When one business takes control of another business, it’s what’s known as a corporate takeover. A corporate takeover can happen in several different ways — in some cases, the process is friendly, with both sides benefitting, but many corporate takeovers are viewed as hostile or adversarial. Whether a takeover is an agreed-upon merger and acquisition process, a dawn raid or something in between, each side will require experienced and knowledgeable legal representation to ensure that the takeover is structured correctly and all of the appropriate protections are put in place.
The simplest and friendliest type of corporate takeover is one where the acquiring company buys a majority stake in its target, usually through a mutually-agreed upon process known as merger and acquisition. Some acquirers will buy a company outright, and in some cases, the corporate takeover is structured as a merger that combines the best aspects of the acquirer and the target. But many companies do not want to be taken over, and when that is the case the process is far less friendly and may be done in a clandestine way. These furtive operations may be pursued all at once in what is known as a dawn raid, with shares purchased as soon as the markets open and without the target having time to respond, or it can be done surreptitiously over time.
To understand the different ways that a takeover can be structured, it is helpful to understand the motivations that are driving the process. In a merger and acquisition scenario, the boards both organizations generally see benefits to the process. When the corporate takeover is viewed as a positive from both sides, a vote in support is a given. But if a takeover is being pursued in order to change a company’s management approach, to eliminate a competitor or to take advantage of another company’s hard work or attractive pricing, the process can be met with suspicion and resentment, and may even generate aggressive tactics meant to dilute the value of the acquiring company’s shares.
When a company decides to pursue the takeover of another, one of the most challenging aspects of the process is funding. While a merger or acquisition done through mutual agreement can be accomplished in any number of ways, those looking to acquire a publicly-traded company in a hostile corporate takeover may need to maneuver on the secondary market. Leveraged buyouts are also a possibility, and involve using debt raised by the issuance of new corporate bonds or by identifying new sources of funding.
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