target company available, rendering the bidder vulnerable to hidden risks regarding the target company's finances. Since takeovers often require loans provided by [[bank]]s in order to service the offer, banks are often less willing to back a hostile bidder because of the relative lack of target information which is available to them. Under [[Delaware]] law, boards must engage in defensive actions that are proportional to the hostile bidder's threat to the target company.<ref>{{cite journal |last1=Badawi |first1=Adam B. |last2=Webber |first2=David H. |author-link2=David H. Webber |title=Does the Quality of the Plaintiffs' Law Firm Matter in Deal Litigation? |journal=The Journal of Corporation Law |date=2015 |volume=41 |issue=2 |page=107 |url=https://scholarship.law.bu.edu/cgi/viewcontent.cgi?article=1036&context=faculty_scholarship |access-date=19 November 2019}}</ref>

A well-known example of an extremely hostile takeover was Oracle's bid to acquire [[PeopleSoft]].<ref>{{Cite news |agency=Associated Press |date=2004-12-13 |title=Oracle to acquire PeopleSoft for $10.3 billion |url=https://www.nbcnews.com/id/wbna6705516 |access-date=2024-12-15 |work=NBC News |language=en}}</ref> As of 2018, about 1,788 hostile takeovers with a total value of US$28.86&nbsp;billion had been announced.<ref>{{Cite news|url=https://imaa-institute.org/m-and-a-statistics-transaction-type/|title=M&A by Transaction Type - Institute for Mergers, Acquisitions and Alliances (IMAA)|publisher=Institute for Mergers, Acquisitions and Alliances (IMAA)|access-date=2018-02-27}}</ref>

=== Reverse takeover ===
{{Main|Reverse takeover}}
A ''reverse takeover'' is a type of takeover where a public company acquires a private company. This is usually done at the instigation of the private company, the purpose being for the private company to effectively [[Float (finance)|float]] itself while avoiding some of the expense and time involved in a conventional [[initial public offering|IPO]]. However, in the [[United Kingdom|UK]] under [[Alternative Investment Market|AIM]] rules, a reverse takeover is an acquisition or acquisitions in a twelve-month period which for an AIM company would:
* exceed 100 percent 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.

An individual or organization, sometimes known as a [[corporate raider]], can purchase a large fraction of the company's stock and, in doing so, get enough votes to replace the board of directors and the [[Chief executive officer|CEO]]. With a new agreeable management team, the stock is, potentially, a much more attractive investment, which might result in a price rise and a [[Profit (accounting)|profit]] for the corporate raider and the other shareholders. A well-known example of a reverse takeover in the United Kingdom was [[Darwen Group]]'s 2008 takeover of [[Optare plc]]. This was also an example of a back-flip takeover (see below) as Darwen was rebranded to the more well-known Optare name.{{citation needed||date=May 2024}}

=== Backflip takeover ===
A ''backflip takeover'' is any sort of takeover in which the acquiring company turns itself into a [[subsidiary]] of the purchased company. This type of takeover can occur when a larger but less well-known company purchases a struggling company with a very well-known brand. Examples include:
* The [[Texas Air Corporation]] takeover of [[Continental Airlines]] but taking the Continental name as it was better known. 
* The SBC takeover of the ailing [[AT&T]] and subsequent rename to AT&T.<ref>{{Cite web |title=SBC completes purchase of AT&T |date=18 November 2005 |url=https://www.nbcnews.com/id/wbna10100350 |access-date=2022-06-15 |publisher=NBC News }}</ref>
* Westinghouse's 1995 purchase of CBS and 1997 renaming to [[CBS Corporation]], with [[Westinghouse Licensing Corporation|Westinghouse]] becoming a brand name owned by the company.
* [[NationsBank]]'s takeover of the [[Bank of America]], but adopting Bank of America's name.
* Norwest purchased [[Wells Fargo]] but kept the latter due to its name recognition and historical legacy in the American West.
* [[Interceptor Entertainment|Interceptor Entertainment's]] acquisition of [[3D Realms]], but kept the name 3D Realms.
* Nordic Games buying [[THQ]] assets and trademark and renaming itself to [[THQ Nordic]].
* Infogrames Entertainment, SA becoming [[Atari SA]].
* The Avago Technologies takeover of [[Broadcom Corporation]] and subsequent rename to [[Broadcom Inc.]]
* [[Overkill Software]]'s takeover of [[Starbreeze Studios|Starbreeze]].<ref name="eg starbreeze">{{cite news | url = https://www.eurogamer.net/articles/2019-01-28-the-fall-of-swedish-game-wonder-starbreeze | title = The fall of Starbreeze |first =Wesley | last= Yin-Poole | date = 28 January 2019 | access-date = 28 January 2019 | work = [[Eurogamer]] }}</ref>