RE: Questions that make CEO's nervous -. The link to my previous post didn't work.
Lets try, copy and paste.
What Is a Hostile Takeover?
A hostile takeover occurs when one company looks to acquire another "target" company whether or not the target company desires to be bought out. The acquiring company does this by buying up a controlling amount of the target company's stock shares. In order for this to happen, the target company must be a public company and a large number of its shares must be readily available for purchase on the open market.
What Can Be the Result of a Hostile Takeover?
Most of the time one company wishes to purchase another company, even forcibly, because of the target company's profitability. This means that the acquiring company will keep the target company doing the same thing it was doing before it was acquired, except now it will be under new ownership and therefore someone else will be reaping the rewards of the company.
An alternative option is the acquiring company conducts what is commonly referred to as a "corporate raid." What this means is that the acquiring company looks to forcibly buy up a company who has a low stock price because it is not doing well, but has valuable tangible assets such as equipment or land. After the acquiring company has successfully conducted the hostile takeover of the target company, it liquidates the company by selling of all of its equipment and land, effectively destroying the target company.
What Steps Can I Take to Avoid a Hostile Takeover of My Business?
There are several steps that a business owner can take to help ensure that her business and ownership survive a hostile takeover attempt:
- Develop a monitoring system - One of the keys to surviving a hostile takeover is to see it coming a mile away and not be blind to impending threats. This means being on the look out for any other businesses that have shown interest in acquiring you, as well as monitoring how your stocks are being bought up so as to see if there is any one buyer purchasing usually large volumes of your company¿s shares.
- Have a developed strategy for fending off hostile takeovers - This strategy should reach to the legal activities, investment banking, PR, and investigative activities of your company.
Should I Consult a Business Attorney if I Am at Risk of a Hostile Takeover?
When an attempt at a hostile takeover is about to be made, the first steps the target company takes to prevent the success of the attempt are some of the most important. Your hostile buyer and your shareholders will both be carefully scrutinizing what action you take, so it must be bold and decisive steps to show the acquiring company they are in for a long, difficult battle. It is important to consult a business attorney with experience in mergers and acquisitions so that you are aware of what protections under the law you and your company have, and what you can do within the legal system to help fend off this unwanted buyout.