 Acquisition

Large organization purchases small firm and

vice-versa.

 Takeover
An inorganic corporate growth device
whereby one company gets control of
another company by gaining control of the
majority shares of the target company. .
 TYPES
 Friendly takeover

 Bail out takeover

 Hostile takeover
 Friendly or Negotiated Takeover:-
Friendly takeover means takeover
of one company by change in its management
& control through negotiations between the
existing promoters and prospective investor in
a friendly manner. Thus it is also called
Negotiated Takeover. This kind of takeover is
resorted to further some common objectives of
both the parties.
 Bail Out Takeover
Takeover of a financially sick company by a
financially rich company as per the provisions of Sick
Industrial Companies (Special Provisions) Act, 1985 to bail
out the former from losses.
 Hostile Takeover
Hostile takeover is a takeover where one company
unilaterally pursues the acquisition of shares of another
company without being into the knowledge of that other
company. The most dominant purpose which has forced
most of the companies to resort to this kind of takeover is
increase in market share.
 Street Sweep:
 Buying maximum shares of target company and
forcing the company to sell
 Bear hug
 An offer made for the target company which is
much higher than the market price- an offer that
cannot be refused
 Dawn Raid / Corporate Raiders
 Large amounts of company stocks are purchased as
soon as the market is open
 Tender Offer:
 Acquiring company makes a public offer at a fixed
price above the current market price
 Corporate raider
 Raider buys a substantial holding in target company’s
equity through a broker
 Lady Macbeth:
 Takeover using a trusted agent by both parties to
overcome mistrust.
 Potential earning power
 High liquidity balance sheet
 Subsidiaries or properties that can be sold for
good profit
 Financial defenses:
 Repurchase equity
 Increase dividends
 Loan covenants to accelerate repayment in case
of takeover
 Acquire other firms with excess liquidity
 Sell undervalued assets
 Decrease excess cash
 Invest in positive net present value projects
 Pay good dividends
 Go for share repurchases
 Create anti trust problem for the bidder
 Target firm my look for international partner
 Change control group

 Make performance improvemnets

 Golden parachute
 Discourage unwanted takeover by offering
lucrative benefits to the top management and
severance pay to those who may loose job due to
takeover to take their help to avoid takeover
 Green Mail
 Repurchase of large block of shares to corner the
raider
 Pac Man offer- the target firm makes a counter
bid to the raider – very costly
 White Knight
 Target firm finds another firm with which it
prefers to be combined
A takeover bid is required to be introduced
through a public announcement
 For acquiring 25% or more of shares or voting
rights
 Or to increase the by 5%
 Or for acquiring control over the company