You are on page 1of 26


BY Shirin Sneha.LS Seema.S Soujanya.N Shruthi.S.Holla

Take Over
• A Take over is the purchase of one company [i.e the target company] by another company [i.e the acquirer or bidder].

• There are basically two types
• Friendly Take Over

• Hostile Take Over

Here the board makes an offer and informs the company’s board of directors. . Friendly Take Over: A friendly take over is an acquisition which is approved by the board of management.Hostile Take Over: An hostile take over allows an acquiring company to take over a target company whose management is unwilling to agree for take over or merger.

Hostile Take Over Approaches  Tender offer: acquiring company makes a public offer at a fixed price above the current market price.  Creeping Tender offer: purchasing enough stock in the open market. to effect a change in management. .  Proxy Fight: tries to persuade enough shareholders. to replace the management with a new one which will approve the takeover. known as a creeping tender offer. usually a simple majority.

.  Killer Bees: are firms or individuals that are employed by a target company to fend off a takeover bid. This is usually done at the commencement of a large Pvt company. These include investment bankers (primary). attorneys.  Back Flip Takeover : is any type of takeover in which the company turns itself into a subsidiary of the purchased company or the acquired company. tax specialists. so that the Pvt company can effectively float itself while avoiding floatation cost and time involved in a public offering. etc. accountants.Other Types of Takeover:  Reverse Takeover : Is a Type of a takeover where a Pvt company acquires a public company.

.  To prevent Coercive takeover.Takeover Defenses Purpose of take over defense  To prevent takeover that would cause an apparent damage to the shareholders interest.  To ensure the time and negotiating power required for the target.

 Principle of Prior Disclosure and Shareholders Will: When Take over measures are adopted. .  Principle of Ensuring the Necessity and Reasonableness: Take over defense measures that are adopted in response to a possible takeover threat must be necessary and reasonable in relation to the threat posed. implementation and termination of takeover defense measures should be undertaken with the goal of protecting and enhancing corporate values. their purpose and terms should be specifically disclosed and such measures should reflect the reasonable will of the shareholders.Principal of takeover defense  Principle of Protecting and Enhancing Corporate Value and Shareholders Common Interest: The adoption.

Precautionary Preventive Measures 2.Type Of Takeover Defense 1. .  Active Measure: these are employed only after a hostile bid had been attempted. Active Measure  Precautionary Preventive Measures: are designed to reduce the possibility of a successful hostile takeover.

Precautionary Preventive Measures  Shark.Repellent  Golden Parachutes  White mail  Staggered Board  Super majority  Poison pills  Crown jewel .

 White mail Utilized by companies in an attempt to undermine a hostile takeover attempt. . Shark-Repellent Strategies used to keep off hostile takeover.  Golden Parachutes Special lucrative compensation agreements that the company provides to Top management.

 Super majority It requires at least 80% of voting shareholder’s approval of takeover. .  Crown Jewel Defense Target company sells off its most attractive assets to a friendly third party or spin off the valuable assets in a separate entity.  Poison pills Make stock less attractive to the acquirer. Staggered Board used to delay effective transfer of control in a takeover.

Active Defense Measures • Greenmail • White Knight • White squire • Pac-man Defense • Lady Mac-Beth • People Mail • Jonestown Defense • Standstill agreements • Capital Structure Changes .

It is the company i. It is also known as “Bon Voyage Bonus” or a “Goodbye Kiss”.e more favorable compared to the Hostile Company[Dark Knight] Grey Knight It is an acquiring company that enters a bid for a hostile takeover in addition to the target firm and first bidder. but less favorable than the white knight (friendly bidder).Greenmail Is a situation in which a large block of stock is held by an unfriendly company. White Knight Also known as “Friendly Company” may be a corporation or a person that intend to help another firm. perceived as more favorable than the black knight (unfriendly bidder). This forces the target company to purchase the stock at a substantial premium to prevent a takeover. .

The White Squire is typically not interested in acquiring management control of the target but either as an investment or representation in board of the target company Pac-man Defense .White squire A White Squire is a firm that consents to purchase a large block of the target company’s stock.

. but then turns around and joins with unfriendly bidder.Lady Mac-Beth A corporate take over strategy with which a third party poses as a white knight to gain trust.

This is also known as a “suicide pill”. and is an extreme version of the poison pill. . In this strategy.People Mail It is kind of Black Mail where the top Management threatens to resign En-mass in case the Hostile takeover takes over the company Jonestown Defense This is an extreme corporation defense against hostile takeovers. the target firm engages in tactics that might threaten the firm’s existence to thwart an imposing acquirer’s bids.

The target firm either offers to repurchase the shares held by the hostile bidder. or asks the bidder to limit its holdings. This act will stop the current attack and give the company time to take preventative measures against future takeovers. usually at a large premium.Standstill agreements A contract that stalls or stops the process of a hostile takeover. Capital Structure Changes .

• Increase dividends on remaining shares. • Liquidate securities portfolios and draw down excess cash. • Invest continuing cash flows from operations in positive net- present-value projects or return it to shareholders.Financial defensive measures • Increase debt with borrowed funds used to repurchase equity. • Structure loan covenants to force acceleration of re-payment in the event of takeover. .

Anti Takeover Amendments  Corporate Charter Amendments • Staggered terms of the board of directors • Supermajority provisions • Fair price provisions • Dual capitalization .

. It requires share holder approval before they can be implemented. as opposed to a simple 51% majority.Staggered terms of the board of directors It is a type of defense where the terms of the board of directors so that only a few such as one-third of the directors may be elected during any one given year. Classified directors cannot be removed before their term expires Supermajority provisions These provisions usually require that at least 80% of voting shareholders approve of the takeover. Such a requirement can make it nearly impossible for an acquirer to obtain enough votes approving the takeover.

.Fair price provisions It is a modification of corporations' charter that requires the acquirer to pay minority shareholders at least a fair market price for the company’s stock.g. It is usually in terms of company’s P/E ratio it’s a weak takeover defense Dual capitalization Restructuring of equity into two classes of stock with different voting rights. E. Ford Motors Berkshire Hathaway .

Poison Pill Defense • Flip Over rights • Flip in Plan • Back End rights plan • Voting plan. • Preferred stock plan. .

Flip In A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. Management offers shares to investors at a discount if an acquirer merely purchases a certain percentage of the company. bearing a set expiration date and no voting power. In the event of an unwelcome bid. A flip-over allows stockholders to buy the acquirer’s shares at a discounted price after the merger. . and so it becomes extremely expensive for that acquirer to complete the takeover. The holders of common stock of a company receive one right for each share held.Flip-over A flip-over allows stockholders to buy the acquirer's shares at a discounted price after the merger. The discount is not available to the acquirer. the rights begin trading separately from the shares.

The back-end plans are used to try to limit the effectiveness of two tiered offer. In fact. the target company issues a dividend of securities.Back-End Plans Under back-end plan share the holder receive a right dividend which give share holder ability to exchange this right along with the share of stock for cash or senior securities that are equal in value to a specific “back-end” price stipulated by the issuer's board of directors. conferring special voting privileges to its stockholders. . Under this plan. the name back-end refers to the back end of a two-tiered offer. Voting Plans This poison pill strategy is designed to dilute the controlling power of the acquirer.

preference shares or is a special equity security that has properties of both equity and debt instruments and is generally considered a hybrid instrument.Preferred stock plan It is also called as preferred shares. . Preferred are senior to common stock but subordinate to bonds.

Thank You .