Types of takeover

Types of takeover

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  TAKEOVER
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  INTRODUCTION • A takeoveroccurs when one company makes a bid to assume control of or acquire another, often by purchasing a majority stake in the target firm. In the takeover process, the company making the bid is the acquirer while the company it wishes to take control of is called the target. • Definition : A takeover or acquisition is the purchase of one company by another. We call the purchaser the bidder or acquirer, while the company it wants to buy is the target. It is a type of merger, but not of equals. In the case of an acquisition, there is a predator and a prey. • In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.
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  TYPES OF TAKEOVER •There are 4 types of takeover: • Friendly-A friendly takeover is an acquisition which is approved by the management of the target company. Before a bidder makes an offer for another company, it usually first informs the company's board of directors. In an ideal world, if the board feels that accepting the offer serves the shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. • Hostile-A hostile takeover allows a bidder to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered hostile if the target company's board rejects the offer, and if the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. • Reverse-A reverse takeover is a type of takeover where a private company acquires a public company. This is usually done at the instigation of the private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. • Backflip-A backflip takeover is any sort of takeover in which the acquiring company turns itself into a subsidiary of the purchased company. This type of takeover can occur when a larger but less well- known company purchases a struggling company with a very well- known brand.
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  ADVANTAGES • market expansion •huge customer reach • monopoly in the market dominance • decrease in the tax payment • increase in the number of employees and reach to skilled, efficient and effective manpower • decrease in the debt payment • increase in the reserve and surplus • decrease in the liabilities • increase in the popularity of the company • huge transaction on a daily basis due to large number of customers
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  DISADVANTAGES AND IMPACT • Highcost involved - with the takeover price often proving too high • Problems of valuation (see the price too high, above) • Upset customers and suppliers, usually as a result of the disruption involved • Problems of integration (change management), including resistance from employees • Incompatibility of management styles, structures and culture • Questionable motives Why takeovers fail? • Price paid for takeover was too high (over-estimate of synergies) • Lack of decisive change management in the early stages • The takeover was mishandled • Cultural incompatibility between the two businesses • Poor communication, particularly with management, employees and other stakeholders of the acquired business • Loss of key personnel & customers post acquisition • Competitors take the opportunity to gain market share whilst the takeover target is being integrated
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  EXAMPLES OF TAKEOVER Johnson& Johnson Takeover of Crucell • Pharmaceutical and health care giant & Johnson announced the successful completion of a Friendly Takeover of Dutch vaccine maker Crucell which employs 1,300 people, produced more than 115 million doses of vaccine in 2009 for distribution in about 100 countries, for about 1.75 billion euros ($2.37 billion). Johnson & Johnson and Crucell jointly announced that Johnson & Johnson has completed the tender offer for Crucell. Johnson & Johnson, which employs 114,000 people, has said it intends to retain Crucell’s management and staff and to keep the headquarters at Leiden in the western Netherlands. Johnson & Johnson now owns more than 95 percent of Crucell’s capital. The European Commission authorized the takeover seeing no competition InBev and Anheuser-Busch • In June 2008, Euro-Brazilian beverage company, InBev, made an unsolicited bid for iconic American beer brewer, Anheuser- InBev offered to buy Anheuser-Busch for $65 a share in a deal that valued its target at $46 billion.
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  • The takeoverquickly turned hostile as both sides traded lawsuits and accusations. InBev filed to have Anheuser-Busch's entire board of directors fired as part of a proxy battle to gain control of the company. The deal took on a soap opera-like quality as it pitted Busch family members against one another for control of the 150-year-old company. Eventually, InBev upped its offer to $52 billion or $70 a share, an amount that swayed shareholders to accept the deal. After the acquisition, the combined company became Anheuser-Busch Inbev (BUD). Godrej Soaps and Gujarat Godrej Innovative Chemicals • Ex. Godrej Soaps — profitable and with a turnover of ₹437 crore — did a reverse merger with loss- making Gujarat Godrej Innovative Chemicals (turnover of ₹60 crore), the resulting firm was named Godrej Soaps DullCo and Hotshot Inc DullCo is a large company that has fallen on relatively hard times because the massive recall of one of its biggest-selling products has hurt its finances and caused large-scale customer defections. Management decides that its brand has suffered irreparable damage, and decides to use its financial resources, which are still substantial, to acquire smaller and fast-growing rival Hotshot Inc. DullCo’s management also decides that business after the completed takeover will be conducted under the Hotshot name, which will be the surviving entity, with DullCo becoming a Hotshot subsidiary.
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  CONCLUSION • Market Expansion •Technological Sharing • Knowledge Sharing • Change in stocks • Impact on Job Security
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  THANK YOU