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Defensive tactics to hostile takeover attempts

When businesses attempt a hostile takeover of another company in a bid to acquire it against the consent or wishes of the company's board of directors, target companies often employ a variety of defensive tactics to prevent the takeover from occurring. Despite such measures, hostile takeovers may still be a method through which a business can acquire another business in order to meet their overall company goals.

In order to discourage hostile takeovers, most corporate boards have defensive strategies in place that will be triggered upon certain conditions occurring. In many cases, a hostile takeover will involve a tender offer, in which the acquiring business will offer shareholders a higher price for the stock they hold than the stock's market value in an attempt to gain a majority of the target company's stock. In order to fight off such attempts, many boards include a poison pill provision in the corporate bylaws, allowing original stockholders in the company to purchase additional shares in a hostile tender offer, thereby preventing the hostile bidder from gaining a majority share.

Companies may also engage in reactive defenses. They may attempt to buy a large amount of the hostile bidder's shares at higher-than market value prices. They may sell off assets that are of interest to the hostile bidder company. An interesting approach is when the target company tries to turn the situation on its head, unleashing its own hostile takeover attempt against the company trying to acquire it.

Whether a company is interested in Business acquisitions or attempting to defend against a hostile takeover, the business may benefit by consulting with a business law attorney who has experience in acquisitions. The attorney can assist by drafting bylaw provisions that can protect the client's interest.

Source: Houston Chronicle, "What Could Make a Hostile Takeover Difficult?", Grygor Scott, December 02, 2014

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