The business world can cause many serious events and decisions. Most of us have heard the term “hostile takeover,” whether in a movie or in real-life. This action is also known as hostile acquisition, and is often a complex, uncomfortable matter. By definition, the word hostile means unfriendly, antagonistic and opposed. In other words, it’s usually not much fun.
A business is experiencing a hostile acquisition when another entity is attempting to takeover by way of shareholder vote. Management of the target business does not want the takeover to happen. Therefore, the acquiring company will make moves to bypass top management and obtain approval from shareholders. In a publicly held company, shareholders vote on members of the governing board. Just as easily as they may vote a member in or request removal, they may also choose to allow another company to takeover altogether.
There are regulations in place, which allow management of a target company several options for defense against a hostile takeover. Common strategies include what are known as the poison pill, the crown-jewel defense, golden parachute and Pac-Man defense. A company who is transitioning into the publicly held space can benefit greatly from the expertise of a knowledgeable business attorney who can explain and incorporate these defenses into the legal organization of the business.
Hostile takeover should never be attempted or defended without expert legal advice. It is often a stressful, complex matter that may be derailed in one wrong move. Having an unbiased, neutral party to conduct negotiations is an invaluable asset to any business, and can result in efficient, fair results allowing parties to confidently move forward.