How To Prevent A Hostile Takeover From Destroying Your Company
It seems like every day there’s another business leader who is being forced to make an agonizing decision about the future of their company. This hostile takeover is one of the most difficult-to-avoid situations a company can find itself in. These moments usually occur when one or more of your competitors have decided that they can better manage your company’s operations. Fortunately, there are several ways to keep a hostile takeover from ruining your business. This article will go over many of them. Continue reading to find out how.
Hostile Takeover
A hostile takeover is a process by which a company is purchased by a competing company. A hostile takeover is often initiated by the company being taken over, as they attempt to buy out their competitors and replace the executives that control the company with their own. The takeover attempt is often successful, and the new owners take control of the company and replace the board of directors with their people. The takeover attempt is usually unsuccessful, as the company can fend off the takeover attempt and fend off its takeover.
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Not all takeovers are hostile. A friendly takeover is one that is the company being taken over, as they attempt to buy out their competitors and replace the executives that control the company with their own. While some takeovers are friendly, others are not. A hostile takeover is one in which the takeover attempt is unsuccessful, but the takeover is still carried out with some degree of force.
One of the prime examples of an attempt to a hostile takeover in recent is Elon Musk vs Twitter. Elon Musk holds 9.2% of twitter’s shares. The billionaire vowed to take the company private, for that he offered $43 billion for the buyout. The offer was rejected by Twitter and now Elon Musk has geared up to buy 15% of Twitter’s shares which allows him to take partial control over the company.
Why does Company have a Hostile Takeover?
A hostile takeover is when one company attempts to purchase another using its own funds. The acquiring company is trying to buy the smaller company with the ultimate goal of taking complete control of their operations, replacing the current management and possibly the board of directors with their people. This kind of takeover is often a risky and costly proposition, as the acquiring company has to put a lot of money into the takeover bid themselves. They can’t just take the profits from the takeover and use those funds to expand the company.
A hostile takeover usually occurs when one company believes it can be better at managing the company than the current management team. This is usually because one of the two companies has more financial resources than the other, so they decide to take over their competitor and use the profits to expand their own company. You can also see a hostile takeover as the result of a board of directors that has made poor decisions and is no longer able to actively manage the company, leaving it open to a takeover attempt from one of their competitors.
Ways to prevent Hostile Takeover.
The best way to prevent a hostile takeover from destroying your company is to make sure that you’re in control. Keep in mind that not only do the other companies that could try to take over your company have the financial resources to do so, but they also have the motivation. Finally, don’t be afraid to stand up to your competitors and to let them know that they aren’t welcome in your company.
We can see that Twitter also tried a way to protect it from a Hostile Takeover called “Poison Pill”. The poison pill is a tactic used by a company threatened with an unwanted takeover bid to make itself unattractive to the bidder. It dilutes promoters’ stake in the company, and it can be enforced for a limited duration of time. It allows shareholders to buy recently issued shares at blinked prices, making any hostile pre-emption extremely precious and delicate.
How to save your company from a Hostile Takeover?
While it’s unlikely that a hostile takeover will end in the destruction of your company, there is still a lot you can do to prevent this from happening. Here are a few things that you can do to protect your company from a takeover:
- Develop a strong financial position in your company. This means that you and the other executives in control of your company need to remain vigilant about potential takeovers. Keep in mind that not only do the other companies that could try to take over your company have the financial resources to do so, but they also have the motivation. And when a company has the motivation to take over your company, they don’t need much financial backing at all.
- Make sure that your board of directors is actively managing your company. This means that you and the other executives in control of your company need to actively manage your company, as opposed to delegating board issues to a board of directors that aren’t actively managing your company.
- Let your competitors know that they aren’t welcome in your company. Letting your competitors know that you aren’t interested in being taken over will prevent most of them from trying to initiate a takeover.
Conclusion
A hostile takeover is a situation in which one or more of your competitors attempt to purchase your company and replace the management team with their own. If you find yourself in this situation, you need to remain vigilant and prepared to defend your company and its assets by developing a strong financial position and making sure that your board of directors is actively managing the company.
Author– Aaryan Choudhury, intern at IP & Legal Filing. In case of any queries please contact/write back to us at support@ipandlegalfilings.com.
